OPERATING AGREEMENT
OF [[COMPANY FULL LEGAL NAME]], LLC
This Operating Agreement (the "Agreement") of [[Company Full Legal Name]], LLC, a Delaware limited liability company (the "Company"), is entered into as of [[Effective Date]] by and among the Members identified in Schedule A.
Article 1 - Organization and Formation
1.1 Formation. The Company was formed pursuant to the Delaware Limited Liability Company Act (6 Del. C. §§ 18-101 et seq., as amended, the "Act") by filing a Certificate of Formation with the Delaware Secretary of State on [[Formation Date]], bearing File Number [[Delaware File Number]].
1.2 Name. The Company's name is [[Company Full Legal Name]], LLC. The Company may do business under registered trade names in Delaware and other jurisdictions.
1.3 Registered Agent and Office. The Company's registered agent in Delaware is [[Registered Agent Name]] at [[Registered Agent Address, City, Delaware, ZIP Code]], as required by 6 Del. C. § 18-104. The registered agent may be changed by filing an amendment with the Secretary of State.
1.4 Principal Place of Business. The Company's principal place of business is [[Principal Office Address, City, State, ZIP Code]].
1.5 Purpose. The Company is organized to engage in [[business purpose, or "any lawful business activity permitted under the laws of the State of Delaware"]] and all activities incidental or related thereto.
1.6 Term. The Company's existence commenced on the date of filing of the Certificate of Formation and shall continue in perpetuity unless dissolved pursuant to Article 13.
1.7 Freedom of Contract. The Delaware LLC Act affords maximum freedom of contract to the Members. The Members exercise that freedom herein. Where this Agreement does not address a matter, the Act's default rules apply. Where this Agreement and the Act conflict (on non-mandatory provisions), this Agreement governs (6 Del. C. § 18-1101(b)).
Article 2 - Members, Capital Contributions, and Capital Accounts
2.1 Members. The initial Members of the Company and their respective ownership interests are set forth in Schedule A (Members Register), which is incorporated herein by reference.
2.2 Initial Capital Contributions. Each Member has made (or commits to make by [[Contribution Deadline]]) the Initial Capital Contribution listed in Schedule A in the form of:
- [ ] Cash;
- [ ] Property with the following agreed fair market value: [[Describe contributed property]]; OR
- [ ] Services (IP development, founding services) with the following agreed value: [[Describe and value]].
2.3 Additional Capital Contributions. No Member shall be required to make any additional Capital Contribution except upon:
- (a) Written approval of [[unanimous / 75% Supermajority / majority-in-interest]] of Members; and
- (b) Delivery of a written Capital Call Notice stating the total amount needed, each Member's pro-rata share, and the call date (not less than [[20]] business days from notice).
Members failing to contribute their allocated share within the call period are subject to dilution or buy-out remedies (Section 10.4).
2.4 Capital Accounts - 704(b) Maintenance. The Company shall maintain a separate Capital Account for each Member in full compliance with Treasury Regulation § 1.704-1(b)(2)(iv):
- (a) Increases: Each Capital Account is increased by (i) the Member's cash contributions; (ii) the fair market value of property contributed (net of liabilities assumed by the Company under Treas. Reg. § 1.752-1); (iii) the Member's allocable share of Profits and gain.
- (b) Decreases: Each Capital Account is decreased by (i) cash distributions; (ii) the fair market value of property distributed (net of liabilities assumed by the Member); (iii) the Member's allocable share of Losses and deductions.
- (c) Book Adjustments: Capital Accounts shall be adjusted to reflect fair market value ("Booked Up") upon admission of new Members, liquidating distributions, or other revaluation events under Treas. Reg. § 1.704-1(b)(2)(iv)(f).
2.5 Deficit Capital Account. [Select one]
- [ ] No Obligation to Restore Deficit: No Member shall be required to restore a negative Capital Account upon liquidation.
- [ ] Deficit Restoration Obligation: Each Member shall be required to restore any negative Capital Account balance to zero within [[90]] days of a liquidating distribution.
2.6 No Return of Capital. Except upon dissolution, no Member has the right to demand or receive a return of any Capital Contribution. No interest accrues on Capital Contributions unless otherwise unanimously agreed.
Article 3 - Membership Interests and Units
3.1 Percentage Interests. The Members' Percentage Interests as set forth in Schedule A govern economic rights (allocations and distributions) and voting, subject to any class-specific provisions.
3.2 Units. [Optional - use if LLC issues units]
The Company may issue Membership Interests in units of the following classes:
- Class A Units: [[Number]] units - [[voting; participate in Profits, Losses, and distributions on a pro-rata basis]].
- Class B Units: [[Number]] units - [[non-voting / preferred return at ___% per annum / other terms]].
3.3 New Issuances. The Company may issue additional Units or Membership Interests to new or existing Members upon approval of [[Supermajority / Unanimous]] Members. Any new issuance shall dilute existing Members' Percentage Interests pro rata unless Members agree otherwise.
3.4 Admission of New Members. New Members may be admitted only with [[unanimous / majority-in-interest]] written consent and upon executing a joinder to this Agreement and making the agreed Capital Contribution.
Article 4 - Profits, Losses, and Tax Allocations
4.1 Allocation of Profits. Subject to Sections 4.3-4.6, Profits shall be allocated among Members in proportion to their Percentage Interests, determined at Fiscal Year end (or as otherwise agreed).
4.2 Allocation of Losses. Subject to Sections 4.3-4.6, Losses shall be allocated among Members in proportion to their Percentage Interests; provided, no Member shall be allocated Losses that would cause a deficit Capital Account unless that Member bears economic risk of loss under Treas. Reg. § 1.752-2.
4.3 Qualified Income Offset (QIO). If any Member unexpectedly incurs an adjustment, allocation, or distribution described in Treas. Reg. §§ 1.704-1(b)(2)(ii)(d)(4), (5), or (6) that causes or increases a Capital Account deficit, the Company shall allocate items of income and gain to such Member as rapidly as possible to eliminate the deficit, in accordance with Treas. Reg. § 1.704-1(b)(2)(ii)(d).
4.4 Company Minimum Gain Chargeback. Notwithstanding any other provision, if there is a net decrease in Company Minimum Gain during any Fiscal Year, each Member shall be allocated items of income and gain for such year equal to that Member's share of the decrease, pursuant to Treas. Reg. § 1.704-2(f).
4.5 Member Nonrecourse Debt Minimum Gain Chargeback. If there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt, the Member who bears economic risk of loss for such debt shall be allocated items of income and gain as required by Treas. Reg. § 1.704-2(i)(4).
4.6 Section 704(c) Allocations. Items of income, gain, loss, and deduction with respect to property contributed by a Member with a difference between adjusted tax basis and fair market value shall be allocated among Members to take into account such difference under I.R.C. § 704(c) (using the [[Traditional / Curative / Remedial]] method, as elected by the Tax Matters Manager).
4.7 Tax Year. The Company's tax year is the calendar year (January 1 - December 31), unless a different year is required by the IRS.
Article 5 - Distributions
5.1 Discretionary Distributions. The Manager(s) (or, in a Member-managed Company, the Members by Majority Vote) may, in their discretion, make distributions of cash or property to Members, provided that no distribution shall be made that would render the Company unable to pay its debts as they come due (6 Del. C. § 18-607 - unlawful distributions).
5.2 Mandatory Tax Distributions. Within [[90]] days after each Fiscal Year end (and quarterly estimated distributions, if approved), the Company shall distribute to each Member an amount at least equal to the product of (a) the Company's estimated taxable income allocable to that Member for the period, multiplied by (b) the highest marginal combined federal and applicable state income tax rate applicable to the Member (estimated at [[__]]%). Tax distributions shall be offset against (and reduce) subsequent discretionary distributions.
5.3 Priority and Order. Distributions shall be made in the following priority:
1. Preferred return to Class B Members (if any): [[Rate and terms]];
- Return of unreturned Capital Contributions (pro rata by Capital Account balance); and
- Residual distributions pro rata by Percentage Interest.
5.4 Distribution in Kind. No Member may demand a distribution in property other than cash except upon dissolution and by unanimous consent.
5.5 Compliance. No distribution shall be made if, after giving effect, the Company would not be able to pay its debts as they become due in the ordinary course, per 6 Del. C. § 18-607.
Article 6 - Management
Option A - Member-Managed
6A.1 Member Management. The Company shall be member-managed. All Members are agents of the Company for the purposes of its business, and each Member (acting alone) may bind the Company in the ordinary course of business.
6A.2 Routine vs. Reserved Matters. Routine business decisions require Majority Vote. Reserved Matters (Section 6A.3) require Supermajority or Unanimous Vote.
6A.3 Reserved Matters (requiring Supermajority [[75%]] or Unanimous Vote as specified):
| Matter | Threshold |
|---|---|
| Amendment of Agreement or Certificate of Formation | Unanimous |
| Admission of new Members or new Unit issuances | [[Unanimous / Supermajority]] |
| Sale, transfer, or encumbrance of all or substantially all assets | Unanimous |
| Merger, conversion, or restructuring | Unanimous |
| Indebtedness exceeding $[[Threshold]] | Supermajority |
| Loans to Members or related parties | Supermajority |
| Initiation/settlement of litigation above $[[Amount]] | Supermajority |
| Related-party contracts | Supermajority |
| Change of tax classification election | Unanimous |
| Voluntary dissolution | Unanimous |
Option B - Manager-Managed
6B.1 Manager-Managed. The Company shall be manager-managed (6 Del. C. § 18-402). Management authority is vested exclusively in the Manager(s). Members (in their capacity as Members) shall not have authority to act on behalf of or bind the Company.
Initial Manager(s):
| Name | Title | Term |
|---|---|---|
| [[Manager 1 Full Legal Name]] | Managing Member / Manager | [[At will / ___ years]] |
| [[Manager 2 Full Legal Name, if any]] | Co-Manager | [[At will / ___ years]] |
6B.2 Manager Authority. Subject to Reserved Matters, the Manager(s) have full authority to manage the Company's business, including executing contracts, opening accounts, hiring personnel, and acquiring or disposing of assets in the ordinary course.
6B.3 Reserved Matters. The items listed in Section 6A.3 require Member approval as described, regardless of manager-managed structure.
6B.4 Manager Removal. A Manager may be removed by [[Majority / Supermajority / Unanimous]] Member vote, with or without cause, upon [[10 / 30]] days written notice.
Article 7 - Voting
7.1 Majority Vote. Approval by Members holding more than 50% of Percentage Interests.
7.2 Supermajority Vote. Approval by Members holding at least [[75%]] of Percentage Interests.
7.3 Unanimous Vote. Approval by all Members.
7.4 Meetings. Any Manager or Members holding [[20%]] of Percentage Interests may call a meeting upon [[10]] days' written notice. Meetings may be held in person, by phone, or by video conference. Written consents in lieu of meeting are permitted and effective when signed by the required percentage.
7.5 Quorum. A quorum for any meeting is Members holding at least [[50%]] of all Percentage Interests present or represented.
7.6 Deadlock Resolution. In the event of deadlock on any Reserved Matter, the Members shall:
1. Submit the dispute to non-binding mediation (AAA Commercial Mediation Procedures) within [[15]] days of written deadlock notice;
- If mediation fails within [[60]] days, any Member may invoke the Buy-Sell Mechanism in Section 10.5.
Article 8 - Books, Records, and Reporting
8.1 Books and Records. The Company shall maintain:
- Certificate of Formation and all amendments;
- This Agreement and all amendments;
- Federal, state, and local tax returns for 3 years;
- Financial statements (balance sheet, income statement) for 3 years;
- Members Register with names, addresses, and Percentage Interests;
- Minutes and written consents.
8.2 Member Access. Each Member has rights to inspect and copy Company records upon reasonable written notice (6 Del. C. § 18-305).
8.3 Financial Reporting. Within [[90]] days of each Fiscal Year end, the Company shall deliver to each Member: (a) annual financial statements; (b) Schedule K-1 (or equivalent); (c) Capital Account statement.
8.4 Partnership Representative. The [[Manager / designated Member]] shall serve as Partnership Representative for BBA centralized audit purposes (I.R.C. § 6223), with full authority to make all elections including the push-out election under I.R.C. § 6226.
Article 9 - Fiduciary Duties
9.1 Delaware Flexibility. Under 6 Del. C. § 18-1101(c), the fiduciary duties of Members and Managers may be expanded, restricted, or eliminated to the extent provided in this Agreement.
9.2 Duty of Loyalty - Modified. The duty of loyalty is limited to: (a) accounting for and holding as trustee any property, profit, or benefit derived from conduct of Company business; (b) refraining from dealing with the Company on behalf of adverse parties without disclosure and Member approval. The Members expressly agree that Members may engage in competing businesses without violating any duty to the Company, so long as they do not use Company confidential information.
9.3 Duty of Care - Modified. The duty of care is limited to refraining from grossly negligent or reckless conduct, intentional misconduct, or knowing violation of law (6 Del. C. § 18-1101(c)).
9.4 Related-Party Transactions. Transactions between the Company and any Member or Manager must be: (a) disclosed to all Members; (b) approved by [[Supermajority / Unanimous]] vote of disinterested Members; and (c) on terms no less favorable than arm's-length.
Article 10 - Transfer of Membership Interests
10.1 Restriction on Transfer. No Member may sell, assign, pledge, hypothecate, or otherwise transfer any part of their Membership Interest without prior written consent of [[Unanimous / Supermajority]] of other Members, except for Permitted Transfers.
10.2 Permitted Transfers. The following transfers are permitted without consent (with 10 business days' written notice to the Company):
- Transfer to the Member's revocable trust for estate planning;
- Transfer to a wholly-owned entity controlled by the Member; and
- Transfer to Immediate Family Members (spouse/domestic partner, children, grandchildren) by gift or on death.
10.3 Right of First Refusal (ROFR). Before any non-Permitted Transfer:
1. The transferring Member ("Seller") shall deliver a Transfer Notice to the Company and all Members specifying the proposed transferee, price, and terms;
- The Company has [[30]] days to purchase all (not less than all) of the offered Interest at the offered price;
- If the Company declines, remaining Members have [[15]] additional days to purchase pro rata;
- If neither exercises their ROFR, Seller may complete the transfer to the named transferee at the same price and terms within [[90]] days.
10.4 Drag-Along Right. If Members holding [[75%]] of all Percentage Interests approve a sale of the Company to a bona fide third-party buyer, all other Members shall be required to vote in favor of and participate in such sale on the same per-unit economic terms.
10.5 Tag-Along Right. If any Member proposes to transfer [[more than 25%]] of their Percentage Interest to a third party, all other Members shall have the right to participate pro rata on the same terms.
10.6 Buy-Sell (Texas Shoot-Out). Upon deadlock or occurrence of any triggering event:
1. Any Member (the "Offeror") may deliver written notice to all Members stating a per-unit valuation for the entire Company;
- Each other Member (the "Offeree") shall within [[60]] days elect either to: (a) purchase the Offeror's Interest at the stated price, or (b) sell their Interest to the Offeror at the stated price;
- Closing shall occur within [[90]] days; the amount may be financed through institutional lenders.
10.7 Assignee vs. Substitute Member. A transferee who has not been admitted as a Substitute Member has only economic rights (Profits, Losses, distributions) and no voting or management rights. Admission as a Substitute Member requires [[Unanimous / Supermajority]] consent.
10.8 Death, Incapacity, or Bankruptcy. Upon a Member's death, incapacity, or bankruptcy, the Member's legal representative/trustee/bankruptcy estate succeeds to economic rights only. The remaining Members have [[90 days]] to elect to purchase the deceased/incapacitated/bankrupt Member's Interest at Fair Market Value (as determined by an agreed appraiser or Section 10.6 procedure).
Article 11 - Indemnification and Liability
11.1 Indemnification. The Company shall indemnify each Member, Manager, officer, and authorized agent (each, a "Covered Person") to the maximum extent permitted by the Act (6 Del. C. § 18-108) against any loss, claim, damage, liability, expense (including reasonable attorneys' fees) arising out of acts or omissions in their capacity as a Covered Person, except for acts constituting fraud, gross negligence, willful misconduct, or knowing violation of law.
11.2 Advance of Expenses. The Company shall advance expenses (including attorneys' fees) to any Covered Person upon receipt of an undertaking to repay if indemnification is ultimately not available.
11.3 Member Non-Liability. No Member shall be personally liable for the Company's debts, obligations, or liabilities solely by reason of membership status (6 Del. C. § 18-303).
11.4 Exculpation. No Member or Manager shall be liable to the Company or other Members for any act or omission unless such act or omission constitutes fraud, gross negligence, or willful misconduct.
11.5 Insurance. The Company shall maintain such insurance as the Manager/Members deem appropriate, including D&O liability coverage.
Article 12 - Anti-Piercing and Separateness
12.1 Separateness Covenants. To preserve the liability shield under the Act, the Company and each Member covenant to:
- (a) Maintain separate bank accounts and financial records from Members and affiliates;
- (b) Not commingle Company and personal funds;
- (c) Conduct all business in the Company's name and capacity;
- (d) Maintain adequate capitalization;
- (e) Observe all Company formalities (minutes, resolutions, capacity signatures);
- (f) Not guarantee personal debts of Members using Company assets without Member approval.
12.2 Single-Member Covenants. If the Company has one Member, that Member shall: (a) execute written consents for all organizational actions; (b) maintain separate books; (c) not hold out to creditors that the member and Company are one entity.
Article 13 - Dissolution and Winding Up
13.1 Events of Dissolution. The Company is dissolved upon:
- (a) Written consent of [[Unanimous / Supermajority]] of all Members (6 Del. C. § 18-801(a)(3));
- (b) Entry of a judicial decree of dissolution (6 Del. C. § 18-802); or
- (c) Cancellation of the Certificate of Formation upon dissolution.
13.2 Member Withdrawal. Under the Delaware Act, a Member's withdrawal, dissociation, bankruptcy, or death does NOT automatically dissolve the Company (6 Del. C. § 18-304).
13.3 Winding Up. Upon dissolution: (1) cease new business; (2) liquidate assets; (3) pay liabilities in order: (i) secured creditors, (ii) unsecured creditors, (iii) Members for unpaid distributions, (iv) Members' Capital Account balances, (v) residual assets pro rata by Percentage Interest; (4) file Certificate of Cancellation with the Delaware Secretary of State.
Article 14 - Tax Elections
14.1 Default Classification. Single-member LLC: disregarded entity. Multi-member LLC: partnership.
14.2 Tax Election. The Members elect the following classification (select one):
- [ ] Default (Partnership / Disregarded Entity)
- [ ] S Corporation - Form 2553 filed with IRS; all eligibility criteria must be satisfied.
- [ ] C Corporation - Form 8832 filed; "check-the-box" election.
14.3 Delaware Business Tax. Delaware imposes an annual LLC tax of $300 per year (8 Del. C. § 18-1107; as of 2024 - verify current amount) due by June 1. The Company's registered agent typically remits this on the Company's behalf.
14.4 BBA Partnership Representative. The [[Manager / designated Member]] is hereby appointed Partnership Representative with full authority for all IRS audit matters.
Article 15 - Amendments, Governing Law, and Miscellaneous
15.1 Amendments. This Agreement may be amended only by a written instrument signed by [[Supermajority / Unanimous]] Members. Any amendment that modifies a Member's economic rights or increases a Member's obligations requires unanimous consent.
15.2 Governing Law. The laws of the State of Delaware, including the Delaware LLC Act (6 Del. C. §§ 18-101 et seq.), govern this Agreement.
15.3 Severability. If any provision is found invalid, the remainder continues in force.
15.4 Notices. All notices shall be in writing and delivered by certified mail, overnight courier, or confirmed email to the addresses in Schedule A.
15.5 Entire Agreement. This Agreement supersedes all prior agreements, representations, and understandings among the Members regarding the subject matter hereof.
15.6 Counterparts and Electronic Signatures. This Agreement may be executed in counterparts, each an original. Electronic signatures (DocuSign, Adobe Sign) are valid under applicable law.
15.7 No Third-Party Beneficiaries. This Agreement is solely for the benefit of the Members and the Company.
Signature Block
IN WITNESS WHEREOF, the undersigned have executed this Operating Agreement as of the date first written above.
MEMBER 1:
Signature: ______________________________
Name: [[Member 1 Full Legal Name]]
Date: [[Date]]
Percentage Interest: [[____%]]
MEMBER 2:
Signature: ______________________________
Name: [[Member 2 Full Legal Name]]
Date: [[Date]]
Percentage Interest: [[____%]]
MEMBER 3 (if applicable):
Signature: ______________________________
Name: [[Member 3 Full Legal Name]]
Date: [[Date]]
Percentage Interest: [[____%]]
MANAGER (if not a Member):
Signature: ______________________________
Name: [[Manager Full Legal Name]]
Title: Manager
Date: [[Date]]
Schedule A - Members Register
| Member Full Legal Name | Address | Initial Capital Contribution | Percentage Interest | Units |
|---|---|---|---|---|
| [[Member 1]] | [[Address]] | $[[Amount]] | [[____%]] | [[#]] |
| [[Member 2]] | [[Address]] | $[[Amount]] | [[____%]] | [[#]] |
| [[Member 3]] | [[Address]] | $[[Amount]] | [[____%]] | [[#]] |
| Totals | | $[[Total]] | 100% | |
> DISCLAIMER: This document is a template for informational purposes only and does not constitute legal advice. Delaware LLC law (6 Del. C. §§ 18-101 et seq.) offers significant contractual flexibility; not all provisions above are required by Delaware law. Tax treatment and elections should be reviewed with a Delaware-licensed attorney and CPA. No attorney-client relationship is created by use of this template.
Sources (as of June 2026):
- Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq.
- 6 Del. C. § 18-105 (name requirements)
- 6 Del. C. § 18-303 (member non-liability)
- 6 Del. C. § 18-402 (management)
- 6 Del. C. § 18-607 (unlawful distributions)
- 6 Del. C. § 18-801 (dissolution)
- 6 Del. C. § 18-802 (judicial dissolution)
- 6 Del. C. § 18-1101(b)(c) (freedom of contract; duty modification)
- 8 Del. C. § 18-1107 (annual LLC tax - $300)
- U.S. Treasury Regulation § 1.704-1(b) (capital account maintenance)
- I.R.C. §§ 704, 1361, 6221-6241 (tax rules)
- I.R.C. § 704(c) (contributed property allocations)
