Free LLC Operating Agreement

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Frequently Asked Questions

What is a Limited Liability Company (LLC)?A limited liability company (LLC) is a type of business entity that shares the attractive features of both a partnership and a corporation.How do I file my Operating Agreement?You do not need to file your LLC Operating Agreement. The Operating Agreement is simply an agreement between the owners (members) of the LLC.

An LLC is created by preparing and filing an Articles of Organization document with the state where the LLC will operate.
Why is the state important?Laws affecting LLC's are different between states. You will be asked questions specific to the state you select. The final document will be specific to your state.
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This Operating Agreement (the "Agreement") made and entered into this 28th day of May, 2016 (the "Execution Date"),


_________________________ of ________________________________________, _________________________,  __________

(the "Member").


A. The Member wishes to be the sole member of a limited liability company.

B. The terms and conditions of this Agreement will govern the member within the limited liability company.

IN CONSIDERATION OF and as a condition of the Members entering into this Agreement and other valuable consideration, the receipt and sufficiency of which is acknowledged, the parties to this Agreement agree as follows:

  1. Formation
  2. By this Agreement the Member forms a Limited Liability Company (the "Company") in accordance with the laws of the State of California. The rights and obligations of the Member will be as stated in the California Revised Uniform Limited Liability Company Act (the "Act") except as otherwise provided here.
  3. Name
  4. The name of the Company will be _______________.
  5. Purpose
  6. ____________________________________________________________.
  7. Term
  8. The Company will continue until terminated as provided in this Agreement or may dissolve under conditions provided in the Act.
  9. Place of Business
  10. The Principal Office of the Company will be located at ____________________, _______________, __________ or such other place as the Members may from time to time designate.
  11. Capital Contributions
  12. The following table shows the Initial Contributions of the Member. The Member agrees to make the Initial Contributions to the Company, full and on time, according to the following terms:


    Contribution Description

    Value of




    28 May 2016

  13. Allocation of Profits/Losses
  14. Subject to the other provisions of this Agreement, the Net Profits or Losses, for both accounting and tax purposes, will accrue to and be borne by the sole Member:

    _________________________ of ________________________________________, _________________________,  __________.
  15. Distributions will be made monthly.
  16. No Member will have priority over any other Member for any Distribution.
  17. Nature of Interest
  18. A Member's interest in the Company will be considered personal property.
  19. Withdrawal of Contribution
  20. No Member will withdraw any portion of their Capital Contribution without the unanimous consent of the other Members.
  21. Liability for Contribution
  22. A Member's obligation to make their required Capital Contribution can only be compromised or released with the consent of all remaining Members or as otherwise provided in this Agreement. If a Member does not make the Capital Contribution when it is due, he is obligated at the option of the remaining Members to contribute cash equal to the agreed value of the Capital Contribution. This option is in addition to and not in lieu of any others rights, including the right to specific performance that the Company may have against the Member.
  23. Additional Contributions
  24. Additional Contributions may be required from time to time as determined by a majority vote of the Members. Where Additional Contributions are determined to be required and where an individual Member is unwilling or unable to meet this requirement within a reasonable period, the remaining Members may contribute in proportion to their existing Capital Contributions to resolve the amount in default.
  25. Any advance of money to the Company by any Member in excess of the amounts provided for in this Agreement or subsequently agreed to, will be deemed a debt due from the Company rather than an increase in the Capital Contribution of the Member. This liability will be repaid with interest at such rates and times to be determined by a majority of the Members. This liability will not entitle the lending Member to any increased share of the Company's profits nor to a greater voting power. Satisfaction of such debts will have priority over any other payments to Members.
  26. Capital Accounts
  27. An individual capital account (the "Capital Account") will be maintained for each Member and their Initial Contributions will be credited to this account. Any Additional Contributions made by any Member will be credited to that Member's individual Capital Account.
  28. Interest on Capital
  29. No borrowing charge or loan interest will be due or payable to any Member on their agreed Capital Contribution inclusive of any agreed Additional Contributions.
  30. Compensation of Members for Services Rendered
  31. Members will not be compensated by the Company for services rendered to or on behalf of the Company, except reimbursement for expenses directly related to the operation of the Company.
  32. Management
  33. Management of this Company is vested in the Members.
  34. Authority to Bind Company
  35. Only the following individuals have authority to bind the Company in contract: ___________________________________________________________
  36. Duty of Loyalty
  37. Any Member may invest in or engage in any business of any type, including without limitation, a business that is similar to the business of the Company whether or not in direct competition with the Company and whether or not within the established or contemplated market regions of the Company. A Member will have no obligation to present any opportunity to the Company. Neither the Company nor any Member will have any right to that opportunity or any income derived from that opportunity.
  38. Duty to Devote Time
  39. Each Member will devote such time and attention to the business of the Company as the majority of the Members will from time to time reasonably determine for the conduct of the Company's business.
  40. Member Meetings
  41. Member meetings will be held at a time and in a location that is reasonable, convenient and practical considering the situation of all Members.
  42. A meeting may be called by any Member providing that appropriate notice has been provided to the other Members.
  43. Regular meetings of the Members will be held as required.
  44. Voting
  45. Each Member will be entitled to cast votes on any matter based upon the proportion of that Member's Capital Contributions in the Company.
  46. Admission of New Members
  47. A new Member may only be admitted to the Company with a unanimous vote of the existing Members.
  48. The new Member agrees to be bound by all the covenants, terms, and conditions of this Agreement, inclusive of all current and future amendments. Further, a new Member will execute such documents as are needed to effect the admission of the new Member. Any new Member will receive such business interest in the Company as determined by a unanimous decision of the other Members.
  49. Voluntary Withdrawal of a Member
  50. Any Member will have the right to voluntarily withdraw from the Company.
  51. The voluntary withdrawal of a Member will have no effect upon the continuance of the Company.
  52. It remains incumbent on the withdrawing Member to exercise this dissociation in good faith and to minimize any present or future harm done to the remaining Members as a result of the withdrawal.
  53. Involuntary Withdrawal of a Member
  54. Events leading to the involuntary withdrawal of a Member from the Company will include but not be limited to: death of a Member; Member mental incapacity; Member disability preventing reasonable participation in the Company; Member incompetence; breach of fiduciary duties by a Member; criminal conviction of a Member; Operation of Law against a Member or a legal judgment against a Member that can reasonably be expected to bring the business or societal reputation of the Company into disrepute. Expulsion of a Member can also occur on application by the Company or another Member, where it has been judicially determined that the Member: has engaged in wrongful conduct that adversely and materially affected the Company's business; has willfully or persistently committed a material breach of this Agreement or of a duty owed to the Company or to the other Members; or has engaged in conduct relating to the Company's business that makes it not reasonably practicable to carry on the business with the Member.
  55. The involuntary withdrawal of a Member will have no effect upon the continuance of the Company.
  56. Dissociation of a Member
  57. In the event of either a voluntary or involuntary withdrawal of a Member, if the remaining Members elect to purchase the interest of the withdrawing Member, the remaining Members will serve written notice of such election, including the purchase price and method and schedule of payment for the withdrawing Member's interest, upon the withdrawing Member, their executor, administrator, trustee, committee or analogous fiduciary within a reasonable period after acquiring knowledge of the change in circumstance to the affected Member. The purchase amount of any buyout of a Member's interest will be determined as outlined in the Valuation of Interest section of this Agreement.
  58. Valuation and distribution will be determined as described in the Valuation of Interest section of this Agreement.
  59. The remaining Members retain the right to seek damages from a dissociated Member where the dissociation resulted from a malicious or criminal act by the dissociated Member or where the dissociated Member had breached their fiduciary duty to the Company or was in breach of this Agreement or had acted in a way that could reasonably be foreseen to bring harm or damage to the Company or to the reputation of the Company.
  60. On any purchase and sale resulting from the voluntary or involuntary dissociation of a Member, a dissociated Member will only have liability for Company obligations that were incurred during their time as a Member. Immediately upon purchase of a withdrawing Member's interest, the Company will prepare, file, serve, and publish all notices required by law to protect the withdrawing Member from liability for future Company obligations. Where the remaining Members have purchased the interest of a dissociated Member, the purchase amount will be paid in full, but without interest, within 90 days of the date of withdrawal. The Company will retain exclusive rights to use of the trade name and firm name and all related brand and model names of the Company.
  61. Buyout Agreement
  62. In the event of a Member's interest in the Company becoming for sale, due to any reason, the remaining Members of the Company have a right of first purchase on the interest. The value of the interest in the Company will be determined as outlined in the Valuation of Interest section of this Agreement.
  63. Assignment of Interest
  64. A Member's financial interest in the Company can only be assigned to another Member and cannot be assigned to a third party.
  65. In the event that a Member’s interest in the company is transferred or assigned as the result of a court order or Operation of Law, the trustee in bankruptcy or other person acquiring that Member's interest in the Company will only acquire that Member's economic rights and interests and will not acquire any other rights of that Member or be admitted as a Member of the Company or have the right to exercise any management or voting interests.
  66. Valuation of Interest
  67. In the absence of a written agreement setting a value, the value of the Company will be based on the fair market value appraisal of all Company assets (less liabilities) determined in accordance with generally accepted accounting principles. This appraisal will be conducted by an independent accounting firm agreed to by all Members. An appraiser will be appointed within a reasonable period of the date of withdrawal or dissolution. The results of the appraisal will be binding on all Members. A withdrawing Member's interest will be in proportion to their profit and loss share in the Company, less any outstanding liabilities a Member may have to the Company. The intent of this section is to ensure the survival of the Company despite the withdrawal of any individual Member.
  68. No allowance will be made for goodwill, trade name, patents or other intangible assets, except where those assets have been reflected on the Company books immediately prior to valuation.
  69. Dissolution
  70. The Company may be dissolved by a unanimous vote of the Members. The Company will also be dissolved on the occurrence of events specified in the Act.
  71. Upon Dissolution of the Company and liquidation of Company property, and after payment of all selling costs and expenses, the liquidator will distribute the Company assets to the following groups according to the following order of priority:
    1. in satisfaction of liabilities to creditors except Company obligations to current Members;
    2. in satisfaction of Company obligations to current Members to pay debts; and
    3. to the Members in proportion to their profit and loss share in the Company.
  72. The claims of each priority group will be satisfied in full before satisfying any claims of a lower priority group. Any excess of Company assets after liabilities or any insufficiency in Company assets in resolving liabilities under this section will be resolved by the Members in proportion to the profit and loss share of each Member as set out in this Agreement.
  73. Records
  74. The Company will at all times maintain accurate records of the following:
    1. Information regarding the status of the business and the financial condition of the Company.
    2. A copy of the Company federal, state, and local income taxes for each year, promptly after becoming available.
    3. Name and last known business, residential, or mailing address of each Member, as well as the date that person became a Member.
    4. A copy of this Agreement and any articles or certificate of formation, as well as all amendments, together with any executed copies of any written powers of attorney pursuant to which this Agreement, articles or certificate, and any amendments have been executed.
    5. The cash, property, and services contributed to the Company by each Member, along with a description and value, and any contributions that have been agreed to be made in the future.
  75. Each Member has the right to demand, within a reasonable period of time, a copy of any of the above documents for any purpose reasonably related to their interest as a Member of the Company, at their expense.
  76. Books of Account
  77. Accurate and complete books of account of the transactions of the Company will be kept in accordance with generally accepted accounting principles (GAAP) and at all reasonable times will be available and open to inspection and examination by any Member. The books and records of the Company will reflect all the Company’s transactions and will be appropriate and adequate for the business conducted by the Company.
  78. Banking and Company Funds
  79. The funds of the Company will be placed in such investments and banking accounts as will be designated by the Members. All withdrawals from these accounts will be made by the duly authorized agent or agents of the Members as agreed by unanimous consent of the Members. Company funds will be held in the name of the Company and will not be commingled with those of any other person or entity.
  80. Audit
  81. Any of the Members will have the right to request an audit of the Company books. The cost of the audit will be borne by the Company. The audit will be performed by an accounting firm acceptable to all the Members. Not more than one (1) audit will be required by any or all of the Members for any fiscal year.
  82. Tax Treatment
  83. This Company is intended to be treated as a partnership, for the purposes of Federal and State Income Tax.
  84. Tax Matters Partner
  85. The tax matters partner will be _________________________, (the "Tax Matters Partner"). The Tax Matters Partner will prepare, or cause to be prepared, all tax returns and reports for the Company and make any related elections that the Members deem advisable.
  86. A Tax Matters Partner can voluntarily withdraw from the position of Tax Matters Partner or can be appointed or replaced by a majority of the Voting Members. In the event of a withdrawal of the Tax Matters Partner from the Company, the remaining Members will appoint a successor as soon as practicable.
  87. Annual Report
  88. As soon as practicable after the close of each fiscal year, the Company will furnish to each Member an annual report showing a full and complete account of the condition of the Company including all information as will be necessary for the preparation of each Member's income or other tax returns. This report will consist of at least:
    1. A copy of the Company's federal income tax returns for that fiscal year.
  89. Goodwill
  90. The goodwill of the Company will be assessed at an amount to be determined by appraisal using generally accepted accounting principles (GAAP).
  91. Governing Law
  92. The Members submit to the jurisdiction of the courts of the State of California for the enforcement of this Agreement or any arbitration award or decision arising from this Agreement.
  93. Force Majeure
  94. A Member will be free of liability to the Company where the Member is prevented from executing their obligations under this Agreement in whole or in part due to force majeure, such as earthquake, typhoon, flood, fire, and war or any other unforeseen and uncontrollable event where the Member has communicated the circumstance of the event to any and all other Members and where the Member has taken any and all appropriate action to satisfy his duties and obligations to the Company and to mitigate the effects of the event.
  95. Forbidden Acts
  96. No Member may do any act in contravention of this Agreement.
  97. No Member may permit, intentionally or unintentionally, the assignment of express, implied or apparent authority to a third party that is not a Member of the Company.
  98. No Member may do any act that would make it impossible to carry on the ordinary business of the Company.
  99. No Member will have the right or authority to bind or obligate the Company to any extent with regard to any matter outside the intended purpose of the Company.
  100. No Member may confess a judgment against the Company.
  101. Any violation of the above forbidden acts will be deemed an Involuntary Withdrawal of the offending Member and may be treated accordingly by the remaining Members.
  102. Indemnification
  103. All Members will be indemnified and held harmless by the Company from and against any and all claims of any nature, whatsoever, arising out of a Member's participation in Company affairs. A Member will not be entitled to indemnification under this section for liability arising out of gross negligence or willful misconduct of the Member or the breach by the Member of any provisions of this Agreement.
  104. Liability
  105. A Member or any employee will not be liable to the Company or to any other Member for any mistake or error in judgment or for any act or omission believed in good faith to be within the scope of authority conferred or implied by this Agreement or the Company. The Member or employee will be liable only for any and all acts and omissions involving intentional wrongdoing.
  106. Liability Insurance
  107. The Company may acquire insurance on behalf of any Member, employee, agent or other person engaged in the business interest of the Company against any liability asserted against them or incurred by them while acting in good faith on behalf of the Company.
  108. Life Insurance
  109. The Company will have the right to acquire life insurance on the lives of any or all of the Members, whenever it is deemed necessary by the Company. Each Member will cooperate fully with the Company in obtaining any such policies of life insurance.
  110. Amendment of this Agreement
  111. No amendment or modification of this Agreement will be valid or effective unless in writing and signed by all the Members.
  112. Title to Company Property
  113. Title to all Company property will remain in the name of the Company. No Member or group of Members will have any ownership interest in Company property in whole or in part.
  114. Miscellaneous
  115. Time is of the essence in this Agreement.
  116. This Agreement may be executed in counterparts.
  117. Headings are inserted for the convenience of the Members only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine gender include the feminine gender and vice versa. Words in a neutral gender include the masculine gender and the feminine gender and vice versa.
  118. If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the Members' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.
  119. This Agreement contains the entire agreement between the Members. All negotiations and understandings have been included in this Agreement. Statements or representations that may have been made by any Member during the negotiation stages of this Agreement, may in some way be inconsistent with this final written Agreement. All such statements have no force or effect in respect to this Agreement. Only the written terms of this Agreement will bind the Members.
  120. This Agreement and the terms and conditions contained in this Agreement apply to and are binding upon each Member's successors, assigns, executors, administrators, beneficiaries, and representatives.
  121. Any notices or delivery required here will be deemed completed when hand-delivered, delivered by agent, or seven (7) days after being placed in the post, postage prepaid, to the Members at the addresses contained in this Agreement or as the Members may later designate in writing.
  122. All of the rights, remedies and benefits provided by this Agreement will be cumulative and will not be exclusive of any other such rights, remedies and benefits allowed by law.
  123. Definitions
  124. For the purpose of this Agreement, the following terms are defined as follows:
    1. "Additional Contribution" means Capital Contributions, other than Initial Contributions, made by Members to the Company.
    2. "Capital Contribution" means the total amount of cash, property, or services contributed to the Company by any one Member.
    3. "Distributions" means a payment of Company profits to the Members.
    4. "Initial Contribution" means the initial Capital Contributions made by any Member to acquire an interest in the Company.
    5. "Net Profits or Losses" means the net profits or losses of the Company as determined by generally accepted accounting principles.
    6. "Operation of Law" means rights or duties that are cast upon a party by the law, without any act or agreement on the part of the individual, including, but not limited to, an assignment for the benefit of creditors, a divorce, or a bankruptcy.
    7. "Principal Office" means the office whether inside or outside the State of California where the executive or management of the Company maintain their primary office.

IN WITNESS WHEREOF the parties have duly affixed their signatures under hand and seal on this 28th day of May, 2016.



in the presence of:


Witness: ______________________ (Sign)



Witness Name: ______________________


_________________________ (Member)

LLC Operating Agreement

Alternate Names:

An LLC Operating Agreement is also known as:

  • Operating Agreement
  • Limited Liability Company Operating Agreement
  • LLC Agreement
  • Operating Agreement for LLC

What is a Limited Liability Company (LLC)?

An LLC is a type of business structure formed by filing the proper paperwork with your state. Like the name suggests, an LLC limits the liability of its members, meaning they are not personally responsible for the company's debt or obligations.

What is an LLC Operating Agreement?

An LLC Operating Agreement is a legal document that establishes the rights and responsibilities of each LLC member and provides details about the LLC's internal management, including how decisions are made, when meetings are held, how new members are admitted and more.

Who is considered a member of an LLC?

A member of a limited liability company is an individual or corporation that owns part of the LLC. He or she must have provided a form of capital contribution (money, services, property) in exchange for a percentage of ownership interest in the company.

Does an LLC have shares of stock like a corporation?

LLC's don't have shares like a corporation, but rather assign a percentage of ownership according to each member's capital contribution. Regardless of the amount of members in an LLC, ownership percentages should always add up to 100%.

What does an LLC Operating Agreement include?

LLC Information

The LLC Operating Agreement has information about the LLC itself, including the name, type/description of services, how long the LLC will be in business, and office address.

Member Information

The LLC agreement includes the following information for each member:

  • Name and address
  • Membership class
  • Capital contribution
  • Percentage of ownership
  • Share of profits and losses

An operating agreement also addresses whether a member can voluntarily leave the LLC, if they can compete against the LLC after leaving, how assets are distributed if the company dissolves, and how new members are admitted.


An LLC Operating Agreement specifies how the company will be managed, including how decisions will be made and if actions require a majority of members to vote in favor of decisions (referred to as unanimous consent).

Regular meetings are part of an LLC's obligations, which is why details regarding where and when meetings will be held are important to include in the operating agreement.

An LLC can be managed either by its members or by a designated manager.


Financial and administrative aspects of an LLC are defined in the operating agreement, including the LLC's accounting methods, fiscal year, annual report details and more.

Other Details in an LLC Agreement

The operating agreement may also specify who has the ability to sign contracts on behalf of the company and methods used to resolve disputes.

Why should an LLC use an Operating Agreement?

By creating and agreeing to all the terms laid out in an operating agreement, members find there are fewer discrepancies in how business is conducted or how profits and losses are distributed.

An LLC Operating Agreement also allows members to specify their own rules for the company, and will serve as an important reference tool if a member decides to withdraw, the company dissolves, or a new member is admitted.

What is the difference between a partnership and an LLC?

A general partnership and an LLC are similar but members of an LLC have limited liability for the debts and obligations of the LLC. In a general partnership, partners have unlimited liability for the debts and obligations of the partnership.

Can members amend (change) terms in the LLC Operating Agreement?

Yes, an operating agreement can be amended if every member agrees and signs an amendment.

Related Documents:

  • Partnership Agreement: Contract used to spell out the terms of a general partnership between two or more partners.
  • Shareholder Agreement: Similar to an LLC Operating Agreement, but it is used by shareholders to define management details, how disputes are resolved, share value and more in a corporation.
  • Articles of Incorporation: Documents filed with the government to register your business as a corporation.
  • Business Plan: A comprehensive document that outlines your company's values, future goals, financial projections, marketing and sales plan, and employee/management details.
LLC Operating Agreement Sample


LLC Operating Agreement

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