Sample Operating Agreement

For Discussion Only

*Seek competent legal assistance when advising clients on drafting Operating Agreements for Limited Liability Companies, LLC’s.

Proposed Regulation 1.1402(a)(13) – John M. Cunningham’s book – “Drafting Limited Liability Company Operating Agreements” Aspen Publishing (800_ 638-8437.

  • Two classes of interest. Operating agreement for the LLC shall hae two classes of interest. One shall be called the Manager Class and the other the Investor Class. For purposes of allocating profits, losses and distributions under this Agreement, these interests shall be divided in units.
  • Manager Class. Only individuals who have contract authority for the LLC shall be entitled to hold units of the Manager Class.
  • Allocations of profits and losses to holders of units of a Manager Class. The LLC shall allocate the first $ of its profits for each calendar year to holders of units of the Management Class in proportion to their holdings of these units.
  • Issuance of one unit of Manager Class to . Upon its formation the LLC shall issue one unit of the Manager Class to in exchange for $ .
  • Rights of members of Investor Class, including righs to allocations of profits and losses; restrictions on issuance of units of Investor Class. The rights of holders of units of the Investor Class shall be as follows:
  • General rule. Except as otherwise provided in the second point, holders of units of the Investor Class shall have the right of nonmanager members under this Agreement.
  • Votes. Only holders of units of the Investor Class may vote on LLC matters. Holders of units of the Investor Class shall have one vote on each LLC matter for each such unit.
  • Allocations of profits and losses. Except as provided in the third point, the LLC shall allocate all of its profits for each calendar year (or, if it incurs losses, all of its losses) to holders of units of the Investor Class in proportion to their holdings of these units.
  • Restrictions on ownership of units of Investor Class. At least 20 percent of all outstanding units of the Investor Class shall at all times during the term of this Agreement be issued and outstanding to persons:
  1. Who lack authority to sign contracts on behalf of the LLC;
  2. Who have no personal liability (except liabilities in the form of personal guarantees) for obligations of the LLC; and
  3. Who provide no more than 500 hours of service to or on behalf of the LLC in any calendar year.
  • Issuance of units of Investor Class. Upon its formation, the LLC shall issue 80 units of the Investor Class to

in exchange for $ and 20 units of the Investor Class to

in exchange for $ .