"Multi-Member LLC Operating Agreement Template"

A Multi-Member LLC Operating Agreement confirms that a business entity is not related to the personal assets of its owners. The big bonus of these types of contracts lies in the fact that they are registered with a state and recognized as genuine. In order to make this official, the signers of this agreement must legally obtain this status by completing a Multi-Member LLC Operating Agreement, which can be downloaded through the link below.

What Is a Multi-Member LLC?

Multi-Member LLCs are limited liability companies (LLC), the only difference being that they consist of several members as opposed to just one. Structurally, it does not differ too much from a Single-Member LLC, which provides personal liability protections.

There aren't a set amount of limitations on the exact number of people who can join a Multi-Member LLC. This gives all owners an opportunity to get involved in operational tasks associated with running a business. Eligibility criteria may differ, this is state-dependent. The most crucial criterion is that the individual applying must be over the age of 18.

Multi-Member LLCs may be governed by one, all, or some members - sometimes even by a third party. Although the experience and knowledge of several members have obvious advantages, problems could arise if even just one member makes a mistake, particularly something serious such as fraud. The result of this will mean that all members will be held accountable for the error of a single person.

This type of agreement outlines how the business is divided and provides a detailed explanation of the way in which the company will function.

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How to File a Multi-Member LLC?

To file a Multi-Member LLC Operating Agreement correctly, you will need to include the following:

  1. First, pick a name for the company. Keep in mind that you need to be certain of the availability first.
  2. Employer Identification Number. Step two requires an EIA which permits the owner(s) to carry out vital functions associated with managing and opening a business such as hiring staff, opening a bank account etc.
  3. State registration. Although specific details will vary between different states, generally it consists of the name and address of the company, information about all members of the LLC and the proposed business services offered. If your state requires you to do so, you may also need to submit information regarding a registered agent.
  4. Creating an operating agreement. This section needs to outline how the roles, responsibilities and profits are delegated between members or managers. This is a good preventative measure against potential disputes.
  5. Licenses and permits. These will differ depending on your services, but at this stage all of the licenses and permits that are required for your business to operate need to be obtained.
  6. Opening a business bank account. This account should be used purely for the business - for personal, individual finances.

How Does a Multi-Member LLC File Taxes?

When concerning federal taxes a Multi-Member LLC will be handled like a partnership - unless otherwise agreed prior to this. Unlike a Single Member LLC which can file taxes using their personal income taxes annually, a Multi-Member LLC cannot.

The members all hold equal responsibility to pay their taxes based on the profit/loss encountered during the year. Companies need to ensure that every member files a Schedule E (Form 1040) tax form which needs to be filed along with their own personal tax return form.

The distribution varies and may be dependent on the level of investment or involvement in a company. All of this information is outlined in the operating agreement. It is crucial that before opening a Multi-Member LLC, you are aware of which taxes need to be filed, not only from the side of each individual member, but also from the side of the company.


Still looking for a particular template? Take a look at the related templates below:

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Multi-Member LLC Operating Agreement
for
_______________________________________________________
This Operating Agreement (hereinafter referred to as the “Agreement”) is entered
into as of __________________, by and between _______________________, with a
mailing address of ______________________________________________________
_____________________ and _______________________, with a mailing address of
_____________________________________________________________________
__________________________________, collectively referred to as the “Members,”
both of whom agree to be bound by this Agreement.
Section 1, The Limited Liability Company
1.1 Formation. Effective __________________, the Members form a Limited
Liability Company under the name __________________, LLC (hereinafter referred
to as the “Company”) on the terms and conditions in this Agreement and pursuant to
the law of the State of __________________ (hereinafter referred to as the “Act”).
The Members agree to file with the appropriate agency within the State of
__________________ charged with processing and maintaining such records all
documentation required for the formation of the Company. The rights and obligations
of the parties are as provided in the Act except as otherwise expressly provided in this
Agreement.
1.2 Name. The business of the Company will be conducted under the name
__________________, LLC, or such other name upon which the Members may
unanimously may agree.
1.3 Purpose. The purpose of the Company is to engage in any lawful act or activity
for which a Limited Liability Company may be formed within the State of
_____________.
1.4 Office. The Company will maintain its principal business office within the State of
__________________ at the following address:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
1.5 Registered Agent. __________________ is the Company's initial registered agent
in the State of __________________, and the registered office at the following
address:
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Multi-Member LLC Operating Agreement
for
_______________________________________________________
This Operating Agreement (hereinafter referred to as the “Agreement”) is entered
into as of __________________, by and between _______________________, with a
mailing address of ______________________________________________________
_____________________ and _______________________, with a mailing address of
_____________________________________________________________________
__________________________________, collectively referred to as the “Members,”
both of whom agree to be bound by this Agreement.
Section 1, The Limited Liability Company
1.1 Formation. Effective __________________, the Members form a Limited
Liability Company under the name __________________, LLC (hereinafter referred
to as the “Company”) on the terms and conditions in this Agreement and pursuant to
the law of the State of __________________ (hereinafter referred to as the “Act”).
The Members agree to file with the appropriate agency within the State of
__________________ charged with processing and maintaining such records all
documentation required for the formation of the Company. The rights and obligations
of the parties are as provided in the Act except as otherwise expressly provided in this
Agreement.
1.2 Name. The business of the Company will be conducted under the name
__________________, LLC, or such other name upon which the Members may
unanimously may agree.
1.3 Purpose. The purpose of the Company is to engage in any lawful act or activity
for which a Limited Liability Company may be formed within the State of
_____________.
1.4 Office. The Company will maintain its principal business office within the State of
__________________ at the following address:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
1.5 Registered Agent. __________________ is the Company's initial registered agent
in the State of __________________, and the registered office at the following
address:
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_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
1.6 Term. The term of the Company commences on __________________ and shall
continue perpetually unless sooner terminated as provided in this Agreement.
1.7 Names and Addresses of Members. The Members' names and addresses are
attached as Schedule 1 to this Agreement.
1.8 Admission of Additional Members. Except as otherwise expressly provided in
this Agreement, no additional members may be admitted to the Company through
issuance by the company of a new interest in the Company without the prior
unanimous written consent of the Members.
Section 2, Capital Contributions
2.1 Initial Contributions. The Members initially shall contribute to the Company
capital as described in Schedule 2 attached to this Agreement.
2.2 Additional Contributions. No Member shall be obligated to make any additional
contribution to the Company's capital without the prior unanimous written consent of
the Members.
2.3 No Interest on Capital Contributions. Members are not entitled to interest or
other compensation for or on account of their capital contributions to the Company
except to the extent, if any, expressly provided in this Agreement.
Section 3, Allocation of Profits and Losses
3.1 Profits/Losses. For financial accounting and tax purposes, the Company's net
profits or net losses shall be determined on an annual basis and shall be allocated to
the Members in proportion to each Member's relative capital interest in the Company
as set forth in Schedule 2 as amended from time to time in accordance with U.S.
Department of the Treasury Regulation 1.704-1.
3.2 Distributions. The Members shall determine and distribute available funds
annually or at more frequent intervals as they see fit. Available funds, as referred to
herein, shall mean the net cash of the Company available after appropriate provision
for expenses and liabilities, as determined by the Managers. Distributions in
liquidation of the Company or in the liquidation of a Member's interest shall be made
in accordance with the positive capital account balances pursuant to U.S. Department
of the Treasury Regulation 1.704.1(b)(2)(ii)(b)(2). To the extent a Member shall have
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a negative capital account balance, there shall be a qualified income offset, as set forth
in U.S. Department of the Treasury Regulation 1.704.1(b)(2)(ii)(d).
3.3 No Right to Demand Return of Capital. No Member has any right to any return
of capital or other distribution except as expressly provided in this Agreement. No
Member has any drawing account in the Company.
Section 4, Indemnification
The Company shall indemnify any person who was or is a party defendant or is
threatened to be made a party defendant, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative (other than an
action by or in the right of the Company) by reason of the fact that he is or was a
Member of the Company, Manager, employee or agent of the Company, or is or was
serving at the request of the Company, against expenses (including attorney's fees),
judgments, fines, and amounts paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding if the Members determine that he
acted in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of the Company, and with respect to any criminal action proceeding,
has no reasonable cause to believe his/her conduct was unlawful. The termination of
any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a
plea of "no lo Contendere" or its equivalent, shall not in itself create a presumption
that the person did or did not act in good faith and in a manner which he reasonably
believed to be in the best interest of the Company, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his/her conduct was lawful
Section 5, Powers and Duties of Managers
5.1. Management of Company.
5.1.1. The Members, within the authority granted by the Act and the terms of
this Agreement shall have the complete power and authority to manage and
operate the Company and make all decisions affecting its business and affairs.
5.1.2. Except as otherwise provided in this Agreement, all decisions and
documents relating to the management and operation of the Company shall be
made and executed by a Majority in Interest of the Members.
5.1.3. Third parties dealing with the Company shall be entitled to rely
conclusively upon the power and authority of a Majority in Interest of the
Members to manage and operate the business and affairs of the Company.
5.2. Decisions by Members. Whenever in this Agreement reference is made to the
decision, consent, approval, judgment, or action of the Members, unless otherwise
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expressly provided in this Agreement, such decision, consent, approval, judgment, or
action shall mean a Majority of the Members.
5.3. Withdrawal by a Member. A Member has no power to withdraw from the
Company, except as otherwise provided in Section 8.
Section 6, Salaries, Reimbursement, and Payment of Expenses
6.1. Organization Expenses. All expenses incurred in connection with the
organization of the Company will be paid by the Company.
6.2. Salary. No salary will be paid to a Member for the performance of his or her
duties under this Agreement unless the salary has been approved in writing by a
majority of the Members.
6.3. Legal and Accounting Services. The Company may obtain legal and accounting
services to the extent reasonably necessary for the conduct of the Company's business.
Section 7, Books of Account, Accounting Reports, Tax Returns,
Fiscal Year, Banking
7.1. Method of Accounting. The Company will use the method of accounting
previously determined by the Members for financial reporting and tax purposes.
7.2. Fiscal Year; Taxable Year. The fiscal year and the taxable year of the Company
is the calendar year.
7.3. Capital Accounts. The Company will maintain a Capital Account for each
Member on a cumulative basis in accordance with federal income tax accounting
principles.
7.4. Banking. All funds of the Company will be deposited in a separate bank account
or in an account or accounts of a savings and loan association in the name of the
Company as determined by a majority of the Members. Company funds will be
invested or deposited with an institution, the accounts or deposits of which are insured
or guaranteed by an agency of the United States government.
Section 8, Transfer of Membership Interest
8.1. Sale or Encumbrance Prohibited. Except as otherwise permitted in this
Agreement, no Member may voluntarily or involuntarily transfer, sell, convey,
encumber, pledge, assign, or otherwise dispose of (collectively referred to as the
“Transfer”) an interest in the Company without the prior written consent of a majority
of the other non-transferring Members determined on a per capita basis.
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8.2. Right of First Refusal. Notwithstanding Section 8.1, a Member may transfer all
or any part of the Member's interest in the Company (the "Interest") as follows:
8.2.1. The Member desiring to transfer his or her Interest first must provide
written notice (hereinafter referred to as the “Notice”) to the other Members,
specifying the price and terms on which the Member is prepared to sell the
Interest (hereinafter referred to as the “Offer”).
8.2.2. For a period of 30 days after receipt of the Notice, the Members may
acquire all, but not less than all, of the Interest at the price and under the terms
specified in the Offer. If the other Members desiring to acquire the Interest
cannot agree among themselves on the allocation of the Interest among them,
the allocation will be proportional to the Ownership Interests of those Members
desiring to acquire the Interest.
8.2.3. Closing of the sale of the Interest will occur as stated in the Offer;
provided, however, that the closing will not be less than 45 days after
expiration of the 30- day notice period.
8.2.4. If the other Members fail or refuse to notify the transferring Member of
their desire to acquire all of the Interest proposed to be transferred within the
30-day period following receipt of the Notice, then the Members will be
deemed to have waived their right to acquire the Interest on the terms described
in the Offer, and the transferring Member may sell and convey the Interest
consistent with the Offer to any other person or entity; provided, however, that
notwithstanding anything in Section 8.2 to the contrary, should the sale to a
third person be at a price or on terms that are more favorable to the purchaser
than stated in the Offer, then the transferring Member must reoffer the sale of
the Interest to the remaining Members at that other price or other terms;
provided, further, that if the sale to a third person is not closed within six
months after the expiration of the 30-day period describe above, then the
provisions of Section 8.2 will again apply to the Interest proposed to be sold or
conveyed.
8.2.5. Notwithstanding the foregoing provisions of Section 8.2, should the sole
remaining Member be entitled to and elect to acquire all the Interests of the
other Members of the Company in accordance with the provisions of Section
8.2, the acquiring Member may assign the right to acquire the Interests to a
spouse, lineal descendent, or an affiliated entity if the assignment is reasonably
believed to be necessary to continue the existence of the Company as a limited
liability company.
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