A single-member LLC operating agreement template is an official document that outlines how an LLC company owned by one member operates. This document affirms the separation among the LLC and the owner’s personal property.
A single-member LLC makes sure the owner is not accountable for the LLC’s financial and legal liabilities. Furthermore, as the company’s net revenue, it benefits the sole owner that can be taxed at the same rate as the owner’s income. It means that the LLC does not pay applicable taxes as an entity.
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Why single member LLC operating agreement?
Here are the reasons that why an operating agreement is a crucial document;
To prove separation
Sometimes a business may face debts, lawsuits, claims, or any other liabilities. Towards the owners of the business, these liabilities can easily be directed. An LLC makes sure that this does not happen by making sure the owner’s assets are separated from the business.
An operating agreement makes sure that an owner outlines the following;
- How assets and liabilities of the business should be divided
- How the business should be dissolved
- The LLC owner has to transfer ownership to a beneficiary
High rate of credibility
With an operating agreement, the credibility of single-member LLCs is held in high regard by external entities like investors, banks, creditors, etc. The operating agreement, therefore, is a reflection of proper governance in an LLC.
Define your rules
By defining owner’s policies, management structure, and rules and regulations, an LLC operating agreement provides them more control over their business.
How do you write an operating agreement?
Let us discuss step-by-step how to write this agreement;
The first items to be noted on a single-member LLC operating agreement form is the purpose of the LLC. Next, there comes the effective date (first day of operation), name of the LLC, and principal location of operation.
By providing name, contact details, and address as stated in the Articles of Organization, the appointed registered agent and office is then identified.
This agreement has to clarify that the owner possesses 100% ownership of the LLC. In this section of the operating agreement, you should also indicate the sole owner’s voting rights, powers, and obligations.
The management structure adopted by the sole owner is indicated in the operating agreement.
There is always a likelihood with a single-member LLC that a new member will join in the future. Consequently, the single-member LLC will need to be converted to a multi member LLC. It means that the operating agreement must be changed to accommodate the new member.
In the subsequent section, you have to show the capital investment made by the sole owner towards the LLC. Any tangible or intangible assets contributed towards starting the LLC should be declared such as cash, promissory note, real estate, etc.
A single-member LLC operating agreement has to show how the owner will be compensated. For instance, you must indicate whether the payment will be salary-based or periodic lump-sum payments. For tax purposes, this information is crucial.
Succession and dissolution
In case of events such as death, legal or physical incapacitation, resignation, and more, the single-member LLC owners have to plan for the dissolution and succession of the LLC.
Next, single-member LLC will be operated under the jurisdiction. It is essential to declare the governing laws in states where an operating agreement is not compulsory.
Single-member LLC owners have to sign the operating agreement in the presence of a notary public in order to finalize the writing process. To validate when the operating agreement came into effect, the notary gives an official stamp and signs. You may also like Membership Application Forms.
Single Member LLC Operating Agreement Template & Form
Sole Member LLC Operating Agreement Template
In conclusion, a single member LLC operating agreement template outlines the roles and responsibilities of everyone involved in running the company. It involves the owner, manager(s), registered agent, officer(s), or any other individual at the key position.