Multi-Member LLC Operating Agreement — New Mexico

Multi-Member LLC Operating Agreement (NEW MEXICO)

Quick-Reference Summary

Article I — Formation

1.1 Formation. This Operating Agreement (the "Agreement") of [________________________________], LLC (the "Company"), a New Mexico limited liability company, is adopted and entered into effective as of [__/__/____] (the "Effective Date") by and among the persons identified as Members on the signature page (each a "Member" and collectively the "Members"). The Company was formed by filing Articles of Organization with the New Mexico Secretary of State pursuant to NMSA § 53-19-8 of the New Mexico Limited Liability Company Act (the "Act").

1.2 Name. The legal name of the Company is [________________________________], LLC. The name complies with NMSA § 53-19-3.

1.3 Principal Place of Business. The Company's principal place of business is [________________________________].

1.4 Registered Office and Registered Agent. The Company's registered office in New Mexico is [________________________________] and the Company's registered agent for service of process is [________________________________], as required by NMSA § 53-19-5.

1.5 Term. The Company shall have perpetual existence unless dissolved earlier under Article XIV or NMSA § 53-19-39.

1.6 Statutory Override. To the maximum extent permitted by NMSA § 53-19-19, this Agreement governs the internal affairs of the Company and the relations among the Members, the Company, managers, assignees, and transferees, except where the Act prohibits variation.

Article II — Purpose and Powers

2.1 Purpose. The Company is formed to engage in any lawful business, trade, investment, or activity for which a limited liability company may be organized under NMSA § 53-19-4, and specifically: [________________________________].

2.2 Powers. The Company has all powers granted under the Act, including the power to enter contracts; acquire, hold, lease, encumber, and dispose of real and personal property; borrow money and issue evidences of indebtedness; sue and be sued in its own name; conduct business and own property in any jurisdiction; indemnify members and managers; and engage in any lawful activity not inconsistent with the Act.

Article III — Members and Membership Interests

3.1 Initial Members.

3.2 Limited Liability. Pursuant to NMSA § 53-19-13, no Member or manager is personally liable for any debt, obligation, or liability of the Company solely by reason of being a Member or acting as a manager.

3.3 Classes of Interests. The Company may issue ☐ a single class ☐ multiple classes of Membership Interests with the rights, preferences, and obligations set forth in Exhibit A.

3.4 Admission of Additional Members. Pursuant to NMSA § 53-19-33, an assignee may become a Member only with the unanimous written consent of all other Members. Additional Members may otherwise be admitted only upon: (a) unanimous written consent of all existing Members; (b) execution of a counterpart of this Agreement; (c) payment of agreed capital contribution; and (d) compliance with applicable federal and state securities laws.

3.5 Anonymity (Optional). New Mexico permits formation of an LLC without disclosure of members or managers in the public Articles of Organization. ☐ The Members elect to maintain anonymity to the extent permitted by NMSA Chapter 53, Article 19. ☐ The Members do not invoke anonymity.

Article IV — Capital Contributions and Capital Accounts

4.1 Initial Capital Contributions. Initial capital contributions are set forth in Section 3.1 and itemized in Exhibit A. Contributions may consist of cash, property, services rendered, promissory notes, or other obligations to contribute, as permitted by NMSA § 53-19-20.

4.2 Additional Contributions. No Member is obligated to make additional contributions except as expressly required by this Agreement or a Capital Call adopted under Article V. Any obligation to contribute must be in writing and signed by the obligated Member (NMSA § 53-19-21).

4.3 Capital Accounts. A separate capital account shall be maintained for each Member in accordance with Treas. Reg. § 1.704-1(b)(2)(iv) and adjusted for contributions, allocations, and distributions.

4.4 No Interest on Contributions. No Member is entitled to interest on the Member's capital contribution or capital account balance.

4.5 Return of Contributions. A Member is entitled to a return of capital contributions only as provided in this Agreement and as permitted by NMSA § 53-19-26 (limitations on distribution; no distribution if Company insolvent).

Article V — Capital Calls

5.1 Discretionary Capital Calls. Upon the approval of Members holding [____]% (default: a Majority in Interest) of the Membership Interests, the Company may issue a written Capital Call to all Members, pro rata to Membership Interests.

5.2 Notice and Funding Deadline. A Capital Call notice shall state the aggregate amount, the per-Member share, the purpose, and a funding deadline of not less than [____] days (default: thirty (30)) after the notice date.

5.3 Remedies for Failure to Fund. If a Member fails to timely fund a Capital Call (a "Non-Funding Member"), the Company and the non-defaulting Members may elect any one or more of the following remedies (the operating agreement controls these elections under NMSA § 53-19-19):

• ☐ Treat the unfunded portion as a loan from the Company to the Non-Funding Member bearing interest at the lesser of [____]% per annum or the maximum lawful rate;
• ☐ Allow non-defaulting Members to fund the shortfall pro rata, with proportionate dilution of the Non-Funding Member's Membership Interest;
• ☐ Suspend voting and distribution rights of the Non-Funding Member until cured;
• ☐ Trigger the Company's purchase right under Article XI (Buy-Sell).

Article VI — Allocations and Distributions

6.1 Allocations. Profits and losses shall be allocated to the Members in proportion to their Membership Interests, in compliance with Subchapter K of the Internal Revenue Code and Treas. Reg. § 1.704-1(b).

6.2 Distributions of Available Cash. Distributions of available cash shall be made to the Members in proportion to their Membership Interests, at such times as the Members (or Managers, if manager-managed) determine, subject to the solvency limitations of NMSA § 53-19-26.

6.3 Default Statutory Rule Modified. Under NMSA § 53-19-25, the default distribution rule allocates by value of contributions. This Agreement instead allocates by Membership Interest as set forth in Section 6.2.

6.4 Tax Distributions. The Company shall, to the extent of available cash and subject to Section 6.2, make a tax distribution to each Member equal to that Member's allocable share of Company taxable income multiplied by the assumed tax rate of [____]% (default: 40%), pro rata in proportion to Membership Interests.

6.5 Liquidating Distributions. Liquidating distributions shall be made in accordance with positive capital account balances under Treas. Reg. § 1.704-1(b)(2)(ii)(b)(2), after payment of creditors as required by NMSA § 53-19-44.

6.6 Improper Distributions. A Member who receives a distribution in violation of NMSA § 53-19-26 is liable to the Company for the amount of the improper distribution.

Article VII — Management

7.1 Management Structure. The Company is ☐ member-managed ☐ manager-managed (check one) pursuant to NMSA § 53-19-15.

7.2 Managers (if Manager-Managed). The initial Manager(s) is/are:

7.3 Authority of Managers / Managing Members. The Manager(s) or, if member-managed, the Members (acting by Majority in Interest) are authorized to:

• ☐ Execute contracts, leases, deeds, promissory notes, and other instruments;
• ☐ Open, maintain, and close Company bank, brokerage, and merchant accounts;
• ☐ Hire, supervise, and terminate employees and independent contractors;
• ☐ File tax returns and make tax elections, including the BBA partnership-representative designation under I.R.C. § 6223;
• ☐ Acquire, hold, lease, pledge, and dispose of Company property;
• ☐ Initiate, defend, settle, and compromise legal proceedings;
• ☐ Borrow funds and grant security interests in Company property.

7.4 Major Decisions Requiring Member Approval. Notwithstanding Section 7.3, the following decisions require approval of Members holding [____]% (default: 75%) of the Membership Interests:

• ☐ Sale, lease, exchange, or other disposition of all or substantially all Company assets;
• ☐ Merger, conversion, or domestication of the Company;
• ☐ Amendment of Articles of Organization or this Agreement;
• ☐ Incurrence of Company indebtedness exceeding $[____________];
• ☐ Admission of new Members or issuance of new Membership Interests;
• ☐ Voluntary dissolution of the Company;
• ☐ Material change in the Company's business purpose.

7.5 Removal of Managers. A Manager may be removed, with or without cause, by Members holding [____]% (default: Majority in Interest) of the Membership Interests.

7.6 Indemnification. The Company shall indemnify each Member, Manager, and officer to the fullest extent permitted by NMSA § 53-19-18 against all judgments, settlements, penalties, fines, and reasonable expenses incurred in connection with any proceeding arising out of service to the Company, except for acts of gross negligence or willful misconduct under NMSA § 53-19-16.

Article VIII — Voting Rights and Member Meetings

8.1 Voting. Each Member is entitled to vote in proportion to that Member's Membership Interest. A "Majority in Interest" means Members holding more than fifty percent (50%) of the outstanding Membership Interests; a "Supermajority" means [____]% (default: 75%).

8.2 Annual Meeting. The Company shall hold an annual meeting of Members on [________________________________] each year, at such location as the Members designate, or by remote means.

8.3 Special Meetings. Special meetings may be called by any Member holding [____]% (default: 25%) or more of the Membership Interests, on not less than [____] days' (default: ten (10)) written notice.

8.4 Quorum. Members holding a Majority in Interest constitute a quorum.

8.5 Action Without Meeting. Any action may be taken without a meeting by written consent signed by Members holding the percentage of Membership Interests required to approve the action, in accordance with NMSA § 53-19-15.

8.6 Proxies. A Member may vote by written proxy, valid for not more than [____] months (default: 11 months) after its date.

Article IX — Fiduciary Duties and Standards of Conduct

9.1 Statutory Standard. Under NMSA § 53-19-16, a Member or Manager vested with management responsibility is not liable to the Company or other Members for acts or omissions unless such conduct constitutes gross negligence or willful misconduct.

9.2 Duty to Account for Profits. Under NMSA § 53-19-16(D), every managing Member and every Manager shall account to the Company and hold as trustee any profit derived from any transaction connected with the Company or from any use of Company property (including confidential information), unless the transaction was either (a) approved by the disinterested Managers or Members after full disclosure, or (b) fair to the Company when authorized.

9.3 Duty of Loyalty — Permitted Modifications. The Members agree that the following activities do not violate the duty of loyalty and are expressly permitted, provided full disclosure is made to the other Members:

• ☐ Outside business activities unrelated to the Company's business;
• ☐ Investment in entities that are not direct competitors of the Company;
• ☐ Reasonable compensation for services rendered separately to the Company.

9.4 Duty of Care — Business Judgment Rule. A Member or Manager shall discharge management duties in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances, and in a manner the Member or Manager reasonably believes is in the Company's best interests. Reliance in good faith on professional advice and on Company records prepared by qualified persons is permitted.

9.5 Good Faith and Fair Dealing. The implied contractual obligation of good faith and fair dealing applies to all parties but does not impose duties beyond those expressly assumed under this Agreement.

9.6 Conflict-of-Interest Transactions. A transaction between the Company and a Member or Manager (or an affiliate) is not voidable solely because of the relationship if: (a) the material facts are disclosed; (b) the transaction is approved by disinterested Members or Managers; or (c) the transaction is fair to the Company.

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

10.1 General Restriction on Transfer. No Member may sell, assign, pledge, hypothecate, encumber, or otherwise transfer (each a "Transfer") all or any part of the Member's Membership Interest except in compliance with this Article X, NMSA §§ 53-19-32 and 53-19-33, and applicable securities laws.

10.2 Permitted Transfers. A Member may Transfer Membership Interest, with notice but without consent, to: (a) a revocable living trust of which the Member is grantor; (b) a wholly-owned entity controlled by the Member; or (c) by testamentary disposition or intestate succession.

10.3 Right of First Refusal (ROFR). Before any other Transfer, the transferring Member ("Selling Member") shall give written notice to the Company and other Members stating the proposed transferee, price, and material terms. The Company shall have [____] days (default: thirty (30)) to elect to purchase, and if it declines, the other Members shall have an additional [____] days (default: thirty (30)) to elect to purchase pro rata.

10.4 Tag-Along Rights. If Members holding more than [____]% (default: 50%) of the Membership Interests propose to Transfer to a third party, each remaining Member shall have the right (but not the obligation) to participate pro rata in the Transfer on the same terms.

10.5 Drag-Along Rights. If Members holding more than [____]% (default: 75%) of the Membership Interests approve a sale to a bona fide third party, all remaining Members shall be required to participate in the sale on the same terms, with customary representations limited to title, capacity, and authority.

10.6 Effect of Transfer Without Consent. Under NMSA § 53-19-33, a transferee of a Membership Interest receives only the right to allocations and distributions; the transferee does not become a Member or acquire any management or voting rights unless admitted under Section 3.4.

Article XI — Buy-Sell Provisions

11.1 Triggering Events. The Company (or, if the Company declines, the remaining Members pro rata) shall have the option to purchase a Member's Membership Interest upon the occurrence of any of the following ("Triggering Events") with respect to such Member:

• ☐ Death;
• ☐ Permanent disability or incapacity (as defined in Section 11.2);
• ☐ Voluntary withdrawal;
• ☐ Bankruptcy or insolvency;
• ☐ Divorce (to extinguish any community-property claim by a former spouse);
• ☐ Material breach of this Agreement;
• ☐ Entry of a charging order under NMSA § 53-19-35 against the Member's interest;
• ☐ Termination of employment with the Company (if applicable);
• ☐ Court order awarding the Membership Interest to a third party.

11.2 Permanent Disability. "Permanent Disability" means a Member's inability, by reason of physical or mental impairment, to perform the essential functions of the Member's role for [____] consecutive months (default: six (6)) or [____] months out of any twelve (12) (default: nine (9)).

11.3 Purchase Price. The purchase price upon a Triggering Event shall be (choose one):

• ☐ Fair market value as determined by an independent appraiser mutually agreed upon (or, if the parties cannot agree, by three appraisers — one selected by each party and the third by the first two);
• ☐ Formula price equal to [____] times trailing 12-month EBITDA, minus indebtedness, multiplied by the departing Member's Membership Interest;
• ☐ Book value based on the most recent audited financial statements;
• ☐ Agreed value set forth in Exhibit B, updated annually.

11.4 Payment Terms. The purchase price shall be paid (choose one):

• ☐ Cash at closing;
• ☐ [____]% cash at closing, balance by promissory note over [____] years (default: 5) at [____]% annual interest;
• ☐ From life insurance proceeds (death only).

11.5 Life Insurance Funding (Optional). The Company may purchase and maintain life insurance on each Member to fund the buy-sell obligation upon death. Premiums are Company expenses; the Company is owner and beneficiary.

11.6 Right of First Refusal Coordination. The buy-sell rights under this Article XI shall be exercised before any rights under Article X.

Article XII — Charging Order (NMSA § 53-19-35)

12.1 Statutory Provision. Pursuant to NMSA § 53-19-35, on application by a judgment creditor of a Member, a New Mexico court may charge the Membership Interest of the Member with payment of the unsatisfied judgment, with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the Member's limited liability company interest under NMSA § 53-19-32.

12.2 Creditor Has Assignee Rights Only. A judgment creditor holding a charging order:

• ☐ Receives only the right to distributions otherwise payable to the Member, if and when made;
• ☐ Does not become a Member of the Company;
• ☐ Does not acquire any voting, management, information, or inspection rights;
• ☐ Cannot compel the Company to make distributions;
• ☐ Cannot participate in management or force dissolution.

12.3 No Foreclosure Right. Because the statute provides only assignee rights and assignees cannot become Members without unanimous consent under NMSA § 53-19-33, no court order may compel transfer of management or membership rights to a charging-order creditor.

12.4 Exemption Preserved. NMSA § 53-19-35 expressly preserves any exemption laws applicable to the Member's interest.

12.5 No Dissociation by Charging Order. Entry of a charging order does not, by itself, cause dissociation of the Member or dissolution of the Company.

12.6 Company Right to Redeem. The Company or the non-debtor Members may, at any time, redeem the charged interest by payment of the unsatisfied judgment, and shall thereupon succeed to the rights of the judgment creditor.

Article XIII — Deadlock and Dispute Resolution

13.1 Deadlock Defined. A "Deadlock" exists if the Members (or Managers) are unable to reach the required vote on a Major Decision (Section 7.4) for [____] consecutive days (default: 60).

13.2 Tiered Dispute Resolution. Members shall first attempt to resolve any Deadlock or dispute by:

• ☐ Good-faith negotiation among Member principals for [____] days (default: 30);
• ☐ Non-binding mediation under JAMS or AAA Commercial Mediation Rules;
• ☐ Binding arbitration in [____________], New Mexico, under AAA Commercial Arbitration Rules; OR
• ☐ Litigation in the District Court of [____________] County, New Mexico.

13.3 Buy-Sell Trigger on Deadlock. If Deadlock persists after the mediation period, any Member may invoke a "Texas Shoot-Out" or "Russian Roulette" buy-sell:

• ☐ Russian Roulette: Invoking Member offers price per percentage Membership Interest; non-invoking Member elects within [____] days to either sell at that price or buy at that price.
• ☐ Texas Shoot-Out: Both Members submit sealed bids; higher bidder buys the lower bidder out at the higher bid price.

13.4 Judicial Dissolution. A Member may apply to the District Court for judicial dissolution under NMSA § 53-19-39 if (a) it is not reasonably practicable to carry on the Company's business in conformity with the Articles of Organization and this Agreement, or (b) the Members in control have acted in a manner that is illegal or fraudulent.

Article XIV — Dissolution and Winding Up

14.1 Events of Dissolution. Pursuant to NMSA § 53-19-39, the Company shall dissolve upon the first to occur of:

• ☐ Written election of Members holding [____]% (default: 75%) of the Membership Interests;
• ☐ Sale of all or substantially all Company assets;
• ☐ Entry of a decree of judicial dissolution;
• ☐ Administrative dissolution by the Secretary of State;
• ☐ Any event that makes it unlawful for the Company to continue;
• ☐ Other events specified in this Agreement.

14.2 Continuation of Business. The Company shall not dissolve solely by reason of a Member's death, retirement, resignation, expulsion, bankruptcy, or dissolution; the business shall continue with the remaining Members.

14.3 Winding Up. Upon dissolution, the Members or Managers shall wind up the Company's affairs pursuant to NMSA §§ 53-19-40 and 53-19-41, including collecting receivables, liquidating assets, paying or providing for known and contingent liabilities, and distributing remaining assets.

14.4 Distribution of Assets. Pursuant to NMSA § 53-19-44, Company assets shall be distributed in the following order:

1. To creditors, including Members who are creditors;
2. To Members for distributions previously declared but not paid;
3. To Members in proportion to positive capital account balances; then
4. To Members in proportion to Membership Interests.

14.5 Articles of Dissolution. Upon completion of winding up, the Members shall file Articles of Dissolution with the New Mexico Secretary of State under NMSA § 53-19-43.

Article XV — State-Specific Provisions

15.1 No Annual Report or Franchise Tax. New Mexico does not require LLCs to file an annual report or pay an annual franchise tax to the Secretary of State. This is a distinctive New Mexico advantage. However, the Company must comply with:

• ☐ New Mexico Taxation and Revenue Department registration (CRS number) if the Company has gross receipts in New Mexico;
• ☐ Gross Receipts Tax (NMSA § 7-9-1 et seq.) on taxable transactions;
• ☐ Federal income tax filings (Form 1065 for partnership treatment).

15.2 Anonymous LLC. New Mexico permits formation of an LLC without disclosure of members or managers in the public Articles of Organization. ☐ The Company elects to remain anonymous as to its members/managers. ☐ The Company does not invoke anonymity. This Agreement and any side letters identifying Members shall be maintained in Company records and not filed publicly.

15.3 No Series LLC. New Mexico does not authorize series LLCs. If the Members wish to segregate assets and liabilities, they must form separate New Mexico LLCs.

15.4 Statement of Authority. The Company may file a Statement of Authority with the Secretary of State to identify persons authorized to enter into transactions on behalf of the Company or transfer Company real property.

15.5 Registered Agent. The Company shall continuously maintain a registered agent in New Mexico under NMSA § 53-19-5 and shall promptly file a statement of change for any change of registered agent or address.

15.6 Foreign Qualification. If the Company transacts business outside New Mexico, it shall qualify as a foreign LLC in each such state. Likewise, foreign LLCs transacting business in New Mexico must obtain a certificate of registration under NMSA § 53-19-46.

15.7 Community Property. A Member who resides in New Mexico (a community property state) and acquires the Membership Interest with community funds holds the interest as community property. Members shall execute spousal consents (Exhibit C) acknowledging the buy-sell, transfer restrictions, and charging-order provisions.

Article XVI — General Provisions

16.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Mexico, without regard to its conflict-of-laws principles. Internal affairs are governed by NMSA § 53-19-49.

16.2 Venue. Any dispute not subject to mandatory arbitration shall be resolved in the District Court of [____________] County, New Mexico.

16.3 Amendment. This Agreement may be amended only by a written instrument signed by Members holding [____]% (default: 75%; or unanimous if the amendment adversely affects only one Member) of the Membership Interests.

16.4 Entire Agreement. This Agreement, together with the Articles of Organization and all exhibits, constitutes the entire agreement among the Members and supersedes all prior oral or written understandings.

16.5 Severability. If any provision is held invalid or unenforceable, the remaining provisions shall continue in full force and effect.

16.6 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts and by electronic signature (E-SIGN Act, 15 U.S.C. § 7001 et seq.; New Mexico Uniform Electronic Transactions Act, NMSA § 14-16-1 et seq.).

16.7 No Third-Party Beneficiaries. This Agreement is solely for the benefit of the Members, the Company, and their respective successors and permitted assigns.

16.8 Notices. All notices shall be in writing and delivered by hand, certified mail, overnight courier, or email with confirmation, to the addresses set forth in Section 3.1 or such other address as a Member may designate.

16.9 Confidentiality. Each Member shall hold in confidence all non-public Company information and shall not use it for any purpose other than Company business.

Signature Block

IN WITNESS WHEREOF, the undersigned Members execute this Operating Agreement effective as of the Effective Date.

Manager (if Manager-Managed):

State of New Mexico
County of [____________]

Acknowledged before me this [__/__/____] by [________________________________].

_________________________________
Notary Public
My commission expires: [__/__/____]

Pre-Execution Checklist

• ☐ Articles of Organization filed with New Mexico Secretary of State (NMSA § 53-19-8).
• ☐ Registered agent and New Mexico street address confirmed and current (§ 53-19-5).
• ☐ Federal EIN obtained from the IRS (Form SS-4).
• ☐ Federal partnership tax election confirmed (Form 8832 not needed if default partnership treatment is desired for multi-member LLC).
• ☐ BBA Partnership Representative designated under I.R.C. § 6223.
• ☐ New Mexico CRS Identification Number obtained from NM Taxation and Revenue Department (if applicable).
• ☐ Initial capital contributions documented in Exhibit A.
• ☐ Spousal consents executed by community-property spouses (Exhibit C).
• ☐ Buy-sell life insurance procured and ownership/beneficiary aligned to Company.
• ☐ Business bank account opened in the Company's name (no commingling).
• ☐ Beneficial ownership information report considered under 31 U.S.C. § 5336 (Corporate Transparency Act).
• ☐ Industry-specific licensing reviewed with NM Regulation and Licensing Department.
• ☐ Foreign qualification evaluated in other states where the Company transacts business.
• ☐ Original signed Agreement maintained in Company records book.
• ☐ Members' estate plans / trusts updated to reference the Membership Interests.
• ☐ Confirm no annual report or franchise tax is due (NM exemption verified).

Sources and References

• New Mexico Limited Liability Company Act, NMSA §§ 53-19-1 to 53-19-74: https://law.justia.com/codes/new-mexico/chapter-53/article-19/
• NMSA § 53-19-2 (Definitions): https://law.justia.com/codes/new-mexico/chapter-53/article-19/section-53-19-2/
• NMSA § 53-19-16 (Liabilities and duties of managers and members): https://law.justia.com/codes/new-mexico/chapter-53/article-19/section-53-19-16/
• NMSA § 53-19-32 (Assignment of interests): https://law.justia.com/codes/new-mexico/chapter-53/article-19/section-53-19-32/
• NMSA § 53-19-33 (Right of assignee to become a member): https://law.justia.com/codes/new-mexico/chapter-53/article-19/section-53-19-33/
• NMSA § 53-19-35 (Rights of judgment creditor): https://chargingorder.com/index.php?n=Site.StateNewMexico
• New Mexico Secretary of State, Business Services: https://www.sos.nm.gov/business-services/
• New Mexico Taxation and Revenue Department: https://www.tax.newmexico.gov/
• Treas. Reg. § 1.704-1(b) (Capital accounts and allocations): https://www.ecfr.gov/current/title-26/section-1.704-1
• I.R.C. § 6223 (Partnership representative): https://www.law.cornell.edu/uscode/text/26/6223