A Model Limited L iability C ompany Operating Agreement

Transcription

1 A Model Limited L iability C ompany Operating Agreement StuartLevine S tuart Levine is a partner in E astwick Rose Wright & Levine, P.A., Baltimore, Maryland. He is chair of the S ubcommittee on Limited Liability Companies and Partnership Classification of the Partnership Committee of the ABA s S ection of Taxation and a frequent author on LLC topics. A complete set of the course materials from which this outline was drawn may be purchased from ALI-ABA. Call CLE-NEWS and ask for Customer S ervice. Have the course number of the course materials S G097 handy. The limited liability company ( LLC ) operating agreement is the basic document of the limited liability operating company. It defines the L L C s purpose and status, and governs the fundamental relationships of the L L C s members. Its importance to the success of the enterprise cannot be overstated. When drafting an L L C operating agreement, it is best to use a model agreement to guide your drafting efforts. T he model agreement below will help you identify the key issues that you will need to deal with when you draft and negotiate your own agreements. Page TABLE OF CONTENTS S ECTION I DE FINED T E RMS 26 S E CTION II FORMAT ION AND NAME ; OFFICE; PURPOS E ; TE RM Organization Name of the C ompany Purposes Principal Office Resident Agent Members 34 SECTION III ME MBE RS ; C APITAL; C APITAL AC C OUNT S Initial C apital C ontributions No Additional C apital C ontributions 35

2 3.3. No Interest on C apital C ontributions Return of C apital C ontributions Form of Return of C apital Capital Accounts Loans 35 SECTION IV PROFIT, L OS S, AND DIS T RIBUTIONS Distributions Compensation Payments Tax Distributions Cash Flow Distributions Allocation of Profit or L oss Regulatory Allocations Qualified Income Offset Minimum Gain C hargeback Contributed Property and Book-Ups Liquidation and Dissolution General 39 S ECTION V MANAGEME NT: RIGHTS, POWE RS, AND DUTIE S Management Meetings of and Voting by Members Personal S ervices Benefits Executive Officers Chief E xecutive Officer President S ubordinate E xecutive Officers 43

3 Compensation Executive Officers Holding More Than One Office Removal Vacancies Duties of Members Liability and Indemnification 44 S ECTION VI T RANS FER OF INTE RE S TS AND WITHDRAWALS OF ME MBE RS Transfers Voluntary Withdrawal Involuntary Withdrawal and Deadlock Life Insurance Death Deadlock, Disability or Bankruptcy Purchase of a Member s Membership Interest Fair Value Agreed Value Appraised Value Outstanding Indebtedness of Member to the Company 51 SECTION VII DIS S OL UTION, L IQUIDAT ION, AND TE RMINATION OF THE C OMPANY Events of Dissolution Procedure for Winding Up and Dissolution Filing of Articles of C ancellation 51 SECTION VIII BOOKS, RECORDS, ACCOUNTING, AND TAX ELECTIONS 52

4 8.1. Bank Accounts Books and Records Annual Accounting Period Reports 52 SECTION IX GE NE RAL PROVIS IONS Assurances Notifications Specific Performance Complete Agreement Amendment Applicable L aw S ection T itles Binding Provisions J urisdiction and Venue Terms S eparability of Provisions Counterparts 54 [Editor s note:author s comments are enclosed by brackets.] CO-TECH, LLC OPERATING AG REEMENT This Operating Agreement (this Agreement ) is executed this day of, 20, effective as of the of, 20, [the L L C can, and should, be effective retroactively] by and among J ohn Henry Plowright and J ames Brown. EXPLANATORY STATEMENT On, the parties to this Agreement caused a limited liability company to be organized under the laws of the S tate of Maryland under the name Co-Vir, L L C (the Company ). On, the parties to this Agreement caused the name of the C ompany to be changed to

5 Co-Tech, L L C from and after. This Agreement sets forth the understanding under which the parties have been and will operate the C ompany. NOW, T HE RE FORE, the parties agree as follows: SECTION I DEFINED TERMS The following capitalized terms shall have the meanings specified in this S ection I. Other terms are defined in the text of this Agreement; and, throughout this Agreement, those terms shall have the meanings respectively ascribed to them. Act means the Maryland L imited L iability C ompany Act, as amended from time to time. Adjusted C apital Account Deficit means, with respect to any Interest Holder, the deficit balance, if any, in the Interest Holder s Capital Account as of the end of the relevant taxable year, after giving effect to the following adj ustments: (i) T he deficit shall be decreased by the amounts which the Interest Holder is obligated to restore under S ection or is deemed obligated to restore under T reas. Reg (b)(2)(ii)(c); and (ii) T he deficit shall be increased by the items described in T reas. Reg (b)(2)(ii)(d)(4), (5), and (6). Agreement means this Agreement, as amended from time to time. Annual L oan Guaranty Base means, with respect to any Member who guarantees a C redit E xtension, an amount equal to six percent (6%) of the average monthly outstanding balance of all such C redit Extensions. Appraised Value means the value of the C ompany as determined under the provisions of S ection of this Agreement. Bankruptcy means, with respect to any Member, the occurrence of any of the following events: (i) T he Member makes an assignment for the benefit of creditors; (ii) T he Member files a voluntary petition of bankruptcy; (iii) T he Member is adj udged bankrupt or insolvent or there is entered against the Member an order for relief in any bankruptcy or