Single-Member LLC Operating Agreement Template
All states | 2 types
Single-member LLC operating agreement, also known as a member-managed operating agreement or a sole member operating agreement, is an essential legal document that outlines the terms and conditions that govern the operations of a single-member limited liability company.
When to Use a Single-Member LLC Operating Agreement
A single-member operating agreement can be used when setting up a single-member LLC. Whether starting a small business or engaging in solo entrepreneurship, this agreement is crucial to defining the relationship between the member and the company, establishing operating procedures, and protecting liability.
Parties
In a single-member LLC operating agreement, also known as a sole member LLC operating agreement, the primary party involved is the single member who owns and operates the LLC. The single member assumes multiple roles within the agreement, including:
- Owner: The single member is the legal owner of the LLC and holds all the membership interests. They can make decisions, control the company's operations, and manage its affairs. This is outlined in the operating agreement of single-member LLC, setting the entity's control.
- Manager: As the sole member, the manager generally acts as the supervisor of the LLC and makes day-to-day administration decisions. The manager can hire employees, enter contracts, and handle the LLC's finances.
- Investor: The single member provides the initial capital to establish the LLC. They contribute funds or assets to the business and may also be responsible for additional capital contributions if required.
- Beneficiary: The single member is entitled to the LLC's profits and benefits. They can receive distributions from the LLC's earnings under the terms outlined in the operating agreement.
- Responsible Party: The single member is responsible for ensuring compliance with legal and regulatory obligations, such as filing tax returns, maintaining accurate records, and adhering to applicable laws governing the operation of the LLC.
It is essential for the single member to fully understand and fulfill these roles within the operating agreement for the single-member LLC to manage and protect their interests in the LLC effectively.
Key Terms
- Business Purpose: Clearly define the LLC's purpose and goals, specifying the nature of the business activities.
- Capital Contributions: Draft the initial contributions completed by the single member to specify the LLC and any future capital contributions if required.
- Management and Decision-Making: Describe how the LLC will be managed and how decisions will be made. In a single-member LLC, the member typically has complete control and authority over the management and decision-making processes.
- Allocation of Profits and Losses: Specify how profits and losses of the LLC will be allocated to the single member. This can be based on the member's ownership interest or any other agreed-upon arrangement.
- Dissolution and Termination: Address the directions for dissolving and terminating the LLC, including how assets and liabilities will be handled and any other applicable requirements.
Including these key terms in your single-member LLC operating agreement template helps establish clear guidelines, avoid misunderstandings, and provide a solid foundation for its operation.
How to Write a Single-Member LLC Operating Agreement
When drafting a sole proprietorship operating agreement, pay attention to the following components:
Include provisions for holding conferences and establishing procedures for decision-making and voting on important matters.
Define the LLC's record-keeping obligations, including financial transactions, accounting records, and document retention.
Specify if the single member will receive compensation for their involvement in the LLC's operations and outline the method and frequency of such payments.
Address circumstances where the single member may dissociate from the LLC and establish procedures for admitting new members or succession planning.
Establish a process for making changes to the operating agreement and clarify if unanimous consent or a specific voting threshold is required.
Remember, consulting with legal professionals is essential to ensure adherence to legal requirements and to tailor the sample single-member LLC operating agreement to meet specific needs.
By utilizing customizable templates for single-member LLC Operating Agreements, you can save time and ensure that your agreement is comprehensive and tailored to the needs of your single-member LLC. Including an operating agreement for sole proprietorship in your business planning can further delineate the structure and rules that guide your sole proprietorship within the LLC. Protect your business and assets by creating this essential legal document today.