RECITALS
WHEREAS, the Members desire to form a limited liability company under the Massachusetts Limited Liability Company Act, M.G.L. c. 156C, as amended from time to time (the "Act"), and to set forth their respective rights, duties, and obligations with respect to the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows.
ARTICLE I - FORMATION AND ORGANIZATIONAL MATTERS
1. Formation; Name
The Company was formed as a Massachusetts limited liability company by the filing of its Certificate of Organization (the "Certificate") with the Secretary of the Commonwealth of Massachusetts (the "Secretary") on [[Formation Date]], pursuant to M.G.L. c. 156C, §§ 12-14. The Company's name is [[LLC Name]], LLC. The Company shall file any amendments to the Certificate as required by the Act.
2. Registered Agent; Principal Office
The Company's registered agent in Massachusetts is [[Registered Agent Name]], located at [[Registered Agent Address]], [[City, Massachusetts Zip Code]] (the "Registered Agent"). The Company's principal place of business is [[Principal Office Address]]. The Members may change the registered agent or principal office upon filing with the Secretary and giving written notice to all Members.
3. Purpose
The Company is formed to engage in [[Business Purpose]] and any other lawful purpose permitted by the Act, as determined from time to time by the Members.
4. Term
The Company shall continue in existence until dissolved and wound up in accordance with Article XIII of this Agreement and the Act.
5. Annual Report
The Company shall file an Annual Report with the Secretary of the Commonwealth on or before the date required by M.G.L. c. 156C, § 12A, and shall pay the applicable filing fee. The designated manager or, if member-managed, the Members holding a majority of the Percentage Interests shall be responsible for ensuring timely filing.
ARTICLE II - DEFINITIONS
6. Defined Terms
As used in this Agreement, the following terms have the meanings set forth below. Capitalized terms used but not defined in this Agreement have the meanings given in the Act.
(a) "Act" means the Massachusetts Limited Liability Company Act, M.G.L. c. 156C, as amended from time to time.
(b) "Affiliate" means, with respect to any Person, any Person that controls, is controlled by, or is under common control with, such Person.
(c) "Agreement" means this Operating Agreement, including all Exhibits, as amended from time to time.
(d) "Capital Account" has the meaning given in Section 12.
(e) "Capital Contribution" means any cash, property, or services contributed or agreed to be contributed to the Company by a Member.
(f) "Certificate" means the Certificate of Organization filed with the Secretary, and any amendments thereto.
(g) "Company" means [[LLC Name]], LLC, the Massachusetts limited liability company governed by this Agreement.
(h) "Distributable Cash" means, for any period, the Company's net cash receipts from all sources, reduced by (i) payments of operating expenses, principal and interest on indebtedness, and capital expenditures, and (ii) reserves established by the Members (or Manager) for working capital, contingencies, and future needs, all as determined by the Members (or Manager) in their reasonable discretion.
(i) "Fiscal Year" has the meaning given in Section 33.
(j) "Interest" means a Member's entire limited liability company interest in the Company, including rights to share in allocations, distributions, and management under this Agreement.
(k) "Majority Vote" means the affirmative vote of Members holding more than fifty percent (50%) of the Percentage Interests.
(l) "Manager" means a Person designated to manage the Company under Article V if the Company is manager-managed.
(m) "Member" means each Person admitted as a member of the Company pursuant to this Agreement and the Act, and shown on Exhibit A, as updated from time to time.
(n) "Net Profits" and "Net Losses" mean, for each Fiscal Year, an amount equal to the Company's taxable income or loss for such year determined in accordance with Code § 703(a), with adjustments required by Treas. Reg. § 1.704-1(b)(2)(iv).
(o) "Percentage Interest" means a Member's percentage ownership interest in the Company, as set forth in Exhibit A, as amended from time to time.
(p) "Person" means an individual, corporation, partnership, limited liability company, trust, estate, association, or other entity.
(q) "Transfer" means any sale, exchange, assignment, hypothecation, pledge, encumbrance, gift, bequest, or other disposition or transfer of an Interest or any portion thereof, whether voluntarily or by operation of law.
(r) "Treasury Regulations" means the regulations promulgated by the United States Department of the Treasury under the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE III - MEMBERS; INTERESTS; CAPITAL CONTRIBUTIONS
7. Members and Percentage Interests
The name, address, Capital Contribution, and Percentage Interest of each initial Member are set forth in Exhibit A. Total Percentage Interests shall at all times equal 100%. The Percentage Interests shall be adjusted as provided in this Agreement.
8. Units
[[ASSUMPTION: The Company will or will not issue Units.]] The Company [[may / shall not]] issue membership interests denominated as units ("Units"). If Units are issued, each Member's Percentage Interest shall be equal to the number of Units held by such Member divided by the total outstanding Units. The initial unit capitalization and per-Member allocation are set forth in Exhibit A.
9. Initial Capital Contributions
Each Member has made or is hereby deemed to have made the Capital Contribution set forth opposite such Member's name in Exhibit A. No Member shall have any obligation to return any portion of such contribution to any other Member except as provided in this Agreement.
10. Additional Capital Contributions
No Member shall be required to make additional Capital Contributions without such Member's written consent. If the Members determine by [[Super-Majority Vote Threshold, e.g., 75%]] of the Percentage Interests that additional capital is required, each Member shall have the right, but not the obligation, to contribute a pro-rata share (based on Percentage Interests). If a Member (a "Non-Contributing Member") declines to contribute, the contributing Member(s) (each, a "Contributing Member") may either (i) treat the contribution as a loan to the Company at the interest rate described below, or (ii) contribute the Non-Contributing Member's share and receive a diluted Percentage Interest adjustment, determined so that the post-contribution Percentage Interests reflect each Member's total Capital Contributions as a proportion of total Company Capital Contributions. The interest rate on Member loans shall be the lower of [[Agreed Rate, e.g., 6% per annum]] or the applicable federal rate under Code § 1274(d).
11. No Interest on Capital
Except as otherwise expressly provided in this Agreement, no Member shall be entitled to receive interest on such Member's Capital Contribution.
ARTICLE IV - CAPITAL ACCOUNTS; ALLOCATIONS; DISTRIBUTIONS
12. Capital Accounts
A separate Capital Account shall be maintained for each Member in accordance with Treas. Reg. § 1.704-1(b)(2)(iv). Each Capital Account shall be:
(a) Credited with such Member's Capital Contributions (at fair market value), allocated Net Profits, and any other items that increase the Capital Account;
(b) Debited with cash distributions, the fair market value of property distributed, allocated Net Losses, and any other items that decrease the Capital Account.
If any Interest is transferred, the transferee's Capital Account shall equal the transferor's Capital Account immediately before the Transfer, adjusted for the pro-rata share of items allocable through the Transfer date. The intent is to comply with Treas. Reg. § 1.704-1(b), and the Members shall make such adjustments as necessary for this purpose.
13. Allocation of Net Profits and Net Losses
Except as otherwise provided in Sections 14 and 15:
(a) Net Profits for each Fiscal Year shall be allocated among the Members in proportion to their Percentage Interests.
(b) Net Losses for each Fiscal Year shall be allocated among the Members in proportion to their Percentage Interests; provided, however, that Net Losses shall not be allocated to a Member to the extent that such allocation would cause such Member's Capital Account to be reduced below zero, and any such excess Net Losses shall be allocated to the Members with positive Capital Accounts in proportion to such positive balances (the "Minimum Gain Limitation").
14. Special Allocations
Notwithstanding Section 13, the following special allocations shall be made in the following order of priority:
(a) Minimum Gain Chargeback. If there is a net decrease in Company minimum gain (within the meaning of Treas. Reg. § 1.704-2(d)) during any Fiscal Year, each Member shall be allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member's share of the net decrease in Company minimum gain, as determined under Treas. Reg. § 1.704-2(g). This section is intended to comply with the minimum gain chargeback requirement of Treas. Reg. § 1.704-2(f).
(b) Member Minimum Gain Chargeback. If there is a net decrease in member nonrecourse debt minimum gain (as defined in Treas. Reg. § 1.704-2(i)(3)) during any Fiscal Year, each Member who has a share of such member nonrecourse debt minimum gain shall be allocated items of Company income and gain for such year (and, if necessary, subsequent years) in proportion to such shares, pursuant to Treas. Reg. § 1.704-2(i)(4).
(c) Qualified Income Offset. If any Member unexpectedly receives an adjustment, allocation, or distribution that causes or increases a deficit balance in such Member's Capital Account beyond the amount such Member is obligated to restore or is deemed to be obligated to restore under Treas. Reg. §§ 1.704-2(g)(1) and (i)(5), such Member shall be allocated items of income and gain sufficient to eliminate such deficit as quickly as possible. This section is intended to constitute a "qualified income offset" within the meaning of Treas. Reg. § 1.704-1(b)(2)(ii)(d).
(d) Nonrecourse Deductions. Nonrecourse deductions (within the meaning of Treas. Reg. § 1.704-2(b)(1)) shall be allocated among the Members in proportion to their Percentage Interests.
(e) Member Nonrecourse Deductions. Member nonrecourse deductions (within the meaning of Treas. Reg. § 1.704-2(i)(2)) shall be allocated to the Member who bears the economic risk of loss for the related Member nonrecourse debt, as determined under Treas. Reg. § 1.704-2(i).
15. Tax Allocations; Code § 704(c)
For income tax purposes only, each item of Company income, gain, loss, deduction, and credit shall be allocated among the Members in the same manner as the corresponding book items under Sections 13 and 14, except that items with respect to Company property contributed by a Member shall be allocated to take into account any variation between the adjusted basis of such property and its fair market value at the time of contribution, in accordance with Code § 704(c) and Treas. Reg. § 1.704-3.
16. Distributions
(a) Timing and Amount. Distributable Cash shall be distributed to the Members at such times and in such amounts as determined by the Members (if member-managed) or the Manager (if manager-managed) by [[Required Vote for Distributions, e.g., Majority Vote]], but no less frequently than [[Distribution Frequency, e.g., quarterly / annually]] unless the Members otherwise agree.
(b) Order of Priority. All distributions shall be made to the Members in proportion to their Percentage Interests, unless the Members unanimously agree otherwise.
(c) Tax Distributions. To the extent available, within [[Tax Distribution Timing, e.g., 90 days]] after the end of each Fiscal Year, the Company shall use commercially reasonable efforts to distribute to each Member an amount equal to such Member's allocable share of Company taxable income for such year multiplied by the Assumed Tax Rate. "Assumed Tax Rate" means [[Assumed Tax Rate, e.g., 40%]] or such other rate as determined by the Members. Tax distributions shall be treated as advances against future distributions to which such Member would otherwise be entitled.
(d) Withholding. The Company may withhold from any distribution to a Member any amount required to be withheld under applicable federal, state, or local tax law. Amounts so withheld shall be treated as distributions to the Member.
(e) No Return of Distributions. Except as required by the Act, no Member shall be required to return any distribution received from the Company.
(f) Limitations. No distribution shall be made if, after giving effect to the distribution, the Company's total assets would be less than the sum of its total liabilities plus the amount needed to satisfy the claims of any Members with preferential distribution rights on dissolution, in accordance with M.G.L. c. 156C, § 30.
ARTICLE V - MANAGEMENT
17. Management Structure
(a) [[Member-Managed / Manager-Managed]] Company. The Company shall be [[MEMBER-MANAGED / MANAGER-MANAGED]] [select one and delete the other].
(b) Member-Managed. [If member-managed, include this subsection; delete if manager-managed.] If member-managed, each Member shall have the right to participate in the management and control of the Company's business and affairs. Decisions shall be made by the vote or written consent of Members holding the Percentage Interests specified herein or, if no threshold is specified, by Majority Vote.
(c) Manager-Managed. [If manager-managed, include this subsection; delete if member-managed.] If manager-managed, the Members hereby designate [[Initial Manager Name]] as the initial Manager. The Manager shall have full and exclusive authority and responsibility to manage and control the business and affairs of the Company, make all decisions affecting the business and affairs of the Company, and take all actions as the Manager deems necessary or advisable to accomplish the purposes of the Company, subject to the limitations and reserved matters set forth in Section 19. The Manager shall be deemed an "authorized person" within the meaning of the Act for purposes of executing and filing documents with the Secretary and third parties.
18. Officers
The Manager, or if member-managed, the Members by Majority Vote, may appoint and remove officers of the Company (including President, Vice President, Secretary, Treasurer, Chief Executive Officer, or such other titles as the Members may designate). Officers shall have such authority and duties as the Manager or Members may delegate. Officers need not be Members. Any officer may be removed with or without cause by the Manager or the Members.
19. Reserved Matters; Unanimous or Supermajority Approval
Notwithstanding any other provision, the following matters shall require the affirmative vote of Members holding [[Reserved Matters Vote, e.g., 75% / 100%]] of the Percentage Interests (the "Reserved Matters"):
(i) Amending or restating this Agreement or the Certificate;
(ii) Approving the merger, consolidation, conversion, or reorganization of the Company;
(iii) Admitting a new Member other than pursuant to the provisions of this Agreement;
(iv) Approving the sale, lease, exchange, or other disposition of all or substantially all of the Company's assets outside the ordinary course of business;
(v) Incurring indebtedness or granting security interests in excess of [[Debt Threshold, e.g., $100,000]] in any single transaction or series of related transactions;
(vi) Making a capital call requiring additional Member contributions;
(vii) Changing the nature of the Company's principal business;
(viii) Authorizing the dissolution or winding up of the Company;
(ix) Making any tax election that materially affects the Members' tax positions, including a change in the Company's tax classification;
(x) Entering into any transaction between the Company and a Member or Affiliate thereof (other than transactions approved on arms'-length terms by disinterested Members); and
(xi) Such other matters as the Members may designate by amendment to this Agreement.
20. Meetings; Action Without Meeting
(a) Meetings. Meetings of the Members may be held at such times and places (including by telephone, videoconference, or other electronic means pursuant to M.G.L. c. 156C, § 26) as determined by the Manager or any Member holding at least [[Meeting Call Threshold, e.g., 10%]] of the Percentage Interests, upon at least [[Notice Period, e.g., 10 days']] prior written notice.
(b) Quorum. A quorum for any meeting shall consist of Members holding at least [[Quorum Percentage, e.g., 51%]] of the Percentage Interests, present in person or by proxy.
(c) Action Without Meeting. Any action required or permitted to be taken at a meeting of the Members may be taken without a meeting if all Members (or the Members required to approve the action) consent in writing or electronically to such action, pursuant to M.G.L. c. 156C, § 26. The written consent shall have the same force as a unanimous vote or, if fewer than all Members consent, the same force as a vote of the consenting Members' Percentage Interests.
(d) Proxies. A Member may vote at any meeting in person or by written proxy signed by such Member and delivered to the presiding person before the meeting.
21. Duties of Care; Loyalty; Business Judgment
(a) Duty of Care. Each Manager (if any) and each Member acting in a management capacity owes to the Company and the Members a duty of care, which shall be satisfied by acting in good faith, in a manner reasonably believed to be in the best interests of the Company, and with the care that a person in a like position would reasonably exercise under similar circumstances.
(b) Duty of Loyalty. Each Manager (if any) and Member acting in a management capacity shall not (i) deal with the Company as an adverse party or on behalf of a person with interests adverse to the Company, or (ii) compete with the Company, except as otherwise permitted by this Agreement or by the unanimous written consent of the other Members.
(c) Business Judgment. A Manager or managing Member who acts in good faith in reliance on the provisions of this Agreement or the records of the Company shall not be liable to the Company or any Member for any action taken or omitted, even if such action or omission constitutes a breach of this Agreement, so long as such action or omission does not constitute gross negligence, fraud, or willful misconduct.
22. Transactions with Members; Conflicts
A Member or Affiliate of a Member may enter into transactions with the Company (including lending money to or borrowing money from the Company), provided such transactions are (i) disclosed to all Members, (ii) on terms no less favorable to the Company than arm's-length market terms, and (iii) approved by a majority of disinterested Members.
ARTICLE VI - TRANSFER OF INTERESTS; BUY-SELL
23. General Transfer Restrictions
No Member shall Transfer all or any part of such Member's Interest without first complying with the procedures set forth in this Article VI. Any purported Transfer in violation of this Agreement shall be null and void. A permitted transferee shall not be admitted as a Member unless approved by [[Approval Required for Transfer, e.g., Majority Vote / all Members]], and until so admitted shall have only the economic rights of an assignee under M.G.L. c. 156C, § 39.
24. Right of First Refusal (ROFR)
(a) Notice. If any Member (the "Transferring Member") receives a bona fide third-party offer to purchase all or any portion of such Member's Interest (a "Third-Party Offer"), the Transferring Member shall give written notice to the Company and the other Members (the "ROFR Notice") at least [[ROFR Notice Period, e.g., 30 days]] before the proposed Transfer date. The ROFR Notice shall specify the name and address of the proposed transferee, the proposed purchase price, payment terms, and all other material terms of the Third-Party Offer, together with a true copy thereof.
(b) Company Option. For [[Company ROFR Period, e.g., 15 days]] after the ROFR Notice, the Company shall have the first right to purchase the offered Interest at the price and on the terms of the Third-Party Offer, by delivering written notice of exercise to the Transferring Member.
(c) Member Option. If the Company does not exercise its option, each remaining Member shall have the right, for an additional [[Member ROFR Period, e.g., 15 days]], to purchase its pro-rata share (or more, if any other Member elects not to exercise) of the offered Interest at the same price and terms.
(d) Permitted Transfer. If neither the Company nor any Member exercises the ROFR right, the Transferring Member may Transfer the offered Interest to the named third party within [[Transfer Window, e.g., 60 days]] after expiration of the Member ROFR Period, on terms no more favorable to the transferee than those stated in the ROFR Notice.
25. Tag-Along Rights
If any Member(s) proposing to Transfer Interests representing, in the aggregate, more than [[Tag-Along Trigger, e.g., 50%]] of the total Percentage Interests to a third party (the "Selling Member"), the non-selling Members (each, a "Tag-Along Member") shall have the right to participate in the proposed Transfer by selling to the same buyer, at the same price per unit and on the same terms, the number of units (rounded down to a whole unit) equal to the Tag-Along Member's proportionate share of the proposed Transfer. The Selling Member shall give written tag-along notice to all Members at least [[Tag-Along Notice Period, e.g., 20 days]] prior to the proposed Transfer.
26. Drag-Along Rights
If Members holding at least [[Drag-Along Threshold, e.g., 75%]] of the Percentage Interests (the "Dragging Members") approve a bona fide arm's-length sale or Transfer of all (not less than all) of the Company's outstanding Interests or substantially all of the Company's assets to a third-party buyer, the remaining Members (each, a "Dragged Member") shall be required to: (i) Transfer their Interests (or vote in favor of the transaction) on the same terms and conditions; (ii) execute all documents required to consummate the transaction; and (iii) cooperate in all reasonable respects, including providing customary representations and warranties regarding title to their Interests, absence of encumbrances, and authority to Transfer. The Dragging Members shall give written drag-along notice at least [[Drag-Along Notice Period, e.g., 30 days]] prior to the proposed closing.
27. Permitted Transfers
Notwithstanding Section 23, each Member may Transfer such Member's Interest, without complying with Sections 24-26, to: (i) a trust for the benefit of such Member or such Member's immediate family members, provided the Member retains a power of revocation; (ii) any entity wholly owned and controlled by such Member; (iii) such Member's spouse, domestic partner, or lineal descendants, in the case of death, by will or intestacy. Any such permitted transferee shall be bound by this Agreement as a condition of Transfer, but shall not be admitted as a Member without the approval required under Section 23.
28. Buy-Sell / Deadlock Resolution
If the Members are deadlocked on a material Reserved Matter and such deadlock continues for [[Deadlock Period, e.g., 60 consecutive days]], any Member may trigger the following buy-sell mechanism: The triggering Member shall deliver a written offer (the "Buy-Sell Notice") to all other Members specifying a valuation price per unit for the Company. Each recipient Member shall, within [[Buy-Sell Election Period, e.g., 30 days]] of receipt, elect to either (i) purchase all of the triggering Member's Interest at the stated price per unit or (ii) sell all of such recipient Member's Interest to the triggering Member at the stated price per unit. If a recipient Member fails to elect, such Member shall be deemed to have elected to sell. The purchase shall close within [[Buy-Sell Closing Period, e.g., 60 days]] of the election.
ARTICLE VII - DISSOCIATION; DEATH; DISABILITY; BANKRUPTCY
29. Dissociation by Notice
A Member may dissociate from the Company by giving [[Dissociation Notice Period, e.g., 90 days']] prior written notice to all other Members. Such dissociation shall not dissolve the Company unless the Company has only one Member remaining. A dissociating Member (a "Dissociated Member") shall retain only the economic rights of an assignee (i.e., the right to receive allocations and distributions attributable to the dissociated Interest) unless the remaining Members elect to purchase the Dissociated Member's Interest pursuant to the procedures in Section 24 (ROFR) within [[Dissociation Purchase Period, e.g., 60 days]] of the effective date of dissociation.
30. Death or Incapacity
Upon the death or permanent incapacity of a Member, such Member's Interest shall pass to such Member's estate, successor, or legal representative (the "Successor"), who shall be an assignee only (not a Member) unless admitted by the vote required under Section 23. The Company (and then the remaining Members) shall have the right to purchase the Successor's Interest within [[Death/Incapacity Purchase Period, e.g., 90 days]] of receiving written notice of the death or incapacity, at a purchase price equal to [[Valuation Method, e.g., fair market value as agreed among the parties or determined by a licensed appraiser]].
31. Bankruptcy or Insolvency of a Member
If a Member (i) files a voluntary petition in bankruptcy, (ii) is adjudicated as bankrupt or insolvent, (iii) makes a general assignment for the benefit of creditors, or (iv) has a receiver or trustee appointed for such Member's property, the Company and the remaining Members shall have the right to purchase the affected Member's Interest within [[Bankruptcy Purchase Period, e.g., 90 days]] of the applicable event, at the same price and on the same terms as the ROFR procedure set forth in Section 24, mutatis mutandis. Until such option lapses or is exercised, the affected Member or such Member's estate, trustee, or receiver shall have only the rights of an assignee.
ARTICLE VIII - ADMISSION OF NEW MEMBERS
32. New Members
Additional Persons may be admitted as Members upon: (i) the approval of Members holding [[New Member Approval, e.g., all / 75%]] of the Percentage Interests; (ii) execution by the new Member of a counterpart to this Agreement or an instrument of adherence in form acceptable to the existing Members; (iii) such Person's Capital Contribution, if any, as agreed by the existing Members; and (iv) amendment of Exhibit A to reflect the new Member's name, address, Capital Contribution, and adjusted Percentage Interest. No admission of a new Member shall cause the dissolution of the Company.
ARTICLE IX - TAX MATTERS
33. Fiscal Year; Accounting
The Company's Fiscal Year shall be the calendar year ending December 31, unless otherwise required by the Code. The Company's books shall be maintained on the [[Cash / Accrual]] method of accounting, consistently applied.
34. Tax Classification
The Company shall be classified for federal income tax purposes as a [[Partnership / Disregarded Entity / S Corporation]] [select applicable classification]. If the Company has a single Member, it shall be disregarded as an entity separate from its owner for federal tax purposes unless an election is made on IRS Form 8832. If the Company has two or more Members, it shall be classified as a partnership unless the Members unanimously elect to be taxed as a corporation by filing IRS Form 8832. The Members [[do / do not]] intend to make an election under Code § 1361 to be treated as an S corporation; if such election is made, each Member shall comply with all S corporation eligibility requirements.
35. Tax Matters Representative
[[Tax Matters Representative Name]] is designated as the Company's Tax Matters Representative (the "TMR") under Code § 6223, with authority to act on behalf of the Company in all federal tax proceedings and make all elections and decisions under the centralized partnership audit rules (Subchapter C of Chapter 63 of the Code). The TMR shall promptly notify all Members of any material tax notices, audits, or proceedings. The TMR may be removed and replaced by Majority Vote of the Members.
36. Tax Returns; Information
The Manager or TMR shall cause the preparation and timely filing of all federal, state, and local tax returns. Within [[K-1 Delivery Period, e.g., 90 days]] after the end of each Fiscal Year, the Company shall deliver to each Member such tax information (including IRS Schedule K-1 or equivalent) as is necessary for such Member to prepare and file such Member's own tax returns.
ARTICLE X - BOOKS, RECORDS, AND REPORTING
37. Books and Records
The Company shall maintain complete and accurate books and records of the Company's business and financial affairs at its principal office (or such other location as the Manager or Members may determine), including: (i) a current list of Members and Managers; (ii) a copy of the Certificate and this Agreement, with all amendments; (iii) financial statements for the three most recently completed Fiscal Years; (iv) a copy of federal, state, and local tax returns for the three most recently completed Fiscal Years; and (v) any other records required by M.G.L. c. 156C, § 9. Each Member shall have the right, at reasonable times and upon reasonable notice, to inspect and copy the Company's records pursuant to M.G.L. c. 156C, § 9.
38. Financial Reporting
The Manager or, if member-managed, the designated managing Member shall provide each Member with: (i) unaudited financial statements (balance sheet, income statement, statement of cash flows) within [[Periodic Report Period, e.g., 45 days]] after the end of each calendar quarter; and (ii) annual financial statements (audited or reviewed, if so required by the Members) within [[Annual Report Period, e.g., 90 days]] after the end of each Fiscal Year. The Company shall obtain an audit or review only if required by a Majority Vote of the Members.
ARTICLE XI - INDEMNIFICATION AND LIABILITY
39. Indemnification
The Company shall indemnify and hold harmless each Member, Manager, officer, employee, and agent of the Company (each, an "Indemnitee") to the fullest extent permitted by M.G.L. c. 156C, § 29, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorneys' fees) ("Losses") arising from any act or omission in connection with the Company's business or affairs, unless such Losses are determined by a final, non-appealable court judgment to have been caused by such Indemnitee's gross negligence, fraud, willful misconduct, or material breach of this Agreement. The right to indemnification shall include the right to advancement of expenses; provided that the Indemnitee undertakes in writing to repay such advances if it is ultimately determined that indemnification is not warranted.
40. Limitation of Liability
No Member or Manager shall be personally liable for any debt, obligation, or liability of the Company solely by reason of being a Member or Manager, whether arising in contract, tort, or otherwise, pursuant to M.G.L. c. 156C, § 22. Notwithstanding the foregoing, a Member or Manager may be liable for (i) any personal guarantee of a Company obligation, (ii) fraudulent or tortious conduct, or (iii) any amount distributed to such Member in violation of M.G.L. c. 156C, § 30, to the extent such Member had knowledge of facts indicating the distribution was improper.
41. Anti-Piercing; Separateness Covenants
(Particularly important for single-member LLCs - include in all agreements.)
To protect the limited liability character of the Company and reduce the risk of veil-piercing under Massachusetts law:
(i) The Company shall maintain financial accounts separate from those of any Member or Affiliate;
(ii) The Company shall not commingle funds with any Member or Affiliate;
(iii) The Company shall observe all formalities required by this Agreement and the Act, including holding required meetings or executing written consents;
(iv) The Company shall pay its own liabilities from its own funds;
(v) The Company shall maintain accurate and complete financial records separate from those of any Member or Affiliate;
(vi) The Company shall hold itself out to third parties as a separate legal entity; and
(vii) Transactions between the Company and any Member or Affiliate shall be documented by written agreement and on arm's-length terms.
42. Insurance
The Company shall obtain and maintain, at the Company's expense, such insurance policies as the Manager or Members determine to be appropriate, including general commercial liability, professional liability (if applicable), property, workers' compensation, and directors' and officers' liability (if applicable) coverage, in such amounts and with such insurers as approved by [[Required Vote for Insurance, e.g., Majority Vote]]. Each Member shall promptly notify the Company of any claim that could give rise to an indemnification obligation under Section 39.
ARTICLE XII - COMPETING ACTIVITIES AND CONFIDENTIALITY
43. Competing Activities
[[ASSUMPTION: The parties intend to restrict / not restrict competing activities.]] [[Option A - Restriction:]] During the Term of this Agreement and for [[Non-Compete Period, e.g., one (1) year]] after a Member ceases to be a Member, no Member shall, directly or indirectly, engage in a business activity that competes with the Company's principal business within [[Geographic Scope, e.g., the Commonwealth of Massachusetts]], without the prior written consent of a [[Required Vote for Non-Compete Waiver]] of the Percentage Interests.
Note: Massachusetts non-compete clauses entered into on or after October 1, 2018, are subject to the Massachusetts Noncompetition Agreement Act, M.G.L. c. 149, § 24L, which requires, among other things, that non-compete agreements for employees and independent contractors be in writing, signed, supported by garden leave pay or other mutually agreed consideration, and limited to one year. The applicability of § 24L to Members who are not employees or independent contractors should be confirmed with counsel.
[[Option B - No Restriction:]] Members shall not be restricted from engaging in any other business activity, including businesses that compete with the Company, except as required by the duty of loyalty set forth in Section 21(b) during the period such Member holds an active management role.
44. Confidentiality
Each Member agrees to keep confidential and not to disclose to any third party (without the prior written consent of the Manager or Members by Majority Vote) any non-public information of the Company, including financial information, customer lists, trade secrets, business plans, and proprietary processes ("Confidential Information"), both during and after such Member's membership in the Company, for a period of [[Confidentiality Period, e.g., three (3) years]] following such Member's dissociation or the dissolution of the Company. Confidential Information shall not include information that: (i) is or becomes publicly available other than through a breach of this Agreement; (ii) was already known to the Member at the time of disclosure; or (iii) is required to be disclosed by law, court order, or regulatory authority, provided the Member gives prompt notice to the Company so it may seek a protective order.
ARTICLE XIII - DISSOLUTION; WINDING UP
45. Events of Dissolution
The Company shall be dissolved upon the earliest to occur of: (i) the consent of Members holding [[Dissolution Vote, e.g., all / 75%]] of the Percentage Interests to dissolve; (ii) the occurrence of an event that under the Act causes dissolution; (iii) entry of a judicial decree of dissolution under M.G.L. c. 156C, § 44; or (iv) the Company has only one Member and such Member dissociates (unless continued by written action within 90 days). The death, dissociation, bankruptcy, or withdrawal of a single Member shall not dissolve the Company if there are two or more remaining Members.
46. Winding Up
Upon dissolution, the Manager (or, if none, a liquidating trustee elected by a Majority Vote of the Members) shall wind up the Company's affairs by: (i) collecting all amounts owing to the Company; (ii) paying or providing for all liabilities and obligations of the Company; (iii) distributing remaining assets in accordance with Section 47; and (iv) filing a Statement of Termination with the Secretary under M.G.L. c. 156C, § 47.
47. Liquidating Distributions
Upon winding up, after paying or providing for all debts, liabilities, and obligations of the Company (including any reserves for contingent liabilities), the remaining assets shall be distributed in the following order:
(i) To Members in respect of any unpaid but accrued and properly declared distributions;
(ii) To Members in proportion to their positive Capital Account balances (after giving effect to all allocations for the Fiscal Year of dissolution); and
(iii) To Members in proportion to their Percentage Interests.
ARTICLE XIV - GENERAL PROVISIONS
48. Notices
All notices, demands, consents, and other communications under this Agreement shall be in writing and shall be deemed duly given when (i) delivered personally, (ii) sent by nationally recognized overnight courier with tracking, (iii) sent by U.S. certified mail, return receipt requested, postage prepaid, or (iv) sent by email with delivery and read receipt confirmed, in each case addressed to the Member at the address set forth in Exhibit A or such other address as such Member may designate in writing. Notices to the Company shall be sent to the principal office. Notice periods run from the date of delivery or confirmed transmission.
49. Amendments
This Agreement may be amended only by a written instrument signed by Members holding [[Amendment Vote, e.g., all / 75%]] of the Percentage Interests, except that Exhibit A may be updated by the Manager or managing Member to reflect Transfers, changes in Capital Contributions, or admissions of new Members made in accordance with this Agreement, without requiring a formal amendment.
50. Entire Agreement
This Agreement (including all Exhibits and any written amendments) constitutes the entire agreement of the Members with respect to the subject matter hereof and supersedes all prior negotiations, agreements, representations, warranties, and understandings, whether oral or written, relating to the Company.
51. Severability
If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, such provision shall be modified to the minimum extent necessary to make it valid, legal, and enforceable; or, if modification is not possible, shall be severed from this Agreement, and the remaining provisions shall continue in full force and effect.
52. No Third-Party Beneficiaries
This Agreement is for the sole and exclusive benefit of the Members and the Company. Nothing in this Agreement, express or implied, is intended to confer on any other Person any rights, remedies, obligations, or liabilities under or by reason of this Agreement.
53. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, including the Act (M.G.L. c. 156C), without regard to conflicts of law principles. Any dispute arising under this Agreement shall be resolved in the courts of the Commonwealth of Massachusetts, and the Members hereby consent to the personal jurisdiction and venue of such courts, or, if the Members agree in writing, through binding arbitration pursuant to the rules of [[Arbitration Body, e.g., the American Arbitration Association]].
54. Counterparts; Electronic Signatures
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Electronic signatures (including signatures via DocuSign, Adobe Sign, or similar platforms) shall be deemed valid and binding to the same extent as original signatures under M.G.L. c. 110G (Massachusetts Uniform Electronic Transactions Act).
55. Waiver
No failure or delay by any party to exercise any right, remedy, power, or privilege under this Agreement shall operate as a waiver thereof. No single or partial exercise of any right, remedy, power, or privilege shall preclude any further exercise thereof.
56. Attorney Fees
In any proceeding to enforce this Agreement, the prevailing party shall be entitled to recover from the non-prevailing party its reasonable attorneys' fees and costs, in addition to any other relief to which it is entitled.
SIGNATURES
IN WITNESS WHEREOF, the undersigned have executed this Operating Agreement as of the date first written above.
THE COMPANY:
[[LLC Name]], LLC
By: ___________________________________
Name: [[Authorized Signatory Name]]
Title: [[Title, e.g., Managing Member / Manager]]
Date: [[Signature Date]]
MEMBERS:
(Each Member must sign below or on a counterpart signature page.)
Member 1:
Signature: ___________________________________
Printed Name: [[Member 1 Full Legal Name]]
Title (if entity): [[Member 1 Title / N/A]]
Percentage Interest: [[Member 1 Percentage Interest]]%
Date: [[Member 1 Signature Date]]
Member 2:
Signature: ___________________________________
Printed Name: [[Member 2 Full Legal Name]]
Title (if entity): [[Member 2 Title / N/A]]
Percentage Interest: [[Member 2 Percentage Interest]]%
Date: [[Member 2 Signature Date]]
(Add additional signature blocks for each Member as needed.)
EXHIBIT A - MEMBERS, CAPITAL CONTRIBUTIONS, AND PERCENTAGE INTERESTS
(As of [[Agreement Date]] - to be updated as permitted by this Agreement)
| Member Name | Capital Contribution | % Interest | Units (if applicable) |
|-------------|----------------------|------------|---------|
| [[Member 1 Full Legal Name]] | [[Member 1 Capital Contribution]] | [[Member 1 Percentage Interest]]% | [[Member 1 Units]] |
| [[Member 2 Full Legal Name]] | [[Member 2 Capital Contribution]] | [[Member 2 Percentage Interest]]% | [[Member 2 Units]] |
| [[Additional Members as needed]] | | | | |
| TOTAL | | [[Total Capital Contributions]] | 100% | [[Total Units]] |
EXHIBIT B - INITIAL OFFICERS (if applicable)
| Office | Name | Appointment Date |
|---|---|---|
| [[Officer Title, e.g., President / CEO]] | [[Officer Name]] | [[Appointment Date]] |
| [[Officer Title, e.g., Secretary]] | [[Officer Name]] | [[Appointment Date]] |
| [[Officer Title, e.g., Treasurer / CFO]] | [[Officer Name]] | [[Appointment Date]] |
SOURCES AND STATUTORY CITATIONS
| Citation | Subject |
|---|---|
| M.G.L. c. 156C (Massachusetts Limited Liability Company Act) | Formation, authority, duties, and dissolution of Massachusetts LLCs |
| M.G.L. c. 156C, § 9 | Member inspection rights and records requirements |
| M.G.L. c. 156C, § 12 | Certificate of Organization and filing requirements |
| M.G.L. c. 156C, § 12A | Annual Report requirements |
| M.G.L. c. 156C, § 22 | Member/Manager limited liability shield |
| M.G.L. c. 156C, § 26 | Member meetings and written consents |
| M.G.L. c. 156C, § 29 | Indemnification authority |
| M.G.L. c. 156C, § 30 | Distribution limitations; wrongful distributions |
| M.G.L. c. 156C, § 39 | Assignment of LLC interests; assignee rights |
| M.G.L. c. 156C, § 44 | Judicial dissolution |
| M.G.L. c. 156C, § 47 | Statement of Termination upon winding up |
| M.G.L. c. 110G (Massachusetts UETA) | Electronic signatures |
| M.G.L. c. 149, § 24L (Massachusetts Noncompetition Agreement Act) | Restrictions on noncompete clauses (effective Oct. 1, 2018) |
| Treas. Reg. § 1.704-1(b) | Capital account maintenance and partnership allocation rules |
| Treas. Reg. § 1.704-2 | Minimum gain chargeback and nonrecourse deductions |
| Code § 703(a) | Partnership taxable income computation |
| Code § 704(c) | Built-in gain/loss allocations for contributed property |
| Code § 1274(d) | Applicable federal rate for below-market loans |
| Code § 6223 | Tax Matters Representative (centralized audit rules) |
Statutory references are as of June 2026. Massachusetts LLC law may be amended; verify all provisions against current statutes before use.
> Template - not legal advice. This document is a starting-point template for informational purposes only and does not constitute legal, tax, or financial advice. LLC law, tax rules, and local regulations vary and change. Consult a licensed Massachusetts attorney and a qualified tax professional before using or relying on this agreement. As of June 2026.
