- Hi everybody, I'm attorney Aiden Kramer,
with The Law Office of Aiden Kramer in Colorado.
Welcome to the magical world of All Up In Yo' Business.
I've talked a lot in previous episodes about the importance
of an Operating Agreement in an LLC.
Particularly, in a single member LLC.
The Operating Agreement for an LLC is essentially
the written agreement of the members about how to operate
the LLC.
So it may seem odd for a single member LLC
to have an Operating Agreement,
because it's not like there's going to be any votes.
The single member's not gonna disagree with anybody,
the single member can for the most part
do whatever they want with the company.
But an Operating Agreement, nonetheless
is very, very important in a single member LLC.
Now, Colorado doesn't require an Operating Agreement
for single member LLC's or for any LLC's for that matter.
But some States do require them.
And even if it's not required, it's still an important piece
of paperwork to have for your LLC.
In a single member LLC, the primary purpose
of the Operating Agreement is to help uphold
the limited liability that an LLC provides.
The Operating Agreement helps to avoid piercing
the corporate veil, which I've talked about
in previous episodes.
So what I'm gonna do today is walk through
a sample Operating Agreement.
So you guys know some of the important points that should
be made in your single member LLC's Operating Agreement.
First, let's start with the basics.
Your Operating Agreement should include,
your business's name, the address of the business,
the registered agent's information and the business purpose.
All of this information should also be reflected
on the Articles of Organization that were filed to create
the LLC.
And the business purpose is, the purpose of the business.
What kind of a business are you going to be operating?
What are you going to be doing?
My Operating Agreement, for example,
would say that I'm going to be operating a law practice,
focusing on business transactions and estate planning.
So whatever the purpose, whatever you're going to be doing
in your business, that's what your business purpose is.
Your Operating Agreement should also reflect whether the LLC
is going to be member-managed or manager-managed.
If you're unsure about which one your LLC is
or what it should be, check back to my previous videos
'cause I have one explaining the difference between member
and manager-managed LLC's.
The Operating Agreement should also include information
about the owners or the members of the LLC
and the percentage breakdown for each one.
Obviously, since you're the only member in it,
you own 100%, but your Operating Agreement
should reflect that you are 100% owner of the LLC.
You also want to include information about how the LLC
is going to be taxed.
Are you going to leave it as a disregarded entity
or are you going to elect to be taxed as an S corporation,
or a C corporation?
Whatever you decide should be in the Operating Agreement.
Your Operating Agreement should also include information
about the contributions that you've made to the LLC.
If you contributed a lump sum of cash,
or if you're just contributing services
and your own knowledge, your Operating Agreement
should reflect whatever your contributions are.
You'll wanna put information in your Operating Agreement
about distributions.
How are you going to take distributions?
Are you going to take a lump sum distribution
on a regular schedule, weekly, monthly, quarterly?
Are you gonna take it whenever you decide to,
in a certain amount?
The terms of how you're going to take those distributions
should be stated in your Operating Agreement.
Your Operating Agreement should also state
if certain actions taken by the LLC need to be consented to
in writing by you the member.
States may require a written consent
to certain actions.
They may not, but you can specify
in your Operating Agreement what types of transactions,
what types of purchases, what types of actions, need
to be consented to, by you in writing.
You also want to include information about meetings
of the members.
You're the only member, so you can hold
a meeting really whenever you want.
But if you want to commit to having annual meetings
by yourself, you can put that in the Operating Agreement
or you can state in the Operating Agreement, that anything
that could be done in a meeting can be done in a writing
in lieu of a meeting.
Whatever you decide should be stated though,
in your Operating Agreement.
Liquidation and dissolution of the LLC should also
be addressed in the Operating Agreement.
When can you dissolve the LLC, if you decide to do so?
What steps need to be taken when you do dissolve and unwind
the LLC?
All of those steps, all of those requirements
that you may impose on yourself or
that your state may impose on you,
it should be included in the Operating Agreement.
You also want to address what will happen if you decide
to transfer ownership of the LLC,
either a partial or complete ownership.
So if you later decide to take on a business partner
and you want to make that business partner, a 50% owner,
your Operating Agreement should describe
under what circumstances you can transfer that ownership,
what steps need to be taken to do that,
and anything else regarding transferring the ownership
of membership interests in the LLC.
And finally, your Operating Agreement should state
how the Operating Agreement can be amended.
If later on down the road, you want to change some
of these terms that you've written
into your Operating Agreement,
your Operating Agreement should say
how you make those amendments.
Obviously, you're the only owner.
So you can decide on your own without talking
to anybody else that you want to amend it.
But if your Operating Agreement states
that you need to consent to amending it in writing,
then you need to do that before amending
the Operating Agreement.
Now, those are certainly not all of the things
that need to be included
in your single member Operating Agreement.
Those are just a few of the more important things
that are typically a part of the Operating Agreement.
There are a lot
of sample Operating Agreements available online.
I don't recommend that you use them just
as a complete template, but they can help
to be a starting point in drafting your Operating Agreement.
But of course, as always, I recommend working
with an attorney to do it.
So you know that everything's been covered
and that your operating agreement is in compliance
with State law.
If your State does have requirements
for an Operating Agreement.
If you're in Colorado, and you would like help
with your Operating Agreement or anything else regarding
your business, you can contact me.
My phone number and email are below.
Thank you all for watching.
I'm Aiden Kramer, and I will see you next time.