If you are looking for a FREE sample of an operating agreement for a single member LLC – congratulations! You’ve actually found one. I remember searching for free operating agreements back in 2011, but online legal tech companies require signing up for a “free” trial of their ministrations. Of course, getting out of those subscriptions is harder than woodpecker lips because “free” legal sites are: a) sneaky, b) crookeder than a snake on a hog wire fence, and c) not free.
About Operating Agreements
An operating agreement is a document used by limited liability companies (LLCs) to outline the rules and provisions of their business. Operating agreements are recommended when establishing a small business as a legal, state-certified entity.
An operating agreement is mandatory in 5 states: California, Delaware, Maine, Missouri, and New York. LLCs operating without an operating agreement are governed by the state’s relevant statutes and courts.
Although there is some overlap between a business plan and an operating agreement, they are not the same. A business plan describes the services a business will provide, and how it will do so.
An operating agreement determines the internal operations of the business, pursuant to the requirements of the business owners (members). An operating agreement acts as a binding contract to its terms, once signed by the members of the LLC.
In other words, the business plan is about pet sitting, but the operating agreement is about the LLC. Pet sitting isn’t even mentioned in the operating agreement (unless the company name contains that phrase).
In single-member LLCs, an operating agreement may be used to prove that the LLC structure is separate from that of the individual owner. This way, the owner has documentation to provide that (s)he is separate from the entity itself.
About Lawyers
A lawyer can provide a number of services to help start a small business. These will vary depending on the goals of the business owner. I set up as a single member LLC, and met with a lawyer only one time when I developed my business plan and operating agreement.
Undertakings such as registering the small business, obtaining a tax ID number, and acquiring a business license may be completed by the organizer of the LLC without a lawyer.
Larger enterprises that will include partners, employees, or other assets, would benefit from hiring a small business lawyer. These entities may require legal services to establish a business structure and sources of finance, or to complete non-disclosure agreements, shareholder agreements, or employment contracts.
About Time
Okay, here it is. Enjoy your FREE operating agreement template. Tailor it as needed, and since this sample is from North Carolina, please note the identifiers provided in [brackets].
REMINDER: This free information is not a legal document, and operating agreements are optional in most states. Have a lawyer review your final draft of an operating agreement before you submit it to the secretary of state in your state of residence.
OPERATING AGREEMENT OF [YOUR COMPANY NAME, LLC]
This Operating Agreement (the “Agreement”) is entered into as of [Month, date, year], by and between [YOUR COMPANY NAME, LLC], a [STATE] limited liability company (the “Company”), and [YOUR NAME], a [STATE] resident and the sole member of the Company (the “Member”), on the following terms and conditions:
ARTICLE I – DEFINITIONS
As used herein, the following terms shall have the following meanings:
“Act” means the [YOUR STATE] Limited Liability Company Act as set forth at [NC Gen. Stat. §57C-1-01 through §57C-10-07], as may be amended from time to time.
“Articles” means the Articles of Organization of the Company as filed with the Secretary of State of [YOUR STATE], as the same may be amended or restated from time to time.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor provision.
“Company” has the meaning set forth in the first paragraph of this Agreement.
“Member” has the meaning set forth in the first paragraph of this Agreement, or any successor in interest or assign.
“Net Profits” and “Net Losses” of the Company mean the taxable income and net losses, respectively, of the Company, determined in accordance with the Code and applicable Regulations; provided, however, the Member acknowledges that as a single member limited liability company, the Company’s existence, for tax purposes, shall be ignored. In the event that the determination of Net Profits and Net Losses must be determined in some manner other than as set forth in this definition by virtue of the method of accounting employed by the Member, then Net Profits and Net Losses shall be determined accordingly.
“Organizer” means the organizer of the Company as defined in [Section 57C-1-03(16a)] of the Act.
“Regulations” means the regulations (including temporary regulations) of the United States Treasury Department pertaining to the income tax, as amended, and any successor provision.
ARTICLE II – REGISTERED AGENT; REGISTERED OFFICE; PRINCIPAL OFFICE
The registered agent of the Company and the registered office of the Company shall be as set forth in the Articles, or such other agent or place as may hereafter be designated by the Member from time to time as provided by law. The Company’s principal office shall be at such place as the Member may designate from time to time, and the Company shall maintain records there as required by the Act (and shall keep the street address of such principal office at the Company’s registered office).
ARTICLE III – PURPOSES; TERM; ORGANIZER INDEMNIFICATION; STATUS
Section 3.1 Purposes. Unless otherwise limited by the Company’s Articles, the business and purposes of the Company shall be to engage in any lawful business. Subject to the terms of this Agreement, the Company shall have all powers of a limited liability company, including without limitation those set forth in [Section 57C-2-02] of the Act.
Section 3.2 Term of Company. The term of the Company commenced on the date the Organizer filed the Articles with the Secretary of State of [YOUR STATE] in accordance with the provisions of the Act and shall continue on a perpetual basis unless dissolved pursuant to Article VII of this Agreement.
Section 3.3 Organizer Indemnification. The Organizer’s acts and conduct in connection with the organization of the Company are hereby ratified and adopted by the Company as acts and conduct by and on behalf of the Company and are deemed to be in its best interest. The organizational and other activities for which the Organizer was responsible have been completed, the Organizer is hereby relieved of any further duties and responsibilities in that regard, and the Company and the Member hereby agree to indemnify and hold harmless the Organizer for any loss, liability or expense arising from his actions or conduct in his capacity as organizer of the Company.
Section 3.4 Status of the Company. The Member acknowledges that, although the Company will be a “limited liability company” under [YOUR STATE] law, for federal and state income tax purposes (under applicable provisions of the Code and the Regulations), as long as the Member is the sole Member of the Company, its existence will be ignored and it will not be treated as a separate tax entity. Such treatment refers solely to the federal and state income tax treatment of the Company, and not to the state law status of the Company as a limited liability company. The Member shall not be personally obligated to any third party for any debt, obligation or liability of the Company solely by reason of being a member of the Company.
ARTICLE IV – CAPITAL CONTRIBUTIONS AND MEMBERSHIP
The Member shall contribute to the Company such property as is necessary to conduct the Company’s operations. However, the Member shall have no duty to make capital contributions to the Company. The Member shall cause any capital contribution to be recorded on the books and records of the Company.
ARTICLE V – ALLOCATION OF NET PROFITS AND NET LOSSES; DISTRIBUTIONS
Section 5.1 Allocation of Net Profits and Net Losses. The Net Profits and Net Losses of the Company shall be allocated exclusively to the Member.
Section 5.2 Distributions. Distributions of Company profits and other assets shall be made exclusively to the Member when and as determined by the Member; provided, however, that the Company shall make no distributions to the extent that (a) immediately after the distribution, the Company’s liabilities would exceed the fair market value of its assets, or (b) the distribution would violate any agreement, note or other instrument to which the Company is a party.
ARTICLE VI – MANAGEMENT OF THE COMPANY
Section 6.1 Decision-making Authority. The Member acknowledges that under the applicable provisions of the Act, the Company may be either “member-managed” or “manager-managed.” The Member desires that the Company be “member-managed” under such provisions. Accordingly, the Member, and only the Member, shall have the right, power and authority to manage, direct and control all of the business and affairs of the Company, to transact business on behalf of the Company, to act as agent for the Company, to sign for the Company or on behalf of the Company or otherwise to bind the Company. The Member shall have this authority to the fullest extent permitted by law. The foregoing provision shall not be amended without the Member’s written consent.
Section 6.2 Officers. The Member may appoint individuals with or without such titles as s/he or it may elect, including the titles of President, Vice President, Treasurer and Secretary, to act on behalf of the Company with such power and authority as the Member may delegate in writing to any such persons.
ARTICLE VII – DISSOLUTION
Section 7.1 Dissolution of the Company. The Company shall be dissolved, and shall terminate and wind up its affairs, upon the first to occur of the following:
(a) the determination by the Member to dissolve the Company;
(b) the entry of a decree of judicial dissolution, as provided in [Section 57C-6-02.3] of the Act; or
(c) an administrative dissolution under [Section 57C-6-03(b)] of the Act.
Section 7.2 Winding Up and Distribution of Assets.
(a) If the Company is dissolved, the Member shall wind up the affairs of the Company. Upon the winding up of the Company, subject to the provisions of the Act, the Member shall pay or make reasonable provision to pay all claims and obligations of the Company, including all costs and expenses of the liquidation and all contingent, conditional or unmatured claims and obligations that are known to the Member but for which the identity of the claimant is unknown. If there are sufficient assets, such claims and obligations shall be paid in full and any such provision shall be made in full.
(b) Upon any such dissolution of the Company, the net assets, if any, of the Company available for distribution, and any cash proceeds from the liquidation of any such assets, shall be applied and distributed in the following order, to the extent available:
(i) First, to the Company’s creditors, including the Member as creditor (to the extent permitted by law), in satisfaction of liabilities of the Company; and
(ii) Thereafter, to the Member.
ARTICLE VIII – MISCELLANEOUS
Section 8.1 Governing Law and Jurisdiction. This Agreement, including its existence, validity, construction and operating effect, and the rights of the Member under the Agreement shall be governed by and construed in accordance with the laws of the State of [YOUR STATE] (without regard to principles of conflicts of laws).
Section 8.2 Indemnification and Liability.
(a) To the maximum extent permitted by applicable law, the Member shall not be liable to the Company or any other third party (i) for mistakes of judgment, (ii) for any act or omission suffered or taken by him or (iii) for losses due to any such mistakes, action or inaction.
(b) Except as may be restricted by applicable law, the Member shall not be liable for, and the Company shall indemnify the Member against and agrees to hold the Member harmless from, all liabilities and claims (including reasonable attorneys’ fees and expenses incurred in defending against such liabilities and claims) against the Member arising from the Member’s performance of his duties in conformance with the terms of this Agreement.
(c) The Member may consult with legal counsel or accountants selected by the Member and, to the maximum extent permitted by applicable law, any action or omission suffered or taken in good faith in reliance and in accordance with the written opinion or advice of any such counsel or accountants (provided such counsel or accountants have been selected with reasonable care) shall be fully protected and justified with respect to the action or omission so suffered or taken.
Section 8.3 Amendments. This Agreement may only be amended, modified or supplemented in a writing executed by the Member. No other written or oral agreement, understanding, instrument or writing other than this Agreement or any amendment hereto shall constitute part of the operating agreement of the Company.
Section 8.4 Binding Effect. The terms, conditions and provisions of this Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective heirs, successors, distributees, legal representatives and permitted assigns. Provided, however, nothing in this Agreement, expressed or implied, is intended or shall be construed to give to any creditor of the Company or any creditor of the Member or any other person whatsoever, other than the Member and the Company, any legal or equitable right, remedy or claim under or in respect of this Agreement or any term, condition or provision herein contained, such terms, covenants and provisions are and shall be held to be for the sole and exclusive benefit of the Member and the Company.
IN WITNESS WHEREOF, this Agreement is executed the day and year first above written.
MEMBER:
[Print Your Name]
COMPANY:
[YOUR COMPANY NAME, LLC]
By: ______________
[Your Signature], its sole Member
Featured photo – Winston (ears) and Duncan want that silly ball!
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