Multi-Member LLC Operating Agreement — Arizona

Multi-Member LLC Operating Agreement (ARIZONA)

Quick-Reference Summary

Article I — Formation

1.1 Formation. The organizers have caused Articles of Organization to be filed with the Arizona Corporation Commission on [__/__/____] pursuant to A.R.S. § 29-3201, forming [________________________________] (the "Company") as a domestic limited liability company.

1.2 Name. The name of the Company is [________________________________], which complies with A.R.S. § 29-3112.

1.3 Principal Address. The principal address of the Company is:
[________________________________]
[________________________________]

1.4 Statutory Agent. The statutory agent for service of process in Arizona under A.R.S. § 29-3115 is:
Name: [________________________________]
Street Address (Arizona): [________________________________]
County: [________________________________]

1.5 Term. The Company shall have perpetual duration unless dissolved under Article XIV or by operation of law.

1.6 Governing Law. This Agreement and the internal affairs of the Company are governed by the laws of the State of Arizona, including the ALLCA, A.R.S. § 29-3101 et seq., without regard to conflict-of-laws principles.

1.7 Publication. If the statutory agent's street address is NOT in Maricopa or Pima County, the Company shall publish notice of the filing of the Articles of Organization in an ACC-approved newspaper of general circulation in the county of the statutory agent's address for three consecutive publications, and file an affidavit of publication with the ACC, within 60 days of formation, pursuant to A.R.S. § 29-3201(G)(1). If the statutory agent's address IS in Maricopa or Pima County, the ACC will input the information into its database and no newspaper publication is required, pursuant to A.R.S. § 29-3201(G)(2).

Article II — Purpose and Powers

2.1 Purpose. The Company is organized for any lawful purpose under A.R.S. § 29-3108, including but not limited to: [________________________________].

2.2 Powers. The Company shall have all powers granted to an Arizona limited liability company under A.R.S. § 29-3109, including the power to sue and be sued, contract, hold and convey property, borrow money, and conduct business inside and outside Arizona.

2.3 Professional Services. [If applicable] The Company is a professional limited liability company organized under A.R.S. § 29-4101 et seq. to render professional services in [profession]; each Member is duly licensed in Arizona.

Article III — Members and Membership Interests

3.1 Members. The Members of the Company, their initial capital contributions, and their Percentage Interests as of the Effective Date are:

3.2 Membership Interest. A "Membership Interest" consists of the Member's transferable interest (economic rights) and the Member's governance rights under this Agreement.

3.3 Admission of Additional Members. A new Member may be admitted only with the written consent of Members holding at least [____]% of the Percentage Interests, and upon execution of a counterpart of this Agreement.

3.4 No Personal Liability. Consistent with A.R.S. § 29-3304, the debts, obligations, and other liabilities of the Company are solely those of the Company. No Member is personally liable solely by reason of being a Member.

3.5 Disclosure for Manager-Managed LLCs. If the Company is manager-managed, the Articles of Organization shall identify the name and address of each manager and each Member who owns a 20% or greater interest in capital or profits, as required by A.R.S. § 29-3201(B)(4)(a).

3.6 Separateness Covenants. To preserve the liability shield, the Members shall cause the Company to:

• ☐ Maintain Company bank accounts separate from personal accounts;
• ☐ Keep Company books and records separate from personal records;
• ☐ Not commingle Company assets with personal assets;
• ☐ Hold the Company out to the public as a separate legal entity;
• ☐ Document loans, distributions, and intercompany transactions in writing;
• ☐ Maintain adequate capitalization for foreseeable operations.

Article IV — Capital Contributions and Capital Accounts

4.1 Initial Contributions. Each Member has contributed (or shall contribute by [__/__/____]) the cash or property described in Section 3.1 and Schedule A. Pursuant to A.R.S. § 29-3402, a contribution may consist of cash, property, services rendered, or a promissory note or other obligation.

4.2 Capital Accounts. A separate capital account shall be maintained for each Member in accordance with U.S. Treasury Regulation § 1.704-1(b)(2)(iv).

4.3 No Interest on Capital. No Member is entitled to interest on capital.

4.4 No Withdrawal of Capital. No Member may withdraw capital except as expressly provided.

4.5 Loans by Members. Any loan shall be evidenced by a written promissory note.

Article V — Capital Calls

5.1 Additional Capital. No Member is obligated to make additional contributions except as provided.

5.2 Mandatory Capital Calls. The [Members / Managers] may issue a written capital call in proportion to Percentage Interests upon affirmative vote of Members holding at least [____]% of the Percentage Interests.

5.3 Notice. Capital call notice shall state amount, pro rata share, purpose, and funding deadline (not less than [30] days).

5.4 Failure to Contribute. Non-defaulting Members may elect:

• ☐ Loan treatment to defaulting Member at [____]% per annum;
• ☐ Dilution per Schedule B;
• ☐ Purchase at [____]% discount under Article XI.

Article VI — Allocations and Distributions

6.1 Allocations. Items of income, gain, loss, deduction, and credit shall be allocated in proportion to Percentage Interests, subject to Treasury Regulation § 1.704-1(b)(2).

6.2 Distributions. Distributions shall be made in proportion to Percentage Interests at such times and amounts as the [Members / Managers] determine, subject to A.R.S. § 29-3405. This supersedes the equal-distribution default of A.R.S. § 29-3404.

6.3 Tax Distributions. Within [30] days after the close of each fiscal quarter, the Company shall distribute to each Member an amount equal to the Member's allocable share of taxable income multiplied by the Assumed Tax Rate ([____]%), subject to available cash.

6.4 Limitations on Distributions. No distribution shall be made if the Company would, after the distribution, be unable to pay debts as they become due in the ordinary course, or total Company assets would be less than total Company liabilities. A.R.S. § 29-3405.

6.5 Liability for Improper Distributions. A Member who receives an improper distribution is liable to the Company under A.R.S. § 29-3406.

6.6 Tax Status. The Company shall be taxed as a partnership under Subchapter K unless and until the Members unanimously elect otherwise.

Article VII — Management

7.1 Management Structure. The Company shall be (check one):

• ☐ Member-managed; or
• ☐ Manager-managed, with initial Manager(s): [________________________________].

The Articles of Organization filed with the ACC shall state the management structure pursuant to A.R.S. § 29-3201(B)(4).

7.2 Authority. The [Members / Managers] have full authority to manage the business and affairs of the Company. Agency power of Members and Managers is governed by A.R.S. § 29-3301.

7.3 Major Decisions. The following actions require the affirmative vote of Members holding at least [____]% of the Percentage Interests:

• Amendment of the Articles of Organization or this Agreement;
• Admission of a new Member or issuance of additional Interests;
• Sale, lease, exchange, or other disposition of all or substantially all of the Company's assets;
• Merger, conversion, domestication, or dissolution;
• Incurring indebtedness in excess of $ [____];
• Capital expenditures in excess of $ [____];
• Change in nature of business;
• Voluntary bankruptcy filing;
• Election of corporate tax classification.

7.4 Removal. A Manager may be removed by Members holding at least [____]% of the Percentage Interests.

7.5 Officers. The Members or Managers may appoint officers.

Article VIII — Voting Rights and Member Meetings

8.1 Voting. Each Member shall vote in proportion to Percentage Interest, superseding the per-capita default of A.R.S. § 29-3407.

8.2 Meetings. Regular meetings shall be held at least annually. Special meetings may be called by any [Member / Manager] on not less than [10] days' written notice.

8.3 Quorum. Members holding a majority of the Percentage Interests constitute a quorum.

8.4 Action Without Meeting. Written consent signed by Members holding the required Percentage Interests may substitute for a meeting.

8.5 Remote Participation. Members may participate by telephone or video conference.

Article IX — Fiduciary Duties and Standards of Conduct

9.1 Statutory Standards. Pursuant to A.R.S. § 29-3409, each Member in a member-managed Company, and each Manager in a manager-managed Company, owes the Company and the other Members:

(a) Duty of loyalty, including:

• Accounting to the Company for any property, profit, or benefit derived from the Company's activities, use of Company property, or appropriation of a Company opportunity;
• Refraining from dealing with the Company as or on behalf of a party having an interest adverse to the Company;
• Refraining from competing with the Company.

(b) Duty of care, which is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

(c) The contractual obligation of good faith and fair dealing.

9.2 Modification of Duties. Pursuant to A.R.S. § 29-3105(C) and (D), this Agreement may not:

• Eliminate the duty of loyalty, the duty of care, or any other fiduciary duty (but may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable);
• Eliminate the contractual obligation of good faith and fair dealing (but may prescribe the standards by which performance is to be measured, if not manifestly unreasonable);
• Relieve or exonerate a person from liability for conduct involving bad faith, willful or intentional misconduct, or knowing violation of law;
• Restrict rights of third parties.

9.3 Authorized Conflicts. The Members hereby authorize the following activities, which shall not constitute a breach of the duty of loyalty: [________________________________].

9.4 Indemnification. To the fullest extent permitted by A.R.S. § 29-3408, the Company shall indemnify and hold harmless each Member, Manager, and officer from any liability incurred in connection with Company business, except for the categories preserved by A.R.S. § 29-3105.

Article X — Transfer Restrictions, ROFR, Tag-Along, Drag-Along

10.1 General Restriction. No Member may transfer all or any portion of the Member's Interest except in compliance with this Article X. Any purported transfer in violation is void.

10.2 Permitted Transfers. A Member may transfer to (a) a revocable trust for the Member's benefit, (b) a family member or family entity for estate planning, or (c) another existing Member, subject to the transferee executing a counterpart.

10.3 Right of First Refusal. Before transferring to a third party, the selling Member shall deliver written notice. The Company shall have [30] days and the non-selling Members an additional [30] days to elect to purchase on the same terms.

10.4 Tag-Along. If Members holding more than [50]% propose to sell to a third party, each other Member may participate proportionally.

10.5 Drag-Along. If Members holding at least [____]% approve a sale of the Company, all other Members shall participate on the same terms.

10.6 Effect of Transfer. A transferee of only economic rights acquires only the transferable interest under A.R.S. § 29-3502 and is not admitted as a Member without the unanimous consent of the other Members.

Article XI — Buy-Sell Provisions

11.1 Triggering Events. Upon any of the following with respect to a Member ("Departing Member"), the Company shall have the option (and as to (c) and (d), the obligation) to purchase:

• (a) Voluntary withdrawal or attempted dissociation;
• (b) Termination of employment;
• (c) Death;
• (d) Adjudicated incapacity;
• (e) Bankruptcy or insolvency;
• (f) Divorce (note: Arizona is a community-property state — Members should consult with counsel regarding spousal community property consent under A.R.S. § 25-211);
• (g) Material breach.

11.2 Purchase Price. Fair market value as determined by:

• ☐ Annual valuation (Schedule D);
• ☐ Appraisal by a qualified appraiser;
• ☐ Formula: [____] × [trailing 12-month EBITDA] − net debt, multiplied by Percentage Interest.

11.3 Discounts. Minority and marketability discounts per Schedule D; no discount on death or incapacity.

11.4 Payment Terms. [____]% at closing in cash; balance over [____] years at the applicable federal rate, prepayable.

11.5 Life Insurance Funding. Optional, per Schedule E.

11.6 Spousal Consent. Because Arizona is a community-property state, each Member whose Interest is community property shall cause the Member's spouse to execute a Spousal Consent in the form of Schedule F to bind any community-property interest to the terms of this Agreement.

Article XII — Charging Order

12.1 Transferable Interest. A Member's transferable interest consists of the right to receive distributions, as set forth in A.R.S. § 29-3502.

12.2 Charging Order — Exclusive Remedy. Pursuant to A.R.S. § 29-3503, on application by a judgment creditor of a Member or transferee, a court may enter a charging order against the transferable interest of the judgment debtor. A charging order requires the Company to pay over to the creditor any distribution that would otherwise be paid to the judgment debtor. This section provides the exclusive remedy by which a judgment creditor may satisfy a judgment from the debtor's transferable interest. A.R.S. § 29-3503(E).

12.3 Right to Extinguish. The Member or transferee whose interest is charged may extinguish the charging order by satisfying the judgment and filing a certified copy of the satisfaction with the issuing court. A.R.S. § 29-3503(B).

12.4 Right of Redemption. The Company or one or more Members whose Interests are not subject to the charging order may pay the judgment creditor the full amount due and thereby succeed to the rights of the judgment creditor, including the charging order. A.R.S. § 29-3503(C).

12.5 No Foreclosure or Management Rights. No creditor of a Member shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the Company. A charging order does not entitle the creditor to participate in management, inspect books and records, or compel distributions.

12.6 No Forced Dissolution. A charging order is not an event of dissolution.

Article XIII — Deadlock and Dispute Resolution

13.1 Deadlock Defined. A "Deadlock" occurs if the Members or Managers cannot reach the required vote on a Major Decision after two consecutive properly noticed meetings held not less than [30] days apart.

13.2 Mediation. Upon a Deadlock or dispute, the parties shall first submit to non-binding mediation in [County], Arizona, before a mediator mutually selected.

13.3 Arbitration. If mediation does not resolve within [60] days, the dispute shall be submitted to binding arbitration in [County], Arizona, before a single arbitrator under AAA Commercial Rules.

13.4 Buy-Sell on Deadlock. After [90] days of unresolved Deadlock, any Member may deliver an offer specifying a price per 1% of Percentage Interest at which the offering Member is willing either to buy the other Members' Interests or to sell its own; recipients shall within [30] days elect to buy or sell at the stated price.

13.5 Judicial Dissolution. Any Member may seek judicial dissolution under A.R.S. § 29-3701 on the grounds that (a) the conduct of substantially all of the Company's activities is unlawful, (b) it is not reasonably practicable to carry on the Company's activities in conformity with the Articles and this Agreement, or (c) the Managers or controlling Members have acted, are acting, or will act in a manner that is illegal or fraudulent, or oppressive and directly harmful to the applicant. The court may order alternative remedies including buyout or appointment of a provisional manager.

Article XIV — Dissolution and Winding Up

14.1 Events of Dissolution. The Company shall be dissolved upon the first to occur of:

• (a) An event specified in this Agreement;
• (b) The consent of all Members;
• (c) The passage of 90 consecutive days during which the Company has no Members;
• (d) Entry of a decree of judicial dissolution under A.R.S. § 29-3701; or
• (e) Administrative dissolution by the ACC.

14.2 Effect of Dissociation. Pursuant to A.R.S. §§ 29-3601 et seq., dissociation of a Member does not, by itself, dissolve the Company. A dissociated Member's Interest is treated as that of a transferee subject to Article XI.

14.3 Winding Up. Upon dissolution, the Company shall wind up under A.R.S. § 29-3702 et seq. and distribute remaining assets under A.R.S. § 29-3711:

• First, to creditors (including Members who are creditors);
• Then, to Members in satisfaction of liabilities for unpaid distributions;
• Then, to Members for return of contributions; and
• Then, to Members in proportion to Percentage Interests.

14.4 Termination Filing. Upon completion of winding up, the [Members / Managers] shall file a Statement of Termination with the ACC.

Article XV — State-Specific Provisions

15.1 No Annual Report. Arizona LLCs are NOT required to file an annual report with the ACC (this distinguishes Arizona LLCs from corporations). The Company shall, however, keep its statutory agent information current and file a Statement of Change under A.R.S. § 29-3116 as needed.

15.2 Publication (Critical). If the statutory agent's street address is NOT in Maricopa or Pima County, publication is mandatory under A.R.S. § 29-3201(G)(1). The Company shall:

• ☐ Publish notice of formation in an ACC-approved newspaper of general circulation in the county of the statutory agent's address;
• ☐ Publish for three consecutive publications;
• ☐ Complete publication within 60 days after the ACC files the Articles of Organization;
• ☐ File an affidavit of publication with the ACC (optional but strongly recommended for proof of compliance).

Failure to publish timely may, under some interpretations of Arizona law, expose Members to personal liability for Company debts based on a challenge to LLC formation. The Members shall comply strictly with this requirement.

15.3 No Series LLC. Arizona does not authorize series LLCs.

15.4 Transaction Privilege Tax (TPT). If the Company engages in a taxable activity (e.g., retail sales, contracting, leasing), the Company shall obtain a TPT license from the Arizona Department of Revenue and file TPT returns. TPT is imposed on the seller (not a sales tax on the buyer), and rates vary by activity classification and city.

15.5 Pass-Through Entity Tax (Optional). The Members may elect under A.R.S. § 43-1014 to subject the Company to the Arizona elective pass-through entity tax (SALT-cap workaround).

15.6 Community Property. Arizona is a community-property state under A.R.S. § 25-211. Each Member's spouse should execute Spousal Consent (Schedule F) confirming the binding effect of this Agreement on any community-property interest.

15.7 Local Business Licenses. The Company shall obtain any required city or county business license, transaction privilege license, or zoning approval.

Article XVI — General Provisions

16.1 Entire Agreement. This Agreement constitutes the entire operating agreement of the Company under A.R.S. § 29-3105.

16.2 Amendment. This Agreement may be amended only by a written instrument signed by Members holding at least [____]% of the Percentage Interests; amendments disproportionately and adversely affecting a Member require that Member's consent.

16.3 Severability. If any provision is held invalid, the remaining provisions remain in full force.

16.4 Notices. Notices shall be in writing and delivered by hand, certified mail, overnight courier, or email.

16.5 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts and by electronic signature under the Arizona Electronic Transactions Act, A.R.S. § 44-7001 et seq.

16.6 Governing Law; Venue. This Agreement is governed by Arizona law. Subject to Article XIII, the state and federal courts in [County], Arizona shall have exclusive jurisdiction.

16.7 Confidentiality. Each Member shall keep confidential all non-public Company information except as required by law or authorized in writing.

Signature Block

THE COMPANY:

[________________________________], an Arizona limited liability company

By: [________________________________]
Name: [________________________________]
Title: [Member / Manager]
Date: [__/__/____]

THE MEMBERS:

Member 1:
[________________________________]
Name (print): [________________________________]
Date: [__/__/____]

Member 2:
[________________________________]
Name (print): [________________________________]
Date: [__/__/____]

Member 3:
[________________________________]
Name (print): [________________________________]
Date: [__/__/____]

State of Arizona, County of [________________________________]

Sworn to (or affirmed) and subscribed before me on [__/__/____] by [________________________________].

Notary Public: [________________________________]
Commission Expiration: [__/__/____]

Pre-Execution Checklist

• ☐ Articles of Organization filed with Arizona Corporation Commission
• ☐ Company name verified through ACC Business Entity Search and complies with A.R.S. § 29-3112
• ☐ Statutory agent with Arizona street address confirmed (cover letter and acceptance signed)
• ☐ Publication completed within 60 days (if statutory agent NOT in Maricopa or Pima County)
• ☐ Affidavit of publication filed with ACC
• ☐ EIN obtained from IRS
• ☐ AZ Department of Revenue TPT license obtained (if applicable)
• ☐ Local city/county business license obtained
• ☐ Separate Company bank account opened
• ☐ Initial capital contributions documented and deposited
• ☐ Schedules A, B, C, D, E, F (Spousal Consents) completed
• ☐ All Member spouses have signed Schedule F if Interests are community property
• ☐ Operating Agreement signed by all Members and stored with corporate records
• ☐ Insurance bound (general liability / professional / D&O as applicable)
• ☐ Tax classification decision (partnership default vs. corporate election) with CPA
• ☐ AZ elective pass-through entity tax election considered

Sources and References

• Arizona Limited Liability Company Act, A.R.S. § 29-3101 et seq.: https://www.azleg.gov/arsDetail/?title=29
• A.R.S. § 29-3201 (Articles of Organization; Publication): https://www.azleg.gov/ars/29/03201.htm
• A.R.S. § 29-3503 (Charging order): https://codes.findlaw.com/az/title-29-partnership/az-rev-st-sect-29-3503/
• Arizona Corporation Commission – LLC Filings: https://azcc.gov/corporations/forms-and-applications
• ACC Approved Newspapers for Publication: https://azcc.gov/corporations/approved-newspapers
• Arizona Department of Revenue – TPT License: https://azdor.gov/transaction-privilege-tax-tpt
• IRS, Limited Liability Company (LLC): https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc