Single-Member LLC Operating Agreement — California

Single-Member LLC Operating Agreement (California)

Quick-Reference Summary

OPERATING AGREEMENT OF [LLC NAME], LLC

A California Single-Member Limited Liability Company

This Operating Agreement (this "Agreement") is entered into and effective as of [__/__/____] (the "Effective Date") by [________________________________] (the "Sole Member"), being the sole member of [LLC NAME], LLC, a California limited liability company (the "Company").

The Sole Member, intending to be legally bound and to confirm the governance, capital, and operational arrangements of the Company under the California Revised Uniform Limited Liability Company Act, Cal. Corp. Code § 17701.01 et seq. (the "Act"), adopts this Agreement.

Article I — Formation

1.1 Formation. The Company was organized as a California limited liability company on [__/__/____] by the filing of Articles of Organization (Form LLC-1) with the California Secretary of State pursuant to Cal. Corp. Code § 17702.01. The Secretary of State's file number assigned to the Company is [________________________________].

1.2 Name. The name of the Company is [LLC NAME], LLC. The name complies with Cal. Corp. Code § 17701.08 (name must contain "Limited Liability Company," "LLC," "L.L.C.," or an acceptable abbreviation).

1.3 Principal Office. The principal executive office of the Company is [________________________________], California [____].

1.4 Agent for Service of Process. The Company's agent for service of process in California is [________________________________], whose address is [________________________________], California [____]. The agent's designation is filed with the Secretary of State pursuant to Cal. Corp. Code § 17701.13. If a corporate agent is used, the agent must have a current Form 1505 on file with the Secretary of State.

1.5 Term. The Company commenced upon Secretary of State acceptance of its Articles of Organization and shall continue until dissolved and wound up in accordance with Article VII and Cal. Corp. Code § 17707.01 et seq.

1.6 No Publication Requirement. California imposes no newspaper publication requirement on a domestic LLC. No publication is therefore required to perfect the Company's existence.

Article II — Purpose and Powers

2.1 Purpose. The Company is organized to engage in any lawful act or activity for which a limited liability company may be organized under the Act, including without limitation: [________________________________].

2.2 Powers. The Company has and may exercise all powers granted to a limited liability company under Cal. Corp. Code § 17701.05, including the power to sue and be sued, to own and convey real and personal property, to enter into contracts, to incur indebtedness, to issue obligations, to act as a partner or member in another entity, and to do every act necessary or convenient to carry on its business.

2.3 Restricted Professional Services. If the Company will render professional services regulated under California law (e.g., medical, legal, architectural), it must comply with Cal. Corp. Code § 17701.04(b) and applicable licensing statutes, and may be required to form as a registered limited liability partnership or professional corporation instead.

Article III — Member (Sole Member)

3.1 Identification of Sole Member. The sole member of the Company on the Effective Date is:

3.2 Initial Capital Contribution. The Sole Member's initial capital contribution is described in Exhibit A (Initial Capital Contribution) and consists of [cash $________ / property described in Exhibit A / services described in Exhibit A]. The agreed value of the contribution is $[____________].

3.3 Additional Capital Contributions. The Sole Member may make additional capital contributions at any time. The Sole Member is not obligated to make additional contributions except as the Sole Member may agree in writing.

3.4 No Other Members. The Company has one (1) member. Admission of any additional member requires (a) execution of a written amendment to this Agreement or a written joinder, and (b) compliance with Cal. Corp. Code § 17704.01.

3.5 Membership Interest. The Sole Member holds 100% of the membership interest, all governance rights, and the entire transferable interest as defined in Cal. Corp. Code § 17705.01.

Article IV — Management

4.1 Member-Managed. The Company is a member-managed limited liability company under Cal. Corp. Code § 17704.07(b). Management and conduct of the Company's activities are vested in the Sole Member.

4.2 Authority of Sole Member. The Sole Member has the exclusive authority to act for and bind the Company, including without limitation the authority to: (a) execute contracts, leases, deeds, notes, security agreements, and other instruments; (b) open and maintain bank, brokerage, and merchant accounts; (c) employ and discharge agents, employees, attorneys, accountants, and other professionals; (d) acquire, dispose of, lease, encumber, and license Company assets; (e) commence, defend, and settle litigation or arbitration; (f) make tax elections, including any check-the-box election under Treas. Reg. § 301.7701-3; and (g) take all other actions appropriate to the conduct of the Company's business.

4.3 Officers (Optional). The Sole Member may, but is not required to, designate officers (e.g., President, Chief Executive Officer, Secretary, Treasurer, Chief Financial Officer). Any officer serves at the pleasure of the Sole Member and has the authority delegated in writing.

4.4 Standards of Conduct. The Sole Member's duties under Cal. Corp. Code § 17704.09 (duty of loyalty, duty of care, and contractual obligation of good faith and fair dealing) are limited as follows, to the maximum extent permitted by Cal. Corp. Code § 17701.10:

• (a) Because the Company has only one member, the duty of loyalty under Cal. Corp. Code § 17704.09(b) does not restrict the Sole Member from competing with the Company or from receiving benefits in transactions with the Company.
• (b) The Sole Member's duty of care under Cal. Corp. Code § 17704.09(c) is limited to refraining from grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

4.5 Indemnification. The Company shall indemnify and hold harmless the Sole Member, and any officer or agent designated by the Sole Member, to the fullest extent permitted by Cal. Corp. Code § 17704.08, against any claim, loss, liability, damage, or expense (including reasonable attorney fees) arising from any act or omission performed or omitted in good faith on behalf of the Company.

Article V — Capital Accounts, Allocations, and Distributions

5.1 Capital Account. A capital account shall be maintained for the Sole Member in accordance with Treas. Reg. § 1.704-1(b)(2)(iv) to the extent applicable to a disregarded entity.

5.2 Distributions. Distributions of cash or property shall be made to the Sole Member at such times and in such amounts as the Sole Member determines, subject to the solvency limitation of Cal. Corp. Code § 17704.05 (no distribution if it would cause the Company to be unable to pay its debts as they become due or if assets would be less than liabilities).

5.3 Federal Tax Classification. Because the Company has a single owner, the Company shall be classified as a disregarded entity for federal income tax purposes under Treas. Reg. § 301.7701-3 unless and until an election is made on IRS Form 8832 (or Form 2553 for S-corporation classification). All items of income, gain, loss, deduction, and credit shall be reported on the Sole Member's federal income tax return.

5.4 California Tax. Regardless of federal classification, the Company remains a "limited liability company" for California tax purposes and is subject to (a) the annual $800 minimum franchise tax under Cal. Rev. & Tax. Code § 17941, and (b) the LLC fee under Cal. Rev. & Tax. Code § 17942 if total California-source income meets statutory thresholds.

Article VI — Transfer of Interest and Charging Orders

6.1 Transfer of Membership Interest. The Sole Member may assign, sell, pledge, encumber, or otherwise transfer all or any portion of the Sole Member's transferable interest in the Company in accordance with Cal. Corp. Code § 17705.02. Admission of a transferee as a member requires compliance with Section 3.4 of this Agreement.

6.2 Charging Order — Exclusive Remedy. Under Cal. Corp. Code § 17705.03(f), the entry of a charging order is the exclusive remedy by which a judgment creditor of the Sole Member may satisfy a judgment from the Sole Member's transferable interest in the Company.

6.3 Charging Order Mechanics. Pursuant to Cal. Corp. Code § 17705.03:

• (a) A charging order constitutes a lien on the Sole Member's transferable interest and requires the Company to pay over to the charging-order holder any distribution that would otherwise be paid to the Sole Member.
• (b) The court may appoint a receiver of the distributions subject to the charging order and make any other orders necessary to effectuate the charging order.
• (c) Upon a showing that distributions under the charging order will not satisfy the judgment within a reasonable time, the court may foreclose the lien and order sale of the transferable interest. The purchaser at the foreclosure sale obtains only the transferable interest, does not thereby become a member, and is subject to Cal. Corp. Code § 17705.02.
• (d) The Sole Member or the Company may extinguish the charging order at any time before foreclosure by satisfying the underlying judgment under Cal. Corp. Code § 17705.03(c)-(d).

6.4 Single-Member Caveat.

6.5 Continuing Jurisdiction. Nothing in this Agreement limits the continuing jurisdiction of the court to enforce a charging order in a manner consistent with Cal. Corp. Code § 17705.03.

Article VII — Dissolution and Winding Up

7.1 Events of Dissolution. The Company shall be dissolved upon the first to occur of the following, pursuant to Cal. Corp. Code § 17707.01:

• (a) the happening of an event specified in this Agreement;
• (b) the written election of the Sole Member;
• (c) the dissociation of the Sole Member without the admission of a successor member within 90 days, unless the legal representative of the Sole Member elects to continue the Company and admits a successor in accordance with Cal. Corp. Code § 17707.01(c);
• (d) entry of a decree of judicial dissolution under Cal. Corp. Code § 17707.03; or
• (e) administrative dissolution by the Secretary of State or the Franchise Tax Board under applicable law.

7.2 Winding Up. On dissolution, the Company shall wind up its affairs in accordance with Cal. Corp. Code § 17707.04. Assets shall be applied in the following priority under Cal. Corp. Code § 17707.05:

1. payment of creditors (including the Sole Member as a creditor) other than for distributions;
2. payment of accrued but unpaid distributions to the Sole Member; and
3. distribution of any remainder to the Sole Member.

7.3 Filing of Certificate of Cancellation; Certificate of Dissolution. Upon completion of winding up, the Company shall file a Certificate of Dissolution (Form LLC-3) and a Certificate of Cancellation (Form LLC-4/7) (or a Short Form Certificate of Cancellation, Form LLC-4/8, if eligible) with the California Secretary of State pursuant to Cal. Corp. Code § 17707.08.

7.4 Franchise Tax Clearance. The Sole Member shall ensure that all California franchise taxes, LLC fees, and Form 568 returns are filed and paid through the final taxable year so that cancellation is processed without rejection.

Article VIII — California-Specific Provisions

8.1 Statement of Information. The Company shall file its initial Statement of Information (Form LLC-12) with the California Secretary of State within 90 days after filing the Articles of Organization and thereafter every two years during the applicable filing window. The filing fee is $20.

8.2 Annual Minimum Franchise Tax. The Company shall pay the $800 minimum franchise tax to the California Franchise Tax Board on or before the 15th day of the 4th month of each taxable year, using Form FTB 3522.

8.3 LLC Fee. If the Company's total California-source income equals or exceeds $250,000 in any taxable year, the Company shall estimate and pay the LLC fee under Cal. Rev. & Tax. Code § 17942 using Form FTB 3536 by the 15th day of the 6th month, and shall file Form 568 with reconciliation.

8.4 No Series LLC (Domestic). California does not authorize formation of a domestic Series LLC. The Company shall not purport to establish series with internal liability shielding under California law.

8.5 Nonwaivable RULLCA Provisions. This Agreement may not, and shall not be construed to, do any of the things prohibited by Cal. Corp. Code § 17701.10(c), including (without limitation): (a) vary the rights of third parties under the Act; (b) eliminate the duty of loyalty or the duty of care other than as expressly permitted by § 17701.10(c); (c) eliminate the contractual obligation of good faith and fair dealing under § 17704.09(d), though the agreement may prescribe the standards by which performance is measured if not manifestly unreasonable; (d) restrict rights of a person other than a member or manager; or (e) vary the power of a court to decree dissolution under § 17707.03.

8.6 Registered Foreign LLCs. If the Company is a foreign LLC registered to do business in California, it shall file Form LLC-5 and remains subject to Sections 8.1 through 8.3 of this Agreement.

Article IX — General Provisions

9.1 Amendment. This Agreement may be amended only by a writing signed by the Sole Member (and by any then-existing transferees with rights affected by the amendment, to the extent required by Cal. Corp. Code § 17701.12(b)).

9.2 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to its conflict-of-laws rules.

9.3 Venue. Any action arising out of or relating to this Agreement or the Company shall be brought exclusively in the state or federal courts located in [________________________________] County, California.

9.4 Severability. If any provision of this Agreement is held invalid or unenforceable, the remainder shall remain in full force and effect.

9.5 Integration. This Agreement, together with the Articles of Organization, constitutes the entire agreement of the Sole Member with respect to the Company.

9.6 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts and by electronic signature in accordance with Cal. Civ. Code § 1633.1 et seq. (Uniform Electronic Transactions Act).

9.7 Records. The Company shall maintain the records required by Cal. Corp. Code § 17701.13 at its principal office.

Signature Block

IN WITNESS WHEREOF, the undersigned Sole Member has executed this Operating Agreement as of the Effective Date.

The Company joins in this Agreement to evidence its acceptance of the terms hereof:

[LLC NAME], LLC

By: [________________________________]
Name: [________________________________]
Title: Sole Member

Exhibit A — Initial Capital Contribution

Pre-Execution Checklist

☐ Articles of Organization (Form LLC-1) filed with California Secretary of State; $70 filing fee paid
☐ Secretary of State LLC file number recorded in Section 1.1
☐ Federal EIN obtained from IRS (Form SS-4 / online)
☐ California agent for service of process designated; if corporate agent, Form 1505 on file
☐ Initial Statement of Information (Form LLC-12) filed within 90 days; $20 fee paid
☐ Initial capital contribution funded and recorded on Company books and Exhibit A
☐ Separate Company bank account opened in the Company's legal name
☐ Federal tax classification confirmed (default disregarded entity; Form 8832 / 2553 filed if electing otherwise)
☐ Annual $800 minimum franchise tax calendar set (Form FTB 3522 due 15th day of 4th month of taxable year)
☐ Form 568 filing calendar set; LLC fee (Form FTB 3536) calendar set if California-source income may reach $250,000
☐ Business licenses, seller's permits, professional licenses, and local registrations obtained
☐ Operating Agreement executed by Sole Member and retained at principal office with required records
☐ Foreign-state qualifications considered if the Company will transact business outside California

Sources and References

• California Revised Uniform Limited Liability Company Act (RULLCA), Cal. Corp. Code § 17701.01 et seq. — https://leginfo.legislature.ca.gov/faces/codes_displayexpandedbranch.xhtml?tocCode=CORP&division=&title=2.6.&part=&chapter=&article=
• Cal. Corp. Code § 17705.03 (Charging order) — https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=17705.03&lawCode=CORP
• California Secretary of State, Business Programs, LLC Forms — https://www.sos.ca.gov/business-programs/business-entities/forms
• California Franchise Tax Board — Limited Liability Company — https://www.ftb.ca.gov/file/business/types/limited-liability-company/index.html
• FTB Publication 3556, Limited Liability Company Filing Information — https://www.ftb.ca.gov/forms/misc/3556.html
• IRS Single-Member LLC guidance — https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies
• bizfile Online (Form LLC-1, LLC-5, LLC-12 e-filing) — https://bizfileonline.sos.ca.gov/