Single-Member LLC Operating Agreement

Single-Member LLC Operating Agreement

Purpose of This Template

This Single-Member LLC Operating Agreement establishes the governance framework, operating procedures, and ownership rights for a limited liability company with one member. While many states do not legally require this document, it is essential for:

• Protecting limited liability status - Demonstrates separation between owner and business
• Opening business bank accounts - Banks typically require this document
• Securing financing - Lenders review operating agreements
• Establishing tax elections - Documents S-Corp election or other tax choices
• Protecting against future disputes - Clarifies ownership and succession

State-Specific Requirements

States Requiring Operating Agreements

States Strongly Recommending Operating Agreements

☐ All other states strongly recommend having an operating agreement even when not legally required

Pre-Drafting Checklist

Company Formation Verification

☐ LLC has been properly filed with the state
☐ Certificate of Formation/Organization obtained
☐ Registered agent designated
☐ EIN (Employer Identification Number) obtained from IRS
☐ State business licenses secured
☐ DBA (Doing Business As) filed if using trade name

Member Information

☐ Member's full legal name documented
☐ Member's current address verified
☐ Member's percentage of ownership determined (100%)
☐ Initial capital contribution amount established
☐ Tax identification information ready

Operating Agreement Essential Provisions

Article I: Formation and Purpose

Section 1.1 - Formation

☐ Company Name: ________________________________________________
☐ State of Formation: ___________________________________________
☐ Date of Formation: ___________________________________________
☐ Principal Place of Business: ___________________________________
☐ Registered Agent Name: _______________________________________
☐ Registered Agent Address: ____________________________________

Section 1.2 - Purpose Statement

☐ Broad purpose clause included: "To engage in any lawful business activity"
☐ Specific business activities described if desired: _______________________
☐ Statement that LLC may exercise all powers permitted by state law

Section 1.3 - Duration

☐ Perpetual existence (recommended)
☐ Specific term: From _____________ to _____________
☐ Statement regarding continuation upon member's death or incapacity

Article II: Member Information and Capital

Section 2.1 - Sole Member Identification

Section 2.2 - Capital Contributions

☐ Cash contribution amount: $_______________________
☐ Property contribution (fair market value): $_______________________
☐ Services contribution (if permitted by state): $_______________________
☐ Future capital contribution obligations: _______________________
☐ No additional capital contribution requirements unless agreed in writing

Section 2.3 - Capital Accounts

☐ Capital account to be maintained in accordance with Treasury Regulations
☐ Initial capital account balance equals initial contribution
☐ Adjustments for profits, losses, and distributions documented
☐ No interest paid on capital contributions unless specified

Article III: Tax Classification and Elections

Section 3.1 - Default Tax Treatment

☐ Disregarded Entity (default for single-member LLC)

• Reported on Schedule C of member's personal tax return
• Self-employment taxes apply to business income

Section 3.2 - Alternative Tax Elections

☐ S-Corporation Election (IRS Form 2553)

• Date of election: _____________
• Payroll requirements apply
• Reasonable salary must be paid to member-employee

☐ C-Corporation Election (IRS Form 8832)

• Date of election: _____________
• Subject to corporate tax rates
• Potential double taxation on distributions

Section 3.3 - Tax Year

☐ Calendar year (January 1 - December 31)
☐ Fiscal year ending: _____________

Section 3.4 - Accounting Method

☐ Cash method
☐ Accrual method
☐ Hybrid method

Article IV: Management and Operations

Section 4.1 - Management Structure

☐ Member-Managed LLC (member has full authority)
☐ Manager-Managed LLC (designate separate manager)

If Manager-Managed:
| Manager Information | |
|---------------------|---|
| Manager Name | |
| Manager Address | |
| Manager Compensation | |
| Term of Management | |

Section 4.2 - Powers of Member/Manager

The Member shall have authority to:
☐ Execute contracts and agreements
☐ Open and manage bank accounts
☐ Hire and terminate employees
☐ Purchase, sell, or lease property
☐ Borrow money and incur debt
☐ Make business decisions without limitation

Section 4.3 - Actions Requiring Written Resolution

☐ Sale of substantially all assets
☐ Merger or conversion
☐ Amendment of operating agreement
☐ Admission of new members
☐ Dissolution of the company
☐ Major loans exceeding: $_______________________

Section 4.4 - Day-to-Day Operations

☐ Banking procedures established
☐ Record-keeping requirements documented
☐ Expense reimbursement policies defined
☐ Business insurance requirements specified

Article V: Financial Provisions

Section 5.1 - Bank Accounts

☐ Primary Business Account Bank: _________________________________
☐ Account Type: Business Checking
☐ Authorized signers documented
☐ Minimum balance requirements: $_______________________

Section 5.2 - Distributions

☐ Distributions made at sole discretion of Member
☐ No required distribution schedule
☐ Distributions to maintain adequate working capital
☐ Tax distributions priority (if S-Corp election)

Section 5.3 - Books and Records

The Company shall maintain:
☐ Current operating agreement
☐ Tax returns for past three years
☐ Financial statements
☐ Bank statements
☐ Contracts and agreements
☐ Meeting minutes and written resolutions
☐ Member capital account records

Section 5.4 - Fiscal Year End Procedures

☐ Annual financial review completed
☐ Tax documents prepared
☐ Capital account reconciliation performed
☐ Business valuation updated (optional)

Article VI: Liability Protection

Section 6.1 - Limited Liability of Member

☐ Member not personally liable for LLC debts and obligations
☐ Liability limited to capital contribution
☐ No personal liability for torts of employees
☐ State law liability protections apply

Section 6.2 - Maintaining Liability Protection

The Member shall:
☐ Keep personal and business finances separate
☐ Use LLC name on all business documents
☐ Maintain adequate business insurance
☐ Follow all corporate formalities
☐ Adequately capitalize the business
☐ File annual reports with state
☐ Not commingle funds

Section 6.3 - Indemnification

☐ Company shall indemnify Member for authorized actions
☐ No indemnification for willful misconduct
☐ No indemnification for gross negligence
☐ No indemnification for breach of operating agreement

Article VII: Transfer of Membership Interest

Section 7.1 - Restrictions on Transfer

☐ Member may freely transfer membership interest
☐ Transfer subject to restrictions: _________________________________
☐ New member admission requires amendment to operating agreement

Section 7.2 - Assignment of Economic Interest

☐ Economic interest may be assigned without Company consent
☐ Assignee becomes "assignee" only (no management rights)
☐ Full membership requires admission as member

Section 7.3 - Death or Incapacity of Member

☐ Company continues with designated successor
☐ Company dissolves unless continued by successor
☐ Designated successor/beneficiary: _________________________________
☐ Buy-out provisions (if applicable): _________________________________

Article VIII: Dissolution and Winding Up

Section 8.1 - Events Causing Dissolution

☐ Written decision by Member to dissolve
☐ Entry of judicial decree of dissolution
☐ Administrative dissolution by state
☐ Death/incapacity of Member (unless continued by successor)
☐ Expiration of LLC term (if specified)

Section 8.2 - Winding Up Procedures

Upon dissolution, the Member shall:
☐ Cease normal business operations
☐ Collect all debts owed to Company
☐ Pay or provide for Company debts and obligations
☐ Liquidate Company assets
☐ Distribute remaining assets to Member
☐ File articles of dissolution with state
☐ Cancel business licenses and permits
☐ Close bank accounts
☐ File final tax returns

Section 8.3 - Distribution Upon Dissolution

Priority of distributions:

1. ☐ Payment of creditors (including Member as creditor)
2. ☐ Establishment of reserves for contingent liabilities
3. ☐ Distribution to Member of remaining assets

Article IX: Miscellaneous Provisions

Section 9.1 - Amendment

☐ Operating Agreement may be amended by written resolution of Member
☐ All amendments shall be in writing and signed
☐ Amendments effective upon date specified

Section 9.2 - Severability

☐ Invalid provisions do not affect remaining provisions
☐ Invalid provisions reformed to minimum extent necessary

Section 9.3 - Governing Law

☐ Governing State: _________________________________
☐ State LLC Act applies to matters not covered by this Agreement

Section 9.4 - Entire Agreement

☐ Operating Agreement supersedes all prior agreements
☐ No oral modifications permitted

Section 9.5 - Dispute Resolution

☐ Mediation first - Required before litigation
☐ Arbitration - Binding arbitration required
☐ Litigation - Courts of _____________ County, _____________ State

Signature Page

Member Acknowledgment and Adoption

I, the undersigned, being the sole member of the above-named Limited Liability Company, hereby adopt this Operating Agreement as of the Effective Date stated below.

SOLE MEMBER:

EFFECTIVE DATE OF AGREEMENT: _________________________________

Required Attachments

Exhibit A: Initial Capital Contribution Receipt

☐ Amount received: $_______________________
☐ Form of contribution: Cash / Property / Services
☐ Date received: _______________________
☐ Description of property (if applicable): _______________________
☐ Fair market value documentation attached

Exhibit B: Certificate of Formation (Copy)

☐ Filed copy of Certificate/Articles of Formation attached

Exhibit C: IRS Form SS-4 Confirmation (EIN)

☐ EIN confirmation letter attached

Exhibit D: Tax Election Forms (if applicable)

☐ IRS Form 2553 (S-Corp election) - Copy attached
☐ IRS Form 8832 (Entity classification) - Copy attached

Annual Maintenance Checklist

State Compliance

☐ Annual report filed with Secretary of State
☐ Registered agent information current
☐ Business licenses renewed
☐ Franchise tax paid (if applicable)

Financial Records

☐ Books and records maintained
☐ Bank accounts reconciled
☐ Capital account updated
☐ Financial statements prepared

Tax Compliance

☐ Federal tax return filed
☐ State tax return filed
☐ Estimated tax payments made
☐ Self-employment tax paid (if applicable)

Corporate Formalities

☐ Written resolutions for major decisions
☐ Operating agreement reviewed and updated
☐ Business separate from personal affairs
☐ Business cards, letterhead use LLC name

Important Notices

Banking Requirements

Many banks require a copy of the operating agreement to open a business account. Ensure this document is executed before visiting the bank.

IRS Requirements

Single-member LLCs are "disregarded entities" for federal tax purposes by default. Report business income and expenses on Schedule C of Form 1040 unless you have elected S-Corp or C-Corp status.

Liability Protection Warning

Failure to follow corporate formalities, commingling funds, or inadequately capitalizing the LLC may result in "piercing the corporate veil" and personal liability for business debts.

State-Specific Considerations

This template provides general guidance. Consult with a licensed attorney in your state to ensure compliance with specific state requirements.

This template is provided for informational purposes only and does not constitute legal advice. Consult with a qualified attorney licensed in your jurisdiction before executing any legal documents.