OPERATING AGREEMENT
OF [[COMPANY FULL LEGAL NAME]], LLC
This Operating Agreement (this "Agreement") of [[Company Full Legal Name]], LLC, a Colorado limited liability company (the "Company"), is entered into as of [[Effective Date]] by and among the Members identified in Schedule A and hereby incorporated.
Article 1 - Organization
1.1 Formation. The Company was formed as a limited liability company under the Colorado Revised Limited Liability Company Act (C.R.S. Title 7, Article 80) by filing Articles of Organization with the Colorado Secretary of State on [[Formation Date]], under Colorado Secretary of State File No. [[File Number]].
1.2 Name. The Company's name is [[Company Full Legal Name]], LLC. The Company may do business under assumed trade names registered in accordance with Colorado law.
1.3 Principal Office. The principal office is located at [[Principal Office Address, City, Colorado, ZIP]], or such other location as the Managers or Members may designate.
1.4 Registered Agent. The Company's registered agent in Colorado is [[Registered Agent Name]], located at [[Registered Agent Address, Colorado]].
1.5 Term. The Company commenced on its formation date and shall continue until dissolved in accordance with this Agreement or applicable law.
1.6 Purpose. The Company is formed to [[State business purpose, e.g., "engage in any lawful business purpose permitted under Colorado law"]], and any other lawful activity.
Article 2 - Members and Capital
2.1 Members. The Members are listed in Schedule A, which sets forth each Member's:
(a) Full legal name and address;
(b) Capital Contribution (initial);
(c) Percentage Interest (or Units); and
(d) Class of Membership Interest (if any - e.g., Class A voting / Class B non-voting).
2.2 Initial Capital Contributions. Each Member has made (or agrees to make by [[Contribution Deadline]]) the Capital Contribution set forth in Schedule A.
2.3 Additional Capital Contributions.
(a) No Member is required to make additional Capital Contributions except as approved by a [[Supermajority, e.g., majority-in-interest or 75%]] vote of Members.
(b) If a Member makes an additional Capital Contribution without required approval, it shall be treated as a loan unless the other Members retroactively approve it.
(c) Members who fail to make required additional contributions are subject to the dilution and buy-out remedies in Section 10.4.
2.4 Capital Accounts. The Company shall maintain a Capital Account for each Member in accordance with Treasury Regulation § 1.704-1(b)(2)(iv):
(a) Each Capital Account shall be increased by the Member's capital contributions and allocable share of income and gain;
(b) Each Capital Account shall be decreased by distributions and the Member's allocable share of losses and deductions;
(c) Capital Accounts shall be adjusted to fair market value ("Book-Up") on the occurrence of any liquidating distribution, admission of a new member, or any other event described in Treas. Reg. § 1.704-1(b)(2)(iv)(f).
2.5 Return of Capital. No Member is entitled to a return of Capital Contributions except upon dissolution or as otherwise agreed. No interest accrues on Capital Contributions.
Article 3 - Percentage Interests and Units
3.1 Percentage Interests. The Percentage Interests of each Member are as set forth in Schedule A, and are based on relative Capital Contributions and any other agreed allocation. A Member's Percentage Interest determines their:
(a) Voting rights (unless Class-specific voting applies);
(b) Share of profits and losses (except as provided in Article 4);
(c) Liquidating distributions.
3.2 Units. [Optional] The Company may issue Membership Interests in units as follows:
- Class A Units: [[Number]] units - voting, participate in profits, losses, and distributions.
- Class B Units: [[Number]] units - [[non-voting / preferred return / other]].
Article 4 - Profits, Losses, and Tax Allocations
4.1 Profits. After any required allocation in Section 4.2 and 4.3, Profits shall be allocated among the Members in proportion to their Percentage Interests.
4.2 Losses. Losses shall be allocated among the Members in proportion to their Percentage Interests, subject to the following limitations:
(a) No Member shall be allocated Losses that would cause that Member's Capital Account to fall below zero unless that Member bears the economic risk of loss (within the meaning of Treas. Reg. § 1.752-2);
(b) Losses in excess of a Member's Capital Account shall be reallocated to Members with positive Capital Account balances.
4.3 Special Allocations - 704(b) Compliance.
(a) Qualified Income Offset (QIO): If a Member receives an unexpected reduction in Capital Account (through distribution or allocation), the Company shall allocate income and gain to that Member as quickly as possible to eliminate the deficit, in accordance with Treas. Reg. § 1.704-1(b)(2)(ii)(d).
(b) Minimum Gain Chargeback: As required by Treas. Reg. § 1.704-2(f), each Member shall be allocated income and gain equal to that Member's share of partnership minimum gain (in the event of non-recourse liability).
(c) Member Nonrecourse Debt Minimum Gain Chargeback: Treas. Reg. § 1.704-2(i)(4).
4.4 Tax Allocations. Income, gain, loss, deduction, and credit items shall be allocated among Members in accordance with the regulations under I.R.C. § 704(b) and § 704(c), as amended.
4.5 Tax Year. The Company's tax year shall be the calendar year (January 1 - December 31) unless otherwise required by law or elected by the Members.
Article 5 - Distributions
5.1 Timing. Distributions shall be made at such times and in such amounts as determined by the [[Managers / Managing Members]] with approval of a [[Majority / Supermajority]] of Members, subject to:
(a) Retention of adequate working capital and reserves;
(b) Compliance with Colorado law (no distributions that would render the Company unable to pay debts as they come due - C.R.S. § 7-80-606).
5.2 Priority - Preferred Return (if applicable). [[Describe any preferred return for Class B or investor Members, or "There is no preferred return - all distributions are pro rata to Percentage Interests."]]
5.3 Pro Rata Distributions. Subject to Section 5.2, distributions shall be made pro rata to Percentage Interests.
5.4 Tax Distributions. The Company shall use commercially reasonable efforts to make quarterly tax distributions to Members in an amount sufficient to enable each Member to pay federal and state income taxes attributable to their share of the Company's taxable income, at an assumed combined federal-plus-state rate of [[e.g., 42%]] (a "Tax Distribution"), before any other distributions.
5.5 Withholding. The Company may withhold from any distribution any amount required to be withheld under applicable federal, state, or local law, and such withheld amount shall be treated as a distribution to the Member.
Article 6 - Management
Select one:
☐ 6A - MEMBER-MANAGED COMPANY
6A.1 Authority. The business and affairs of the Company shall be managed by the Members in proportion to their Percentage Interests. Each Member is an agent of the Company and may bind the Company in the ordinary course of business.
6A.2 Decisions - Ordinary Course. Actions in the ordinary course of business require the approval of a majority-in-interest of the Members.
6A.3 Decisions - Major Actions (Reserved Matters). The following actions require approval of a [[75% or two-thirds or unanimous]] majority-in-interest of the Members (or as specified - "Reserved Matters"):
(a) Admission of a new Member;
(b) Sale or transfer of all or substantially all the Company's assets;
(c) Amendment of this Agreement;
(d) Merger, consolidation, or reorganization;
(e) Incurring debt in excess of $[[Amount]] in any 12-month period;
(f) Capital expenditures exceeding $[[Amount]];
(g) Entering into any contract with a value exceeding $[[Amount]];
(h) Dissolution of the Company;
(i) Making or revoking any tax election;
(j) Commencing or settling litigation with a value exceeding $[[Amount]].
☐ 6B - MANAGER-MANAGED COMPANY
6B.1 Manager(s). The Company is managed by [[one Manager / two or more Managers]]. The initial Manager(s) are:
| Manager | Address | Term |
|---------|---------|------|
| [[Manager 1 Full Name]] | [[Address]] | [[Until resignation, removal, or successor appointment]] |
6B.2 Authority. The Manager(s) have authority to manage the business and affairs of the Company in the ordinary course of business. Individual Members (other than those who are also Managers) are not agents of the Company and cannot bind the Company.
6B.3 Reserved Matters (Manager-Managed). The following actions require approval of Members holding a [[Majority / Supermajority]] of Percentage Interests even in a manager-managed company:
(a) Any of the actions listed in Section 6A.3 above.
6B.4 Manager Removal and Replacement. A Manager may be removed, with or without cause, by a vote of Members holding a majority (or such higher percentage as set forth in Schedule A) of Percentage Interests. A replacement Manager shall be appointed by a majority of Percentage Interests.
Article 7 - Officers (Optional)
7.1 The Managers or Members may designate officers (e.g., President, CEO, CFO, Secretary) with authority as delegated by the Managers or Members.
7.2 Current Officers: [[List titles and names, or "None designated at formation"]].
Article 8 - Transfer of Membership Interests; ROFR
8.1 Restriction on Transfer. No Member may Transfer (as defined below) all or any part of their Membership Interest without complying with this Article 8. Any purported Transfer in violation of this Agreement is void.
"Transfer" means any sale, assignment, gift, pledge, hypothecation, or other disposition, whether voluntary, involuntary, or by operation of law.
8.2 Right of First Refusal (ROFR).
(a) Before any Member (the "Transferring Member") Transfers their Membership Interest to a third party, the Transferring Member must provide written notice ("Transfer Notice") to all other Members (the "ROFR Holders") setting forth: (i) the identity of the proposed transferee; (ii) the price and terms; and (iii) the number of Interests to be transferred.
(b) Each ROFR Holder has 30 days after receipt of the Transfer Notice to elect to purchase the Interests on the same terms, in proportion to their Percentage Interests (or in such other proportion as they may agree among themselves).
(c) If all ROFR Holders decline or fail to respond within 30 days, the Transferring Member may complete the Transfer to the proposed transferee on the terms stated in the Transfer Notice within 90 days of the Transfer Notice, subject to Section 8.4.
8.3 Drag-Along Rights. If Members holding [[Majority / Supermajority]] of Percentage Interests approve a sale of all or substantially all of the Membership Interests or Company assets to a bona fide third-party purchaser (a "Drag-Along Sale"), they may require all other Members to transfer their Interests on the same terms and conditions (pro rata).
8.4 Tag-Along Rights. If one or more Members propose to Transfer a controlling interest to a third party without triggering drag-along, each remaining Member has the right ("Tag-Along Right") to participate in the Transfer and sell a proportionate share of their Interests on the same terms and conditions as the Transferring Member.
8.5 Permitted Transfers. Notwithstanding the above, the following Transfers are permitted without ROFR compliance (but require prior written notice to the Company):
(a) To a trust for estate planning purposes where the Member retains beneficial control;
(b) To a wholly owned entity of the Member for tax planning purposes;
(c) To a spouse, lineal descendant, or legal entity controlled by such persons.
8.6 Assignee vs. Substituted Member. A transferee who has not been approved as a Substituted Member under Section 9.1 is an "Assignee" only - they have economic rights but no management or voting rights.
Article 9 - Admission of New Members; Substituted Members
9.1 New Members. New Members may be admitted only with the approval of Members holding [[Majority / Unanimous]] of Percentage Interests.
9.2 Substituted Members. A transferee becomes a Substituted Member (with full membership rights) only with the approval of Members holding [[Majority / Unanimous]] of Percentage Interests and execution of a joinder to this Agreement.
Article 10 - Dissociation; Buy-Out; Deadlock
10.1 Voluntary Dissociation. A Member may dissociate from the Company upon [[90 days' / 6 months']] prior written notice, subject to payment of any amounts owed to the Company.
10.2 Involuntary Dissociation. A Member shall be dissociated upon:
(a) Filing for personal bankruptcy;
(b) Death, incapacity, or dissolution (for entity Members);
(c) Expulsion by vote of Members holding [[75%]] of Percentage Interests for material breach after written notice and 30-day cure period.
10.3 Buy-Out on Dissociation. On dissociation, the Company shall purchase the dissociated Member's Interest at "Fair Market Value" (as determined by an independent appraiser if not agreed within 30 days). The purchase price shall be paid in [[cash / installments over up to [[Number]] months at [[interest rate]]% interest]].
10.4 Deadlock Resolution.
(a) If the Members are deadlocked on a major decision for more than [[60 / 90]] days, any Member may invoke the following resolution procedures:
1. Mediation: The Members shall engage a mutually agreed mediator for not less than one 8-hour mediation session.
2. Texas Shoot-Out / Buy-Sell: If mediation fails, any Member may invoke the buy-sell mechanism under Section 10.5.
3. Dissolution: If neither mediation nor buy-sell resolves the deadlock within [[180 days]], any Member may apply to a court for judicial dissolution under C.R.S. § 7-80-810.
10.5 Buy-Sell Mechanism ("Texas Shoot-Out"). Any Member ("Offeror") may offer to purchase all other Members' Interests ("Buy-Sell Notice") at a price per Percentage Interest point stated in the Buy-Sell Notice. Each other Member may, within [[30 / 45]] days, either: (a) accept and sell their Interests at the stated price; or (b) buy the Offeror's Interests at the same price per point. If no election is made, the other Members are deemed to accept the Offeror's purchase.
Article 11 - Tax Classification Election
11.1 Default Classification. By default, an LLC with two or more Members is classified as a partnership for U.S. federal income tax purposes (I.R.C. § 7701; Treas. Reg. § 301.7701-3). A single-member LLC is classified as a "disregarded entity."
11.2 Election. The Members [have / have not] elected to change the default classification. If an election has been made:
- [ ] S Corporation Election (I.R.C. § 1361(a)): The Company has elected S corporation status. All Members must be eligible S corporation shareholders (U.S. citizens/residents, no more than 100 shareholders, one class of stock).
- [ ] C Corporation Election: The Company has elected C corporation classification.
11.3 Tax Matters Partner / Partnership Representative. The "Partnership Representative" (for purposes of the centralized partnership audit rules under I.R.C. § 6221 et seq.) is [[Name]]. The Partnership Representative has authority to make all tax elections and to bind the Company and Members in any audit.
Article 12 - Indemnification
12.1 Indemnification of Members and Managers. The Company shall indemnify and hold harmless each Member and Manager (and their respective officers, employees, and agents, collectively "Covered Persons") from and against any claims, damages, losses, and expenses (including reasonable attorney fees) arising from or related to the person's service to the Company, to the fullest extent permitted by C.R.S. § 7-80-402, EXCEPT where the Covered Person's conduct constitutes:
(a) Willful misconduct or reckless disregard of duties;
(b) Fraud or intentional misrepresentation;
(c) A knowing violation of law.
12.2 Advancement of Expenses. The Company shall advance reasonable legal expenses upon written undertaking to repay if ultimately determined the person is not entitled to indemnification.
12.3 Insurance. The Company may obtain Directors and Officers (D&O) or similar liability insurance at Company expense.
Article 13 - Books and Records; Reporting
13.1 Books. The Company shall maintain complete and accurate books of account, including capital accounts, meeting minutes, tax returns, and all financial records.
13.2 Member Access. Each Member shall have the right to inspect and copy, at reasonable times and upon reasonable notice, any Company book or record (C.R.S. § 7-80-411).
13.3 Tax Returns. The Partnership Representative shall prepare or cause to be prepared, and shall distribute to each Member, a Schedule K-1 (or equivalent) within [[90 / 120]] days after the end of each tax year.
13.4 Annual Financial Report. The Company shall prepare (or cause to be prepared) annual financial statements (at minimum, income statement and balance sheet) and deliver them to each Member within [[90]] days after fiscal year-end.
Article 14 - Dissolution and Winding Up
14.1 Events of Dissolution. The Company shall be dissolved upon:
(a) The unanimous written consent of all Members;
(b) A vote of Members holding [[75%]] of Percentage Interests;
(c) Entry of a court order for judicial dissolution (C.R.S. § 7-80-810);
(d) Any event making it unlawful for the Company's business to be continued.
14.2 Winding Up. Upon dissolution, the Company shall wind up its affairs, liquidate assets, and distribute proceeds in the following order:
1. Payment of creditors (including Members who are creditors, but not on account of their Membership Interests);
- Distribution to Members with positive Capital Account balances, pro rata (after adjusting Capital Accounts for final-year allocations).
14.3 Articles of Dissolution. After completing wind-up, the Company shall file Articles of Dissolution with the Colorado Secretary of State (C.R.S. § 7-80-806).
Article 15 - Anti-Piercing / Separateness Covenants (Single-Member LLC)
If applicable (single-member LLC):
15.1 Separate Entity. The Company shall be maintained as an entity legally separate and distinct from its Member(s), and the Member(s) shall:
(a) Not commingle personal assets with Company assets;
(b) Maintain separate bank accounts and financial records;
(c) Observe all formalities required by law and this Agreement;
(d) Ensure the Company is adequately capitalized at all times;
(e) Not represent to third parties that they are personally liable for Company obligations.
Article 16 - Miscellaneous
16.1 Amendments. This Agreement may be amended only by a written instrument signed by Members holding [[Majority / Supermajority / Unanimous]] of Percentage Interests.
16.2 Governing Law. This Agreement is governed by and construed under the laws of the State of Colorado, including the Colorado Revised Limited Liability Company Act (C.R.S. Title 7, Article 80).
16.3 Dispute Resolution. Any dispute among the Members or between the Company and a Member shall first be submitted to mediation. If mediation fails within [[30]] days, disputes shall be resolved by binding arbitration under the American Arbitration Association Commercial Arbitration Rules, in [[City, Colorado]], or by litigation in the courts of [[County]] County, Colorado.
16.4 Notices. Notices shall be in writing and delivered personally, by email, or by USPS certified mail to the address for each Member set forth in Schedule A.
16.5 Entire Agreement. This Agreement (including all Schedules) constitutes the entire agreement among the Members regarding the Company's governance and supersedes all prior agreements and understandings.
16.6 Counterparts; Electronic Signature. This Agreement may be executed in counterparts and by electronic signature.
16.7 Severability. If any provision is held unenforceable, the remaining provisions remain in full force.
Schedule A - Members, Capital Contributions, and Percentage Interests
| Member Name | Capital Contribution | % Interest | Class |
|-------------|----------------------|------------|---------|
| [[Member 1 Full Name]] | $[[Amount]] | [[%]] | Class A |
| [[Member 2 Full Name]] | $[[Amount]] | [[%]] | Class A |
| TOTAL | | $[[Total]] | 100% | |
Signature Block
The undersigned, being all of the Members of the Company, agree to the terms of this Operating Agreement as of the date first written above.
Member 1: _______________________________
[[Member 1 Full Name]]
Date: __________
Member 2: _______________________________
[[Member 2 Full Name]]
Date: __________
Manager (if Manager-Managed): _______________________________
[[Manager Full Name]], Manager
Date: __________
> Template - not legal advice. Colorado LLCs are governed by the Colorado Revised Limited Liability Company Act (C.R.S. Title 7, Article 80). Tax provisions reference federal law (I.R.C. § 704; Treas. Reg. § 1.704-1(b)) and are subject to change. Consult a Colorado business attorney and a CPA before finalizing. Operating agreements should be customized to your specific business, ownership structure, and tax planning needs.
Primary Sources (as of 2026-06):
- Colorado Revised Limited Liability Company Act, C.R.S. Title 7, Article 80 (ss. 7-80-402, 7-80-411, 7-80-606, 7-80-806, 7-80-810)
- I.R.C. §§ 704, 1361, 6221; Treas. Reg. §§ 1.704-1(b), 1.704-2, 301.7701-3
- Colorado Secretary of State - Business Registration: sos.state.co.us/biz
