Multi-Member LLC Operating Agreement — District of Columbia

Multi-Member LLC Operating Agreement (District of Columbia)

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 District of Columbia limited liability company (the "Company").

Quick-Reference Summary

Article I — Formation

1.1 Formation. The Company was formed as a District of Columbia limited liability company on [__/__/____] by the filing of a Certificate of Organization with the DC Department of Licensing and Consumer Protection (DLCP), Corporations Division, pursuant to D.C. Code § 29-802.01. The Members adopt and ratify that filing.

1.2 Name. The name of the Company is "[____]," which complies with D.C. Code § 29-103.02, 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 D.C. Code § 29-104.04, the Company's registered agent is [____], whose registered office address is [____].

1.5 Duration. The Company has perpetual duration unless dissolved as provided in Article XIV or under D.C. Code § 29-807.01.

1.6 Operating Agreement Authority. This Agreement is the "operating agreement" within the meaning of D.C. Code § 29-801.02 and § 29-801.07. To the extent this Agreement does not provide for a matter, the Act governs (§ 29-801.07(b)).

Article II — Purpose and Powers

2.1 Purpose. The Company is formed to engage in [____] and any other lawful purpose, regardless of whether for profit (D.C. Code § 29-801.04).

2.2 Powers. The Company has all powers granted to limited liability companies under D.C. Code § 29-801.05.

2.3 No Unlawful Activity. Nothing in this Agreement authorizes any business prohibited by District of Columbia 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 Transferable Interest. Pursuant to D.C. Code § 29-805.01, a Member's transferable interest is personal property and consists of the right to receive distributions.

3.3 Limited Liability. Pursuant to D.C. Code § 29-803.04, no Member or Manager is personally liable for the Company's debts, obligations, or liabilities solely by reason of being a Member or Manager, except as expressly provided by District of Columbia law or a written guaranty.

3.4 Admission of Additional Members. A new Member may be admitted only with the consent of all existing Members (D.C. Code § 29-803.01(c)) and upon execution of a joinder.

Article IV — Capital Contributions and Capital Accounts

4.1 Initial Capital Contributions. Each Member shall contribute the cash, property, or services described on Schedule A on or before the Effective Date (D.C. Code § 29-803.02).

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

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

4.4 No Withdrawal of Capital. No Member may withdraw capital except as provided in this Agreement or by unanimous written consent.

4.5 Liability for Promised Contributions. A Member's obligation to contribute is enforceable under D.C. Code § 29-803.03 even if the Member is unable to perform.

Article V — Capital Calls

5.1 No Mandatory Capital Calls. No Member is obligated to make additional contributions except as provided in Section 4.5 or by separate unanimous written agreement.

5.2 Voluntary Capital Calls. Written notice shall specify the aggregate amount, each Member's pro-rata share by Percentage Interest, due date (not less than [____] days), and consequences of nonpayment.

5.3 Remedies for Failure to Fund. A Delinquent Member may be subjected to any one or more of:

(a) deemed demand loan at [____]% per annum;
(b) pro-rata dilution of Percentage Interest;
(c) forced sale at [____]% of fair market value; or
(d) any other remedy at law or equity.

Article VI — Allocations and Distributions

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

6.2 Distributions. Notwithstanding the equal-shares default of D.C. Code § 29-804.04, distributions shall be made to the Members in proportion to their Percentage Interests, at the times and amounts determined by the Governance Body.

6.3 Tax Distributions. Unless waived by unanimous consent, the Company shall distribute, before each estimated-tax due date, an amount equal to each Member's allocated taxable income multiplied by [____]% (combined federal and District of Columbia).

6.4 Limitations on Distributions. No distribution shall be made if, after giving effect to it, (a) the Company would be unable to pay its debts as they become due, or (b) the Company's total assets would be less than its total liabilities (D.C. Code § 29-804.05). Members are liable for improper distributions under § 29-804.06.

6.5 Liquidating Distributions. Upon winding up under Article XIV, liquidating distributions shall be (a) first, to return positive capital-account balances, and (b) thereafter, in proportion to Percentage Interests.

6.6 Federal Tax Classification. Unless 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 (default under D.C. Code § 29-804.07). Decisions are made by a Majority by Percentage Interest (Section 8.1), except for actions reserved to Member supermajority or unanimous consent in Section 7.3 and § 29-804.07(c).

☐ Manager-managed. The operating agreement designates the Company as manager-managed. The initial Manager(s) is/are [____]. Non-Manager Members have no agency authority by default.

7.2 Authority. Subject to Sections 7.3 and 8.2, the Governance Body may:

(a) execute contracts, deeds, leases, notes, and other instruments;
(b) open, maintain, and close financial accounts;
(c) hire, supervise, and terminate employees, 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] Member Consent. The following actions require the written consent of Members holding at least [____]% of the Percentage Interests (or, where the Act requires, unanimous consent under § 29-804.07(c)):

(a) amending the Certificate of Organization or this Agreement;
(b) admitting a new Member;
(c) approving any merger, conversion, domestication, sale of all or substantially all of the Company's assets, or dissolution;
(d) authorizing an act outside the ordinary course of business;
(e) incurring indebtedness in excess of $[____];
(f) changing federal tax classification or making material tax elections; or
(g) appointing or removing a Manager.

7.4 Compensation. Reasonable compensation may be paid to Managers and Managing Members as approved by disinterested Members.

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

Article VIII — Voting Rights and Member Meetings

8.1 Override to Percentage-Interest Voting. Notwithstanding the per-capita default of D.C. Code § 29-804.07, the Members agree that all Member votes shall be cast in proportion to Percentage Interests. References to "Majority," "Supermajority," and similar thresholds refer to the specified percentage of the Percentage Interests.

8.2 Matters Requiring Unanimous Member Consent. The following matters require the unanimous consent of all Members (consistent with D.C. Code § 29-804.07(c)):

(a) amending the Certificate of Organization or this Agreement;
(b) admitting a new Member; and
(c) any other matter for which the Act requires unanimous consent.

8.3 Annual Meeting. An annual meeting of the Members shall be held on [____] of each year.

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

8.5 Action Without Meeting. Any action may be taken by written or electronic consent signed by 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 Remote Participation. Permitted under the District of Columbia Uniform Electronic Transactions Act, D.C. Code § 28-4901 et seq.

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 duties of loyalty and care set forth in D.C. Code § 29-804.09, and the contractual obligation of good faith and fair dealing.

9.2 Permitted Modifications. Pursuant to D.C. Code § 29-801.07(d), and if not manifestly unreasonable, the operating agreement may:

(a) restrict or eliminate the aspects of the duty of loyalty stated in § 29-804.09;
(b) identify specific types or categories of activities that do not violate the duty of loyalty (e.g., outside investments, family-business interests);
(c) alter the duty of care, but may not authorize willful or intentional misconduct or knowing violation of law; and
(d) alter or eliminate any other fiduciary duty.

The Members accordingly agree that each Member and Manager may engage in outside activities, including those competing with the Company, except for opportunities arising directly from the use of Company resources; and that the operating agreement may specify the method (after full disclosure to disinterested and independent persons) by which an otherwise-conflicting transaction may be authorized or ratified (§ 29-801.07(d)(1)).

9.3 Nonwaivable Provisions. Nothing in this Article may, under D.C. Code § 29-801.07(c):

(a) eliminate the duty of loyalty, the duty of care, or any other fiduciary duty except as permitted by § 29-801.07(d);
(b) eliminate the contractual obligation of good faith and fair dealing (the operating agreement may prescribe standards, if not manifestly unreasonable, by which performance is measured); or
(c) relieve or exonerate a person from liability for conduct involving bad faith, willful or intentional misconduct, or knowing violation of law.

The Superior Court decides as a matter of law whether a term is manifestly unreasonable (§ 29-801.07(h)).

9.4 Indemnification. The Company shall indemnify each Member, Manager, and officer to the fullest extent permitted by D.C. Code § 29-804.08, except for conduct described in Section 9.3(c).

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 interest, except in accordance with this Article. A transferee acquires only the rights of a transferee under D.C. Code § 29-805.02 and not the rights of a Member, unless admitted under Section 3.4.

10.2 Permitted Transfers. A Member may transfer all or part of the transferable interest, without other Member consent, to (a) a revocable living trust of which the Member is 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, subject in each case to a joinder.

10.3 Right of First Refusal (ROFR). A Selling Member who receives a bona fide third-party offer shall deliver a ROFR Notice to the Company and other Members. The Company has [____] days to elect to purchase; non-selling Members then have [____] additional days to elect pro rata.

10.4 Tag-Along. If Members holding more than 50% of the Percentage Interests propose to sell to a third party, the other Members may tag along pro rata within [____] days on the same terms.

10.5 Drag-Along. If Members holding at least [____]% of the Percentage Interests approve a sale of all membership interests or substantially all of the Company's assets to a bona fide third party, the remaining Members shall sell on the same terms.

10.6 Spousal Consent. Each married Member shall obtain spousal consent in the form attached as Schedule B.

Article XI — Buy-Sell Provisions

11.1 Triggering Events. A "Triggering Event" includes:

(a) death;
(b) Permanent Disability (Section 11.7);
(c) bankruptcy or assignment for the benefit of creditors;
(d) divorce affecting the membership interest;
(e) attempted transfer in violation of Article X;
(f) dissociation under D.C. Code § 29-806.02; or
(g) voluntary withdrawal.

11.2 Company First Right; Other Members Second. Upon a Triggering Event, the Company has the option for [____] days to purchase the affected Member's interest; any unexercised portion is offered to the non-affected Members pro rata for [____] additional days.

11.3 Purchase Price. ☐ Fair market value (Section 11.5); ☐ book value; ☐ [____ × trailing-12-month EBITDA] less debt; or ☐ most-recent value agreed at the annual meeting.

11.4 Payment Terms. [____]% in cash at closing; balance by [____]-year promissory note at [____]% per annum.

11.5 Appraisal Procedure. Each side selects an appraiser; if values differ by 10% or less, the average controls; otherwise the two appraisers select a third whose appraisal controls.

11.6 No Statutory Mandatory Buy-Out. The D.C. Act does not require a mandatory buyout on dissociation. Dissociation is a Triggering Event under Section 11.1(f), giving the Company and other Members the OPTION (not the obligation) to purchase.

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

Article XII — Charging Order (D.C. Code § 29-806.07)

12.1 Charging Order. 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 for the unsatisfied amount of the judgment (D.C. Code § 29-806.07(a)).

12.2 Lien; Pay-Over. A charging order constitutes a lien on the judgment debtor's transferable interest and requires the Company to pay over to the order-holder any distribution that would otherwise be paid to the judgment debtor (D.C. Code § 29-806.07(b)).

12.3 Foreclosure (Multi-Member). Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, the court may foreclose the lien and order the sale of the transferable interest. The purchaser at the foreclosure sale obtains only the transferable interest, DOES NOT become a Member, and is subject to D.C. Code § 29-805.02 (D.C. Code § 29-806.07(c)).

12.4 Redemption. Before foreclosure, the judgment debtor, the Company, or a non-debtor Member may extinguish the charging order or redeem the interest (D.C. Code § 29-806.07(d)-(e)).

12.5 Exclusive Remedy. This section provides the exclusive remedy by which a judgment creditor of a Member or transferee may satisfy a judgment out of the judgment debtor's transferable interest (D.C. Code § 29-806.07(f)).

12.6 Exemptions Preserved. This Agreement does not deprive any Member or transferee of the benefit of any exemption laws (D.C. Code § 29-806.07(g)).

Article XIII — Deadlock and Dispute Resolution

13.1 Deadlock Defined. A "Deadlock" exists if (a) the Members or Managers fail to reach the required vote on a Major Decision for [____] consecutive days, or (b) any Member meeting fails to achieve a quorum twice in succession.

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

13.3 Buy-Sell Election (Optional). If Deadlock continues for [____] days after mediation, any Member may deliver an Offer Notice specifying a price per 1% Percentage Interest. The receiving Members must elect within [____] days to either sell to the Initiating Member or buy out the Initiating Member at the stated price.

13.4 Judicial Dissolution. A Member may petition the Superior Court of the District of Columbia for judicial dissolution under D.C. Code § 29-807.03 on the grounds that it is not reasonably practicable to carry on the Company's activities in conformity with the Certificate of Organization and this Agreement, or that the managers or controlling members have acted illegally or fraudulently.

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

13.6 Venue. Subject to Section 13.7, exclusive venue lies in the Superior Court of the District of Columbia or the United States District Court for the District of Columbia.

13.7 Arbitration (Optional). ☐ Any dispute (other than petitions for injunctive relief or judicial dissolution) shall be resolved by binding arbitration administered by [☐ JAMS / ☐ AAA] in the District of Columbia, before [☐ one / ☐ three] arbitrator(s), under the Federal Arbitration Act and the District of Columbia Revised Uniform Arbitration Act, D.C. Code § 16-4401 et seq.

Article XIV — Dissolution and Winding Up

14.1 Events Causing Dissolution. The Company is dissolved on the first to occur of (D.C. Code § 29-807.01):

(a) an event specified in this Agreement;
(b) consent of all Members (or, as elected, Members holding at least [____]% of the Percentage Interests);
(c) the passage of 90 consecutive days during which the Company has no members;
(d) entry of a decree of judicial dissolution under § 29-807.03; or
(e) administrative dissolution by the DLCP under § 29-106.02.

14.2 Winding Up. Upon dissolution, the Company shall wind up its activities under D.C. Code § 29-807.02 and apply proceeds in the order required by § 29-807.05:

(a) creditors (including Members who are creditors);
(b) reasonable reserves; and
(c) Members in accordance with Section 6.5.

14.3 Statement of Dissolution / Termination. Upon completion of winding up, the Company shall file the appropriate dissolution and cancellation statements with the DLCP under D.C. Code § 29-807.06 and § 29-807.07.

Article XV — District of Columbia-Specific Provisions

15.1 Biennial Report. The Company shall file a Biennial Report (Form BRA-25) with the DLCP, due by April 1 of the calendar year following registration and by April 1 every second year thereafter.

15.2 Clean Hands / Basic Business License. The Company shall obtain and maintain any required Basic Business License and remain in good standing under the DC Clean Hands Act.

15.3 DC Unincorporated Business Franchise Tax. The Company shall evaluate liability for the District's Unincorporated Business Franchise Tax (Form D-30) under D.C. Code § 47-1808.01 et seq., subject to applicable thresholds and exemptions.

15.4 Partnership Representative. The Company designates [____] as Partnership Representative under I.R.C. § 6223 for the Bipartisan Budget Act of 2015 centralized partnership audit regime.

Article XVI — General Provisions

16.1 Notices. All notices shall be in writing and delivered by hand, certified mail, 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.

16.3 Entire Agreement. This Agreement, together with the Certificate of Organization and the schedules and exhibits, constitutes the entire agreement among the Members 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 so as to be valid; remaining provisions remain in full force.

16.5 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, including by electronic signature under the District of Columbia Uniform Electronic Transactions Act, D.C. Code § 28-4901 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.

Signature Block

THE COMPANY

[____], a District of Columbia 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)

Pre-Execution Checklist

☐ Certificate of Organization filed with DC DLCP Corporations Division (D.C. Code § 29-802.01)
☐ Registered agent with DC street address designated (D.C. Code § 29-104.04)
☐ EIN obtained from IRS
☐ Basic Business License and Clean Hands compliance evaluated
☐ Biennial Report (Form BRA-25) calendared (due April 1, every second year)
☐ Unincorporated Business Franchise Tax (Form D-30) analyzed
☐ Schedule A completed
☐ Schedule B (Spousal Consent) signed where applicable
☐ Buy-sell valuation method selected (Section 11.3)
☐ Major-Decision threshold completed (Section 7.3)
☐ Partnership Representative designated
☐ Operating Agreement reviewed by District of Columbia-licensed counsel
☐ Beneficial Ownership Information evaluated under the Corporate Transparency Act
☐ D&O / E&O / general liability insurance obtained

Sources and References

• District of Columbia Uniform Limited Liability Company Act of 2010, D.C. Code Title 29, Chapter 8: https://code.dccouncil.gov/us/dc/council/code/titles/29/chapters/8
• D.C. Code § 29-801.07 (Operating agreement; scope and limitations): https://code.dccouncil.gov/us/dc/council/code/sections/29-801.07
• D.C. Code § 29-806.07 (Charging order): https://code.dccouncil.gov/us/dc/council/code/sections/29-806.07
• D.C. Code § 29-804.09 (Standards of conduct): https://code.dccouncil.gov/us/dc/council/code/sections/29-804.09
• DC Department of Licensing and Consumer Protection, Corporations Division: https://dlcp.dc.gov/service/corporate-registration