"Single-Member LLC Operating Agreement Template"

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

What Is a Single-Member LLC?

A Single-Member LLC means that the company is owned by only one person and their business is registered to a particular state. Different states can request a slightly different set of documents, known as 'Articles of Organization'. The company owner, sometimes also referred to as a "company member," will not be personally responsible should the company experience debt issues or any other problems. An exception to this is when a member involves themselves in illegal activities (for example, fraud).

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Single-Member LLC Vs. Multi-Member LLC

The structure of a Single-Member LLC is practically identical to a Multi-Member LLC. One of the only differences is that in a Single-Member LLC the entire business is controlled by one sole individual, while a Multi-Member LLC will have at least two owners. Just like a Single-Member LLC, the members of a Multi-Member LLC prove that it is an independent legal entity not related to the personal assets of its members. This type of LLC must decide how profits or losses will be shared in relation to each member. Usually, this is proportional to the sum of money invested in the company or the degree of involvement within the company.

This presents both advantages and disadvantages for a business, depending on the requirements of the business. On one hand, if you are a Single-Member LLC this means that you can run a business entirely independently and make the decisions that you think are necessary, without having to check them over with other members. But this does mean that you are in charge of everything yourself, all the responsibilities are dealt with solely by one individual.

On the other hand, working with a Multi-Member LLC business structure provides you with the opportunity to discuss decisions as a team, where each member can put their expertise, knowledge, and experience to good use. But this does mean that sometimes as a member, you have to compromise and possibly stick with decisions that do not fit your ideas or vision.

How to Write a Single-Member LLC Operating Agreement?

Keep in mind that the procedures and requirements could slightly differ depending on the state. After you have searched the online database of the Secretary of State and found an available name, you have the complete package of documents (Articles of Organization) and you have paid the filing fee - it makes sense to draft up a simple Operating Agreement for a Single-Member LLC. This should include the following steps:

  1. Information about the company. This should include the name, address, and service of the business.
  2. Details about the registered agent. Include their name and address (if required by state laws).
  3. Ownership. This is simple, one individual owns all of the company and has the right to vote.
  4. Management. If you are the only manager, this needs to be stated. Some members choose to hire managers. If this is the case, specify their details, responsibilities, and financial package. You may also want to add a section about possible changes in the future in case you decide to include members in the future.
  5. Finances. Include any assets that you are adding to the business along with the method of compensation by the LLC. This is particularly important when it comes to taxes.
  6. Dissolution of the business and successors. In case of life-changing circumstances, you will need a concrete plan and here you can also name any successors of the business.
  7. State governing. Include which state will govern the business and agreement.
  8. Sign and date in a notary public to have a witness.

How Is a Single-Member LLC Taxed?

The LLC itself is not required to pay any taxes and there is no need to file a tax return to the Internal Revenue Service. If you are the only member, you must file reports of any profits or losses on Schedule C along with your 1040 tax return. To do this correctly, you will need all documents relating to any income and expenses associated with your company. Tax must be paid on all profit, regardless of whether or not you have distributed it.


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Single-Member LLC Operating Agreement
for
_______________________________________________________
Article 1, Company Formation
1.1. Formation. The member (__________________________) has formed a Limited
Liability Company (hereinafter referred to as the “Company”) according to the laws of
the state in which the Company was formed. This operating agreement is entered into and
effective as of the date it is adopted by the member.
1.2. Registered Agent. The name and location of the Company’s registered agent will be
stated in the company’s formation documents.
1.3. Term. The Company will continue perpetually unless:
A. The sole member resolves to dissolve.
B. Any event which causes the Company’s business to become unlawful.
C. The death, resignation, expulsion, bankruptcy, the retirement of the sole member,
or the occurrence of any other event that terminates the continued membership of a
member of the Company.
D. Any other event causing dissolution of the Company under applicable state laws.
1.4. Continuance of Company. In the event of an occurrence described in Section 1.3
(C), the Company will expire and may be administratively dissolved.
1.5. Business Purpose. The Company will conduct any lawful business deemed
appropriate in carrying out the Company’s objectives.
1.6. Principal Place of Business. The Company’s principal place of business will be
stated in the formation documents, or as later selected by the member.
1.7. The Member. The name and residential address of the sole member is listed in the
Certification of Member section of this agreement.
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Single-Member LLC Operating Agreement
for
_______________________________________________________
Article 1, Company Formation
1.1. Formation. The member (__________________________) has formed a Limited
Liability Company (hereinafter referred to as the “Company”) according to the laws of
the state in which the Company was formed. This operating agreement is entered into and
effective as of the date it is adopted by the member.
1.2. Registered Agent. The name and location of the Company’s registered agent will be
stated in the company’s formation documents.
1.3. Term. The Company will continue perpetually unless:
A. The sole member resolves to dissolve.
B. Any event which causes the Company’s business to become unlawful.
C. The death, resignation, expulsion, bankruptcy, the retirement of the sole member,
or the occurrence of any other event that terminates the continued membership of a
member of the Company.
D. Any other event causing dissolution of the Company under applicable state laws.
1.4. Continuance of Company. In the event of an occurrence described in Section 1.3
(C), the Company will expire and may be administratively dissolved.
1.5. Business Purpose. The Company will conduct any lawful business deemed
appropriate in carrying out the Company’s objectives.
1.6. Principal Place of Business. The Company’s principal place of business will be
stated in the formation documents, or as later selected by the member.
1.7. The Member. The name and residential address of the sole member is listed in the
Certification of Member section of this agreement.
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1.8. Admission of Additional Members. Additional members may only be admitted to
the Company through a Certificate of New Membership issuance by the company of new
interest in the Company or as otherwise provided in this agreement.
Article 2, Capital Contributions
2.1. Initial Contributions. The member will initially contribute capital to the Company,
as described in Exhibit 1 attached to this agreement. The agreed total value of such
property and cash is $__________________________.
2.2. Additional Contributions. Except as provided in Article 6.2, no member will be
obligated to make any additional contribution to the Company's capital.
Article 3, Profits, Losses, and Distributions
3.1. Profits and Losses. For financial accounting and tax purposes, the Company's net
profits or net losses will be determined on an annual basis. These profits and losses will
be allocated to the member as set forth in this agreement below, as amended, and in
accordance with Treasury Regulation 1.704-1.
3.2. Distributions. The member will determine and distribute available funds annually or
as they see fit. “Available funds” refers to the net cash of the Company available after
expenses and liabilities are paid. Upon liquidation of the Company, distributions will be
made in accordance with the positive capital account balances or pursuant to Treasury
Regulation 1.704-l(b)(2)(ii)(b) (2). To the extent the member has a negative capital
account balance, there will be a qualified income offset, as set forth in Treasury
Regulation 1.704-l(b)(2)(ii)(d)
Article 4, Management
4.1. Management of the Business. The member is responsible for the management of
the Company.
4.2. Members. The liability of the member will be limited according to state law.
4.3. Powers of Members. The member is authorized on the Company's behalf to make
decisions as to:
A. The sale, development, lease, or other disposition of the Company's assets.
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B. The purchase or other acquisition of other assets.
C. The management of all or any part of the Company's assets.
D. The borrowing of money and the granting of security interests in the Company’s
assets.
E. The pre-payment, refinancing, or extension of any loan affecting the Company’s
assets.
F. The compromise or release of any of the Company's claims or debts.
G. The employment of persons, firms, or corporations for the operation and
management of the Company's business.
The member is further authorized to execute and deliver:
A. All contracts, conveyances, assignments, leases, sub-leases, franchise agreements,
licensing agreements, management contracts, and maintenance contracts covering
or affecting Company assets.
B. All checks, drafts, and other orders for the payment of the Company's funds.
C. All promissory notes, loans, security agreements, and other similar documents.
D. All other instruments of any other kind relating to the Company's affairs.
4.4. Nominee. Title to the Company's assets must be held in the Company's name or in
the name of any nominee that the member may designate. Pursuant to the powers listed in
Section 4.3, the member has the power to enter into a nominee agreement with any such
person, and such agreement may contain provisions indemnifying the nominee, except
for his or her willful misconduct.
4.5. Exculpation. Any act or omission of the member, the effect of which may cause loss
or damage to the Company, if done in good faith to promote the best interests of the
Company, will not subject the member to any liability.
4.6. Indemnification. The Company will indemnify any person who was or is a party
defendant or is threatened to be made a party defendant, in a 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 the person is
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or was a member of the Company, employee, or agent of the Company, or is or was
serving at the request of the Company, for instant 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 member determines that the person
acted in good faith and in a manner he or she 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 or 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, does not in itself create a presumption that the
person did or did not act in good faith and in a manner which he or she 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 or her conduct was lawful.
4.7. Records. The member must keep the following at the Company’s principal place of
business or other location:
A. A current list of the full name and the last known street address of each member.
B. A copy of the Articles of Organization, this operating agreement, and all
amendments to either document.
C. Copies of the Company's federal, state, and local income tax returns and reports
for the three most recent years.
D. Copies of the Company’s financial statements for the three most recent years.
Article 5, Compensation
5.1. Management Fee. The member rendering services to the Company is entitled to
compensation proportionate with the value of those services.
5.2. Reimbursement. The Company must reimburse the member for all direct
out-of-pocket expenses incurred in managing the Company.
Article 6, Bookkeeping
6.1. Books. The member will maintain a complete and accurate accounting of the
Company's affairs at the Company's principal place of business. The member may select
the method of accounting and the company's accounting period will be the calendar year.
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6.2. Member’s Accounts. The member's capital account will be determined and
maintained in the manner set forth in Treasury Regulation 1.704-l(b)(2)(iv) and will
consist of his or her initial capital contribution increased by:
A. Any additional capital contribution made by the member.
B. Credit balances transferred from the member’s distribution account to his or her
capital account.
And decreased by:
A. Distributions to the member in reduction of Company capital.
B. The member's share of Company losses if charged to his or her capital account.
6.3. Reports. The member will close the books of account after the close of each
calendar year and will prepare a statement of such member's distributive share of income
and expense for income tax reporting purposes. The member must keep such statements
with the other financial statements kept pursuant to Section 4.7(C).
Article 7, Transfers
7.1. Assignment. The member may sell, assign, or otherwise dispose of all or any part of
his or her interest in the Company.
Article 8, Dissolution
8.1. Dissolution. The member may dissolve the company at any time. The member may
NOT dissolve the company for a loss of membership interests. Upon dissolution, the
company must pay its debts first before distributing cash, assets, and/or initial capital to
the member or the member’s economic interests. The dissolution may only be ordered by
the member, not by the owner of the member’s economic interests.
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