An operating agreement is a vital document for any LLC (Limited Liability Company) as it outlines the company`s internal operations and management structure. In the case of a manager-managed LLC, the operating agreement plays an even more significant role. A manager-managed LLC is when the company is managed by a designated manager or managers, rather than the members themselves. In this article, we will discuss the various aspects of an operating agreement for a manager-managed LLC.
Management Structure
The first and foremost aspect of an operating agreement for a manager-managed LLC is the management structure. The agreement should clearly outline the roles and responsibilities of the manager(s) and the members. For instance, the manager(s) will have the authority to manage the day-to-day operations, whereas the members can vote on major company decisions such as modifying the operating agreement, admitting new members, or dissolving the company.
Membership Information
The operating agreement should also include information on the members of the LLC, including their names, contact details, and percentage of ownership. Moreover, it should outline the procedures for admitting new members, transferring ownership, and exiting the company.
Duties and Powers of Managers
The operating agreement should outline the duties and powers of the manager(s), including their decision-making authority, voting rights, and compensation. It should also delineate the circumstances under which the manager(s) can be terminated, how to appoint a new manager if needed, and how to resolve disputes among managers.
Voting Procedures
The operating agreement should include guidelines on voting procedures for both major and minor decisions. For instance, it should outline how a quorum is determined, how votes are counted, and how to resolve disputes related to voting.
Distribution of Profits and Losses
The operating agreement should establish how profits and losses will be allocated to the members of the LLC. This can be done through a percentage-based allocation of profits and losses or a more customized approach. It should also outline when and how profits will be distributed to the members.
Capital Contributions
The operating agreement should outline the initial capital contributions required from each member, as well as any additional contributions that may be required in the future. It should also delineate the circumstances under which a member can withdraw their capital contribution.
Duration and Termination
Finally, the operating agreement should specify the duration of the LLC and delineate the steps required to dissolve the company. It should outline the circumstances under which the LLC can be terminated and the procedures that need to be followed to wind up the company`s affairs.
In conclusion, an operating agreement for a manager-managed LLC is a crucial document that outlines the company`s internal operations, management structure, and procedures. It should include information on the management structure, membership details, duties and powers of managers, voting procedures, distribution of profits and losses, capital contributions, duration, and termination. Creating a comprehensive operating agreement can help avoid disputes and ensure the smooth functioning of the LLC.
