Multi-Member LLC Operating Agreement — Colorado

Multi-Member LLC Operating Agreement (Colorado)

This Multi-Member Limited Liability Company Operating Agreement (this "Agreement") is entered into and made effective as of [__/__/____] (the "Effective Date") by and among the persons listed on Schedule A (each, a "Member" and collectively, the "Members") and [________________________________], a Colorado limited liability company (the "Company").

Quick-Reference Summary

Article I — Formation

1.1 Formation. The Company was formed as a Colorado limited liability company on [__/__/____] by the filing of Articles of Organization with the Colorado Secretary of State pursuant to C.R.S. § 7-80-203. The Members adopt and ratify that filing.

1.2 Name. The name of the Company is "[________________________________]," which complies with the entity-name requirements of C.R.S. § 7-90-601 (including the required designation "limited liability company," "LLC," or "L.L.C.").

1.3 Principal Office. The principal office of the Company is located at [________________________________].

1.4 Registered Agent and Registered Office. Pursuant to C.R.S. § 7-90-701, the Company's registered agent is [________________________________], whose registered office address is [________________________________].

1.5 Duration. The Company has perpetual existence under C.R.S. § 7-80-204 unless dissolved as provided in Article XIV or under C.R.S. § 7-80-801.

1.6 Operating Agreement Authority. This Agreement is the "operating agreement" within the meaning of C.R.S. § 7-80-102(11) and § 7-80-108. To the maximum extent permitted by Colorado law, this Agreement governs the rights, duties, limitations, and relations among the Members, any Managers, and the Company. The Company is bound by this Agreement under C.R.S. § 7-80-108(1)(b).

Article II — Purpose and Powers

2.1 Purpose. The Company is formed to engage in [________________________________] and any other lawful business or activity for which a limited liability company may be formed under Colorado law.

2.2 Powers. The Company has all powers granted to limited liability companies under C.R.S. § 7-80-104, including the powers to contract, hold property, sue and be sued, borrow, lend, and perform any act necessary or incidental to its business.

2.3 No Cannabis or Unlawful Activity. Nothing in this Agreement authorizes any business prohibited by Colorado or federal law.

Article III — Members and Membership Interests

3.1 Initial Members; Percentage Interests. The names, addresses, capital contributions, and Percentage Interests of the initial Members are set forth on Schedule A.

3.2 Nature of Membership Interest. Pursuant to C.R.S. § 7-80-501, a Member's interest is personal property. A Member has no interest in specific Company property.

3.3 Limited Liability. Pursuant to C.R.S. § 7-80-705, no Member or Manager is personally liable for the Company's debts, obligations, or other liabilities solely by reason of being a Member or Manager, except as expressly provided by Colorado law or by a written guaranty.

3.4 Admission of Additional Members. A new Member may be admitted only upon (a) unanimous written consent of the existing Members (C.R.S. § 7-80-701), (b) execution of a joinder to this Agreement, and (c) any amendment to Schedule A and to this Agreement reflecting the new Percentage Interests.

3.5 No Member Authority by Default in Manager-Managed Company. If the Company is Manager-managed (Section 7.1), a non-Manager Member has no agency authority to bind the Company in ordinary business transactions, except as expressly delegated by the Managers.

Article IV — Capital Contributions and Capital Accounts

4.1 Initial Capital Contributions. Each Member shall contribute on or before the Effective Date the cash, property, or services described opposite the Member's name on Schedule A. The agreed fair-market value of each non-cash contribution is also set forth on Schedule A.

4.2 Capital Accounts. The Company shall maintain a separate capital account for each Member in accordance with U.S. Treasury Regulations § 1.704-1(b)(2)(iv).

4.3 No Interest. No Member is entitled to interest on the Member's capital account or capital contributions.

4.4 No Withdrawal of Capital. Except as expressly provided in this Agreement, no Member may withdraw any portion of the Member's capital contribution without unanimous written consent.

4.5 Liability for Contributions. A Member is obligated to perform an enforceable promise to make a contribution under C.R.S. § 7-80-502, even if the Member is unable to perform because of death, disability, or other reason.

Article V — Capital Calls

5.1 Additional Capital Calls — Optional. No Member is obligated to make additional capital contributions, except as required under Section 4.5 or by unanimous written agreement of the Members.

5.2 Procedure for Voluntary Capital Calls. If the Members determine by [☐ Majority / ☐ Supermajority (___%) / ☐ Unanimous] vote that additional capital is needed, the Company shall deliver a written capital-call notice specifying:

(a) the aggregate amount called;
(b) each Member's pro-rata share;
(c) the due date (not less than [____] days after notice); and
(d) the consequences of failure to fund.

5.3 Remedies for Failure to Fund. A Member who fails to fund within the time required is a "Delinquent Member." The non-delinquent Members may elect any one or more of the following remedies:

(a) treat the unfunded amount as a demand loan from the contributing Members at [____]% per annum (or the maximum lawful rate);
(b) dilute the Delinquent Member's Percentage Interest pro rata in proportion to the cash actually contributed;
(c) purchase the Delinquent Member's interest at [____]% of fair market value; or
(d) any other remedy at law or equity not inconsistent with this Agreement.

Article VI — Allocations and Distributions

6.1 Allocations. All items of Company income, gain, loss, deduction, and credit shall be allocated among the Members in proportion to their Percentage Interests, subject to the regulatory allocations required by Treas. Reg. § 1.704-1(b) and § 1.704-2.

6.2 Distributions. Subject to Section 6.4, the Company shall distribute cash and other property to the Members in proportion to their Percentage Interests at the times and in the amounts determined by [☐ the Managers / ☐ a Majority of the Members].

6.3 Tax Distributions. Unless waived by unanimous consent, the Company shall distribute to each Member, no later than [____] days before each estimated-tax due date, an amount equal to the Member's allocated share of taxable income multiplied by the assumed tax rate of [____]% (combined federal and Colorado).

6.4 Limitations on Distributions. No distribution shall be made if, after giving effect to it, (a) the Company would not be able to pay its debts as they become due in the ordinary course, or (b) the Company's total assets would be less than the sum of its total liabilities. C.R.S. § 7-80-606. Members who knowingly receive an improper distribution may have personal liability under C.R.S. § 7-80-607.

6.5 Federal Tax Classification. Unless and until otherwise elected, the Company is classified as a partnership for federal income tax purposes under Treas. Reg. § 301.7701-3.

Article VII — Management

7.1 Management Structure. The Company is (check one):

☐ Member-managed under C.R.S. § 7-80-401. Decisions are made by a Majority of the Members, except as provided in Section 7.3 or 8.2.

☐ Manager-managed. The initial Manager(s) is/are [________________________________]. The Manager(s) shall serve until removal under Section 7.5 or resignation. Decisions reserved to the Members under Section 8.2 require Member action.

7.2 Authority of Managers / Managing Members. Subject to Sections 7.3 and 8.2, the Manager(s) (or in a member-managed Company, a Majority of the Members) may:

(a) execute and deliver contracts, deeds, leases, notes, security agreements, and other instruments in the Company's name;
(b) open, maintain, and close bank, brokerage, and credit accounts;
(c) hire, supervise, and terminate employees, independent contractors, and agents;
(d) acquire, hold, encumber, and dispose of property;
(e) borrow money and incur indebtedness; and
(f) institute, defend, settle, and compromise legal actions.

7.3 Major Decisions Requiring [Supermajority / Unanimous] Consent. Notwithstanding Section 7.2, the following actions require the written consent of Members holding at least [____]% of the Percentage Interests (or, where the Act requires, unanimous consent under C.R.S. § 7-80-401(2)):

(a) amending the Articles of Organization or this Agreement;
(b) admitting a new Member;
(c) authorizing any act not in the ordinary course of business;
(d) merger, conversion, sale of all or substantially all of the Company's assets, or dissolution;
(e) incurring indebtedness in excess of $[____];
(f) issuing or redeeming any membership interest; or
(g) making a tax election under Subchapter K or changing federal tax classification.

7.4 Compensation. Managers and Managing Members may receive reasonable compensation as approved by the non-affiliated Members.

7.5 Removal of Managers. Any Manager may be removed at any time, with or without cause, by Members holding at least [____]% of the Percentage Interests.

Article VIII — Voting Rights and Member Meetings

8.1 Default Voting Rule. Except where this Agreement or C.R.S. § 7-80-401(2) requires a different vote, decisions are made by a Majority of the Members (counted per capita under C.R.S. § 7-80-401(1)).

8.2 Matters Requiring Unanimous Consent (Mandatory under C.R.S. § 7-80-401(2)). The unanimous written consent of all Members is required to:

(a) amend the Articles of Organization;
(b) amend this Agreement; and
(c) authorize an act not in the ordinary course of the Company's business.

8.3 Annual Meeting. An annual meeting of the Members shall be held on [____________] of each year, at the Company's principal office or by remote communication.

8.4 Special Meetings. A special meeting may be called by any Manager or by Members holding at least [____]% of the Percentage Interests, on not less than [____] days' written notice stating the purpose of the meeting.

8.5 Action Without Meeting. Any action that may be taken at a meeting may be taken without a meeting by written or electronic consent signed by the Members holding the percentage required to approve the action.

8.6 Quorum. Members holding at least [____]% of the Percentage Interests constitute a quorum.

8.7 Proxies. A Member may vote by proxy executed in writing or by electronic transmission.

Article IX — Fiduciary Duties and Standards of Conduct

9.1 Statutory Standards. Each Member of a member-managed Company, and each Manager of a manager-managed Company, owes the Company and the other Members the duties of loyalty and care set forth in C.R.S. § 7-80-404, and the obligation of good faith and fair dealing under C.R.S. § 7-80-404(3).

9.2 Permitted Modification. Pursuant to C.R.S. § 7-80-108(1.5), the Members agree that the duties set forth in C.R.S. § 7-80-404 are modified as follows, provided that no such modification is manifestly unreasonable and the obligation of good faith and fair dealing is not eliminated:

(a) Outside Activities. Each Member and Manager may engage in any business or investment (including businesses that compete with the Company), and is not required to offer business opportunities to the Company, except for opportunities that arise from the use of Company resources or in the Member's or Manager's capacity as such.
(b) Self-Interested Transactions. A transaction between the Company and a Member or Manager (or an Affiliate) is not voidable solely by reason of the relationship if (i) it is approved or ratified, after disclosure of material facts, by Members or Managers who are not interested in the transaction, or (ii) it is fair to the Company at the time entered into.

9.3 Standards Not Subject to Modification. Nothing in this Article eliminates:

(a) the obligation of good faith and fair dealing (C.R.S. § 7-80-108(2)(d));
(b) liability for intentional misconduct, knowing violation of law, or improper personal benefit; or
(c) any other duty made nonwaivable by C.R.S. § 7-80-108(2) or § 7-80-108(1.5).

9.4 Indemnification. The Company shall indemnify each Member and Manager to the fullest extent permitted by C.R.S. § 7-80-407, except for claims arising from conduct described in Section 9.3(b).

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

10.1 General Transfer Restriction. No Member may sell, assign, pledge, encumber, or otherwise transfer all or any part of the Member's membership interest, except in accordance with this Article. A transferee acquires only the economic rights of a transferee under C.R.S. § 7-80-702, and not the rights of a Member, unless admitted under Section 3.4.

10.2 Permitted Transfers. A Member may transfer all or any part of the Member's interest, without other Member consent, to:

(a) a revocable living trust of which the Member is the settlor;
(b) the Member's spouse, descendants, or a trust for the benefit of any of them; or
(c) an entity wholly owned by the Member, provided the Member retains beneficial ownership.

The transferee shall execute a joinder agreeing to be bound by this Agreement.

10.3 Right of First Refusal (ROFR). If a Member ("Selling Member") receives a bona fide third-party offer to purchase all or part of the Member's interest, the Selling Member shall deliver written notice to the Company and the other Members ("ROFR Notice"), including a copy of the offer, the price, and material terms. The Company shall have [____] days to elect to purchase, and thereafter each non-selling Member shall have [____] additional days to elect to purchase its pro-rata share of any interest not purchased by the Company.

10.4 Tag-Along. If Members holding more than 50% of the Percentage Interests propose to sell their interests to a third party in a single transaction or series of related transactions, the other Members may elect, by written notice within [____] days, to "tag along" and sell their pro-rata portion on the same terms.

10.5 Drag-Along. If Members holding at least [____]% of the Percentage Interests approve a sale of all of the membership interests or substantially all of the Company's assets to a bona fide third-party purchaser, the remaining Members shall, on written notice, sell their interests on the same terms (subject to customary exceptions for representations and indemnities not pro-rata).

10.6 Spousal Consent. Each Member who is married shall obtain the spouse's written consent to this Agreement, in the form attached as Schedule B, acknowledging the transfer restrictions and the spouse's lack of management or transfer rights.

Article XI — Buy-Sell Provisions

11.1 Triggering Events. A "Triggering Event" with respect to a Member occurs upon the Member's:

(a) death;
(b) Permanent Disability (as defined in Section 11.7);
(c) bankruptcy or assignment for the benefit of creditors;
(d) divorce in which the Member's interest is, or is at risk of being, awarded in whole or in part to the non-Member spouse;
(e) attempted transfer in violation of Article X; or
(f) Voluntary Withdrawal (subject to Section 11.6).

11.2 Company First Right; Other Members Second. Upon a Triggering Event, the Company has the option (but not obligation) for [____] days to purchase all of the affected Member's interest. Any unexercised portion may be purchased by the non-affected Members pro rata for an additional [____] days.

11.3 Purchase Price. The purchase price shall be (check one):

☐ Fair market value as determined by an independent appraiser under Section 11.5;
☐ Book value as of the end of the month preceding the Triggering Event;
☐ A formula equal to [____ × trailing-12-month EBITDA] less debt; or
☐ The price most recently agreed by the Members at the annual meeting.

11.4 Payment Terms. Unless the parties agree otherwise, the purchase price shall be paid [____]% in cash at closing and the balance by a [____]-year promissory note bearing interest at [____]% per annum, with equal [☐ monthly / ☐ quarterly / ☐ annual] installments of principal and interest.

11.5 Appraisal Procedure. If fair market value is required, the Company and the affected Member (or representative) shall each select an appraiser; if the appraisers' values differ by 10% or less, the average controls; otherwise the two appraisers select a third, whose appraisal controls.

11.6 Voluntary Withdrawal. A Member may not voluntarily withdraw prior to dissolution except with the unanimous consent of the other Members.

11.7 Permanent Disability Defined. "Permanent Disability" means a Member's inability, by reason of physical or mental impairment, to perform the Member's customary services to the Company for [____] consecutive days or [____] days in any 12-month period, as determined by a physician selected by the Company.

Article XII — Charging Order (C.R.S. § 7-80-703)

12.1 Statutory Charging Order. Pursuant to C.R.S. § 7-80-703, the sole remedy of a judgment creditor of a Member against the Member's interest in the Company is a charging order entered by a court of competent jurisdiction. The judgment creditor has only the rights of a transferee with respect to the charged distributions and does not, by reason of the charging order, become a Member or acquire any management, voting, inspection, or other Member rights.

12.2 No Foreclosure by Operation of This Agreement. The Members acknowledge that C.R.S. § 7-80-703 does not expressly designate the charging order as the "sole and exclusive" remedy. To the maximum extent permitted by Colorado law, the Members agree that no judgment creditor may foreclose on a Member's interest, compel a distribution, or otherwise interfere with the management of the Company.

12.3 No Information Rights. A charging order holder is not entitled to inspect the books, records, or tax returns of the Company and is not entitled to any accounting or information rights granted to Members under C.R.S. § 7-80-411.

12.4 Continuation Despite Charging Order. A charging order against a Member's interest is not a dissolution event and does not cause the Member's dissociation.

Article XIII — Deadlock and Dispute Resolution

13.1 Deadlock Defined. A "Deadlock" exists if (a) the Members or Managers are unable to reach the required vote on any Major Decision (Section 7.3) for [____] consecutive days after a matter is first put to a vote, or (b) any meeting of the Members fails to achieve a quorum twice in succession.

13.2 Mediation. Before pursuing any remedy in Section 13.3 or 13.4, the Members shall participate in good-faith mediation administered by [☐ JAMS / ☐ AAA / ☐ a mediator in Denver, Colorado] for at least one session.

13.3 Buy-Sell Election ("Texas Shoot-Out") (Optional). If Deadlock continues for [____] days after mediation, any Member ("Initiating Member") may deliver a written offer ("Offer Notice") to the other Members specifying a price per 1% Percentage Interest. Within [____] days, each receiving Member must elect either (a) to sell its entire interest to the Initiating Member at the stated price, or (b) to buy the Initiating Member's entire interest at the stated price. If multiple Members elect to buy, they shall purchase pro rata.

13.4 Judicial Dissolution. Subject to C.R.S. § 7-80-801(1)(d), a Member may petition a Colorado district court for judicial dissolution on the grounds that it is "not reasonably practicable to carry on the Company's business in conformity with the Articles of Organization and this Agreement."

13.5 Governing Law. This Agreement is governed by Colorado law without regard to its conflict-of-laws principles.

13.6 Venue. Subject to Section 13.7, exclusive venue lies in the District Court for [____________] County, Colorado, or the United States District Court for the District of Colorado.

13.7 Arbitration (Optional). ☐ Any dispute arising under this Agreement (other than a petition for injunctive relief or judicial dissolution) shall be resolved by binding arbitration administered by [☐ JAMS / ☐ AAA] in Denver, Colorado, before [☐ one / ☐ three] arbitrator(s). Judgment on the award may be entered in any court of competent jurisdiction.

Article XIV — Dissolution and Winding Up

14.1 Events Causing Dissolution. The Company is dissolved on the first to occur of (C.R.S. § 7-80-801):

(a) the affirmative vote of Members holding at least [____]% of the Percentage Interests (default unanimous under § 7-80-801(1)(c));
(b) entry of a decree of judicial dissolution under § 7-80-801(1)(d);
(c) the occurrence of any event specified in the Articles of Organization; or
(d) administrative dissolution by the Colorado Secretary of State.

14.2 Continuation Despite Dissociation. The death, bankruptcy, dissociation, or expulsion of a Member does not, by itself, cause dissolution.

14.3 Winding Up. Upon dissolution, the Company shall wind up its affairs, liquidate assets, and distribute proceeds in the following order (C.R.S. § 7-80-803):

(a) to creditors (including Members who are creditors), in the order of priority required by law;
(b) to the establishment of any reserve reasonably deemed necessary;
(c) to Members in satisfaction of accrued but unpaid distributions; and
(d) to Members in proportion to positive capital-account balances.

14.4 Articles of Dissolution. The Company shall file a Statement of Dissolution with the Colorado Secretary of State under C.R.S. § 7-80-802 and § 7-80-810.

Article XV — State-Specific Provisions

15.1 Periodic Report. The Company shall file the annual Periodic Report with the Colorado Secretary of State on or before the close of the second month following the anniversary month of formation, pursuant to C.R.S. § 7-90-501. As of July 1, 2024, the filing fee is $25 (confirm at coloradosos.gov).

15.2 Colorado Income Tax. If the Company is treated as a partnership for federal income-tax purposes, the Company shall file the Colorado Partnership and S Corporation Tax Return (Form DR 0106) and shall withhold or pay composite tax on behalf of nonresident Members to the extent required by C.R.S. § 39-22-601(2.5).

15.3 No Series LLC. The Members acknowledge that Colorado does not authorize series limited liability companies. Any segregation of assets among internal "series" within this Company has no statutory liability-shielding effect under Colorado law.

15.4 Trade Name; DBA. Any "doing business as" name used by the Company shall be registered with the Colorado Secretary of State under C.R.S. § 7-71-103.

15.5 Articles Override. To the extent the Articles of Organization and this Agreement conflict, this Agreement controls as among the Members (subject to C.R.S. § 7-80-108(3)); the Articles control as to third parties.

Article XVI — General Provisions

16.1 Notices. All notices shall be in writing and delivered by hand, certified mail, recognized overnight courier, or email (with confirmation) to the addresses on Schedule A.

16.2 Amendments. This Agreement may be amended only by a writing signed by all Members (C.R.S. § 7-80-401(2)(b)).

16.3 Entire Agreement; Merger. This Agreement, together with the Articles of Organization and the schedules and exhibits hereto, constitutes the entire agreement among the Members with respect to the subject matter and supersedes all prior agreements, written or oral.

16.4 Severability. If any provision is held invalid or unenforceable, it shall be limited or construed under C.R.S. § 7-80-108(2.5)(b) so as to be valid, and the remaining provisions shall remain in full force.

16.5 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, including by electronic signature under C.R.S. § 24-71.3-101 et seq.

16.6 No Third-Party Beneficiaries. Except for indemnified persons under Section 9.4, this Agreement creates no rights in any person other than the Members and the Company.

16.7 Construction. Captions are for convenience only. Words of any gender include all genders; singular includes plural.

Signature Block

THE COMPANY

[________________________________], a Colorado limited liability company

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

MEMBERS

Member 1: [________________________________]
Signature: [________________________________]
Date: [__/__/____]

Member 2: [________________________________]
Signature: [________________________________]
Date: [__/__/____]

Member 3: [________________________________]
Signature: [________________________________]
Date: [__/__/____]

SPOUSAL CONSENT (See Schedule B)

Each married Member shall obtain spousal acknowledgment of this Agreement in the form attached as Schedule B.

Pre-Execution Checklist

☐ Articles of Organization filed with Colorado Secretary of State (C.R.S. § 7-80-203)
☐ EIN obtained from IRS (Form SS-4)
☐ Colorado Department of Revenue registration completed (sales/use tax, wage withholding, as applicable)
☐ Registered agent identified with Colorado street address
☐ Schedule A (Members, Capital Contributions, Percentage Interests) completed
☐ Schedule B (Spousal Consent) signed by each married Member's spouse
☐ Operating Agreement reviewed by Colorado-licensed counsel
☐ Initial capital contributions deposited to Company bank account
☐ Federal tax classification confirmed (Form 8832 / Form 2553 filed if applicable)
☐ Buy-sell valuation method selected (Section 11.3)
☐ Major-Decision threshold completed (Section 7.3)
☐ Initial Periodic Report month calendared (CO SOS — C.R.S. § 7-90-501)
☐ Business Personal Property and local license filings identified
☐ D&O / E&O / general liability insurance obtained

Sources and References

• Colorado Limited Liability Company Act — C.R.S. Title 7, Article 80: https://leg.colorado.gov/colorado-revised-statutes
• Colorado Secretary of State, Business Filings: https://www.coloradosos.gov/biz/
• C.R.S. § 7-80-108 (Effect of operating agreement): https://law.justia.com/codes/colorado/title-7/limited-liability-companies/article-80/part-1/section-7-80-108/
• C.R.S. § 7-80-401 (Management): https://codes.findlaw.com/co/title-7-corporations-and-associations/co-rev-st-sect-7-80-401/
• C.R.S. § 7-80-703 (Charging order): https://chargingorder.com/index.php?n=Site.StateColorado
• Colorado Periodic Report FAQ: https://www.sos.state.co.us/pubs/business/FAQs/reports.html
• Colorado Department of Revenue, Partnership returns: https://tax.colorado.gov/partnerships-and-s-corporations