Multi-Member LLC Operating Agreement — Virginia

Multi-Member LLC Operating Agreement (VIRGINIA)

Quick-Reference Summary

Article I — Formation

1.1 Formation. The organizers have caused Articles of Organization to be filed with the Virginia State Corporation Commission ("SCC") on [__/__/____] pursuant to Va. Code § 13.1-1011, forming [________________________________] (the "Company") as a domestic limited liability company.

1.2 Name. The name of the Company is [________________________________].

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

1.4 Registered Office and Registered Agent. The registered office and registered agent for service of process in Virginia (Va. Code § 13.1-1015) are:
Name: [________________________________]
Address: [________________________________]

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 Commonwealth of Virginia, including the Virginia Limited Liability Company Act, Va. Code § 13.1-1000 et seq., without regard to conflict-of-laws principles.

Article II — Purpose and Powers

2.1 Purpose. The Company is organized for any lawful purpose under Va. Code § 13.1-1008, including but not limited to: [________________________________].

2.2 Powers. The Company shall have all powers granted to a Virginia limited liability company under Va. Code § 13.1-1009, including the power to sue and be sued, contract, hold and convey property, borrow money, and conduct business inside and outside Virginia.

2.3 Professional Services. [If applicable] The Company is a professional limited liability company organized under Va. Code § 13.1-1100 et seq. to render professional services in [profession]; each Member is duly licensed in the Commonwealth to render such services.

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" or "Interest" consists of the Member's share of profits and losses of the Company and the Member's right to receive distributions, plus governance rights set forth in this Agreement. See Va. Code § 13.1-1002.

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 Va. Code § 13.1-1019 and § 13.1-1025, no Member is personally liable for the debts, obligations, or other liabilities of the Company solely by reason of being a Member.

3.5 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 Va. Code § 13.1-1027, a contribution may consist of cash, property, services rendered, or a promissory note or other obligation to contribute.

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 the Member's capital contribution or capital account balance.

4.4 No Withdrawal of Capital. No Member may withdraw any portion of the Member's capital contribution or capital account balance except as expressly provided in this Agreement.

4.5 Loans by Members. Any loan by a Member to the Company shall be evidenced by a written promissory note and shall not be treated as a capital contribution.

Article V — Capital Calls

5.1 Additional Capital. No Member is obligated to make additional capital contributions except as provided in this Article V.

5.2 Mandatory Capital Calls. The [Members / Managers] may issue a written capital call to all Members in proportion to Percentage Interests upon a determination that additional capital is necessary for Company operations. A capital call requires the affirmative vote of Members holding at least [____]% of the Percentage Interests.

5.3 Notice. A capital call notice shall state the aggregate amount, each Member's pro rata share, the purpose, and the funding deadline (not less than [30] days from notice).

5.4 Failure to Contribute. If a Member fails to fund a properly noticed capital call, the non-defaulting Members may, at their election:

• ☐ Treat the unfunded amount as a loan to the defaulting Member at [____]% per annum;
• ☐ Dilute the defaulting Member's Percentage Interest pro rata to the shortfall (Schedule B formula);
• ☐ Purchase the defaulting Member's Interest at a [____]% discount under Article XI.

Article VI — Allocations and Distributions

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

6.2 Distributions. Distributions shall be made to the Members in proportion to Percentage Interests at such times and in such amounts as the [Members / Managers] determine, subject to Va. Code § 13.1-1035 (limitations on distributions). This Section 6.2 supersedes any default in Va. Code § 13.1-1029.

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 such Member's allocable share of taxable income multiplied by the Assumed Tax Rate ([____]%), subject to available cash and Section 6.4.

6.4 Limitations on Distributions. No distribution shall be made if, after giving effect to the distribution, the Company would be unable to pay its debts as they become due in the ordinary course or total Company assets would be less than total Company liabilities. Va. Code § 13.1-1035.

6.5 Liability for Improper Distributions. A Member who receives a distribution in violation of Va. Code § 13.1-1035 is liable to the Company under Va. Code § 13.1-1036.

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

Article VII — Management

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

• ☐ Member-managed pursuant to Va. Code § 13.1-1022; or
• ☐ Manager-managed pursuant to Va. Code § 13.1-1024. The initial Managers are: [________________________________].

7.2 Authority of [Members / Managers]. Subject to Section 7.3, the [Members / Managers] have full authority to manage the business and affairs of the Company, including the power to contract, hire, borrow, acquire and dispose of property, and bring or defend litigation. Members and Managers are agents under Va. Code § 13.1-1021.1.

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;
• Establishment, modification, or termination of a protected series under Va. Code § 13.1-1088.2;
• Incurring indebtedness in excess of $ [____];
• Capital expenditures in excess of $ [____];
• Change in nature of the Company's business;
• Voluntary bankruptcy filing;
• Election of corporate tax classification.

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

7.5 Officers (Optional). The Members or Managers may appoint officers (e.g., President, CEO, CFO, Secretary). Any such appointment may be revoked at any time.

Article VIII — Voting Rights and Member Meetings

8.1 Voting. Each Member shall vote in proportion to Percentage Interest.

8.2 Meetings. Regular meetings of the Members 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. A quorum consists of Members holding a majority of the Percentage Interests.

8.4 Action Without a Meeting. Any action that may be taken at a meeting may be taken by written consent signed by Members holding the Percentage Interests required to approve the action at 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. A Manager shall discharge the Manager's duties in accordance with Va. Code § 13.1-1024.1: in good faith, with the care of a person in like position would exercise under similar circumstances, and in a manner the Manager reasonably believes to be in the best interests of the Company. A Manager is not liable for any action taken or any failure to act if the Manager performed the duties in compliance with this Section.

9.2 Members in Member-Managed Company. In a member-managed Company, each Member acting in connection with the Company's business owes the duties applicable to a Manager under Va. Code § 13.1-1024.1 as modified herein.

9.3 Modification of Duties. Pursuant to Va. Code § 13.1-1023, the Members may, by this Agreement, expand, restrict, or eliminate the duties (including fiduciary duties) and liabilities of a Member or Manager, except that this Agreement may not eliminate liability for willful misconduct or a knowing violation of criminal law.

9.4 Authorized Conflicts. The Members hereby authorize the following activities, which shall not constitute a breach of duty: [________________________________]. Va. Code § 13.1-1026 governs business transactions of a Member or Manager with the Company.

9.5 Indemnification. To the fullest extent permitted by Va. Code § 13.1-1009(16), the Company shall indemnify and hold harmless each Member, Manager, and officer from and against any liability incurred in connection with Company business, except for willful misconduct or knowing violation of criminal law.

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

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

10.2 Permitted Transfers. A Member may transfer the Member's Interest, without compliance with Sections 10.3–10.5, to (a) a revocable trust for the Member's benefit, (b) a family member or family entity for estate-planning purposes, or (c) another existing Member, subject to the transferee executing a counterpart of this Agreement.

10.3 Right of First Refusal. Before transferring to a third party, the selling Member shall deliver to the Company and the other Members written notice specifying the proposed transferee, price, and terms. 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]% of the Percentage Interests propose to sell to a third party, each other Member shall have the right to participate on the same terms, in proportion to Percentage Interests.

10.5 Drag-Along. If Members holding at least [____]% of the Percentage Interests approve a sale of the Company to a bona fide third party, 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 Va. Code § 13.1-1038 and is not admitted as a Member without the consent of all 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 the Departing Member's Interest:

• (a) Voluntary withdrawal or attempted dissociation;
• (b) Termination of employment with the Company;
• (c) Death;
• (d) Adjudicated incapacity;
• (e) Bankruptcy or insolvency;
• (f) Divorce;
• (g) Material breach of this Agreement.

11.2 Purchase Price. The purchase price shall be the fair market value as determined by:

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

11.3 Discounts. Minority and marketability discounts may apply per Schedule D, except no discount applies on death or incapacity.

11.4 Payment Terms. [____]% at closing in cash; balance over [____] years pursuant to a promissory note at the applicable federal rate, quarterly installments, prepayable without penalty.

11.5 Life Insurance Funding. Optional cross-purchase or entity-purchase life insurance per Schedule E.

Article XII — Charging Order

12.1 Transferable Interest. A Member's transferable interest is the share of profits and losses and right to distributions, as set forth in Va. Code § 13.1-1038.

12.2 Charging Order — Exclusive Remedy. Pursuant to Va. Code § 13.1-1041.1, the entry of a charging order is the exclusive remedy by which a judgment creditor of a Member or of a Member's assignee may satisfy a judgment out of the judgment debtor's transferable interest. A charging order constitutes a lien on the judgment debtor's transferable interest and entitles the judgment creditor only to distributions to which the debtor would otherwise be entitled.

12.3 No Foreclosure. No creditor of a Member or of a Member's assignee shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the Company. Va. Code § 13.1-1041.1(E).

12.4 No Management Rights. A charging order does not confer on the creditor any right to participate in management, inspect books and records, or compel distributions.

12.5 No Forced Dissolution. A charging order is not an event of dissolution of the Company.

Article XIII — Deadlock and Dispute Resolution

13.1 Deadlock Defined. A "Deadlock" occurs if the Members or Managers are unable to reach the requisite 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 under this Agreement, the parties shall first submit to non-binding mediation in [City/County], Virginia, 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 [City/County], Virginia, before a single arbitrator under AAA Commercial Rules. Judgment may be entered in any court of competent jurisdiction.

13.4 Buy-Sell on Deadlock. Alternatively, any Member may, in the event of a Deadlock not resolved within [90] days, 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. Notwithstanding the foregoing, any Member may seek judicial dissolution under Va. Code § 13.1-1047 on the grounds that it is not reasonably practicable to carry on the business in conformity with the articles of organization and any operating agreement. The Virginia State Corporation Commission has jurisdiction over such proceedings.

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 unanimous written consent of all Members;
• (c) Entry of a decree of judicial dissolution under Va. Code § 13.1-1047; or
• (d) Automatic cancellation of existence by the SCC for failure to pay annual registration fees or maintain a registered agent.

14.2 Effect of Dissociation. Withdrawal or dissociation of a Member does not, by itself, cause dissolution. 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 its affairs pursuant to Va. Code § 13.1-1048 and distribute its remaining assets in accordance with Va. Code § 13.1-1049:

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

14.4 Articles of Cancellation. Upon completion of winding up, the [Members / Managers] shall cause Articles of Cancellation to be filed with the SCC pursuant to Va. Code § 13.1-1050.

Article XV — State-Specific Provisions

15.1 Annual Registration Fee. Pursuant to Va. Code § 13.1-1062, the Company shall pay an annual registration fee of $50 to the SCC on or before the last day of the twelfth month succeeding the month of organization, and by such date in each year thereafter.

15.2 Registered Agent. The Company shall continuously maintain a registered office and a registered agent in Virginia under Va. Code § 13.1-1015. The registered agent must be either an individual Virginia resident who is a member or manager of the LLC, an officer or director of a corporate member, an attorney licensed to practice in Virginia, or a domestic or foreign business entity authorized to transact business in Virginia.

15.3 Protected Series (Optional). If the Members elect to establish one or more protected series under Va. Code § 13.1-1088.1 et seq., the Company shall:

• ☐ File a Statement of Protected Series with the SCC for each series and pay the applicable filing fee;
• ☐ Maintain separate and distinct records for each series;
• ☐ Hold the assets of each series separately and identifiably;
• ☐ Pay a separate $50 annual registration fee for each protected series;
• ☐ Identify each series by name in any contract entered into on behalf of that series.

15.4 Local BPOL Tax. The Company may be subject to local Business, Professional, and Occupational License (BPOL) taxes in the city or county where it conducts business.

15.5 Pass-Through Entity Tax (Optional). The Members may elect on Form PTE to subject the Company to the Virginia elective pass-through entity tax under Va. Code § 58.1-390.3 (SALT-cap workaround), shifting state income tax liability to the Company.

15.6 Sales and Use Tax. If applicable, the Company shall register with the Virginia Department of Taxation for sales and use tax.

15.7 No Publication Requirement. Virginia does not impose a newspaper publication requirement for formation of an LLC.

Article XVI — General Provisions

16.1 Entire Agreement. This Agreement constitutes the entire operating agreement of the Company under Va. Code § 13.1-1023 and supersedes all prior agreements and understandings.

16.2 Amendment. This Agreement may be amended only by a written instrument signed by Members holding at least [____]% of the Percentage Interests, except that any amendment that disproportionately and adversely affects a Member's economic rights requires that Member's written consent.

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

16.4 Notices. Notices shall be in writing and delivered by hand, certified mail, overnight courier, or email to the address listed in Section 3.1.

16.5 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts and by electronic signature under the Virginia Uniform Electronic Transactions Act, Va. Code § 59.1-479 et seq.

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

16.7 Confidentiality. Each Member shall keep confidential all non-public Company information except as required by law or authorized by the [Members / Managers].

Signature Block

THE COMPANY:

[________________________________], a Virginia 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: [__/__/____]

Commonwealth of Virginia, City/County of [________________________________]

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

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

Pre-Execution Checklist

• ☐ Articles of Organization filed with Virginia SCC
• ☐ Company name verified through SCC Business Entity Search
• ☐ Registered agent qualifies under Va. Code § 13.1-1015 (Virginia resident with proper status or authorized business entity)
• ☐ EIN obtained from IRS
• ☐ Virginia Department of Taxation registration completed (if applicable)
• ☐ Local BPOL license obtained in city/county of operation
• ☐ Separate Company bank account opened
• ☐ Initial capital contributions documented and deposited
• ☐ Schedules A, B, C, D, E completed
• ☐ Annual registration fee calendar reminder (12th month after formation)
• ☐ 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) documented
• ☐ If protected series: Statement of Protected Series filed for each series

Sources and References

• Virginia Limited Liability Company Act, Va. Code § 13.1-1000 et seq.: https://law.lis.virginia.gov/vacode/title13.1/chapter12/
• Va. Code § 13.1-1041.1 (Charging order): https://law.lis.virginia.gov/vacode/title13.1/chapter12/section13.1-1041.1/
• Va. Code § 13.1-1062 (Annual registration fee): https://law.lis.virginia.gov/vacode/title13.1/chapter12/section13.1-1062/
• Virginia SCC – Business Entity Filings: https://www.scc.virginia.gov/pages/Business-Entity-Filings
• Virginia Department of Taxation – Pass-Through Entities: https://www.tax.virginia.gov/pass-through-entities
• IRS, Limited Liability Company (LLC): https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc