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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 your 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 members not going to 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 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 going to 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 agents 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 purposes 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 because 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 a hundred percent but your operating agreement should reflect that you are one hundred percent 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 want to 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 going to take it whenever you decide to in a certain amount the terms of how you want 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 that 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 also want to include information about meetings of the members you're the only member so you can hold a meeting really whatever 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 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 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 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 they are 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
Thanks for your comment Stefani Elcock, have a nice day.
- Michell Easterwood, Staff Member
all right leave Phillips again I want to talk about how to get somebody out of a corporation or an LLC you may be business partners with somebody now you're not partners your LLC members together but your partner's okay and you want to go your separate ways you want to continue the LLC the other guy doesn't want to continue the LLC wants out that's fine get him out how do you get him out that's the question well you may have to buy him out and I'm not gonna go into the economics of it that's for you to figure out but legally what you're gonna do is you're gonna put them in an entry and now here again you've got to look at your operating agreement or your bylaws if it's corporation bylaws operating agreement LLC they may have something in written in there that says how you get rid of a member or if the guy wants to sell his stock basically selling these stockers membership interests you may be buying that the company may be buying it back it may go back into the Treasury but we're getting rid of this guy and the bylaws operating agreement may say then everybody has the first right of refusal if there's four of you in the LLC or the corporation Joe down here he may want to buy that guy's piece so that he has a bigger control so look at the operating room at the bylaws assuming that everything's cool doesn't say anything about it or whatever you're gonna have the guy sign the back of his membership certificate or his stock certificate you didn't ever issue a stock certificate or a membership certificate did you well okay let's make a minute entry in the books you remember you're supposed to have meetings take minutes that sort of stuff that's another YouTube but we make a minute entry that says Joe is returning his stock membership interest to the company and at that point if there is a certificate or stock certificate membership certificate you're gonna have him sign the back transfer it to the company or transfer it to you whatever you want and you're gonna cross out certificate number one or certificate number two whatever that one is and say transfer to company or transferred to you or whatever and that takes it off of the books now what you pay the guy is another issue the guy may have put money into it he didn't get anything out he just wants out fine he now has a tax loss okay because he gave you stocks to do Mia back got zero foreign so the economics of it are another issue but the how to get rid of him from a legal standpoint from the company standpoint pretty easy make the minute entry having signed the certificate cut off the certificate on the stock books now you may have to adjust the membership role or the the the owners role on the state books some states require that you list the members in the LLC fine you can make an amendment at that point to those state records just go to the state website unless you're in California they don't have a state website and get the amendment papers and take his name off of that list or if it's close to the annual then you wait for the state some states do some states don't you wait for the state to send out the request for the update of the information and you send it into this with your check for that year and pay him off so get his name off and if you're the one leaving you want your name off because you don't want to be liable for anything on those state records you want out so make sure that your name is off call up the state a month later and say is is Joe Blow me a member of this LLC if you if your recorded at the state records if you're recording you've got a problem because you haven't been out yet you're still on the records and you don't want to be on the records so check the records to if you're the one leaving that's pretty much about it as far as the legal aspects of taking a person off the role as a stockholder in a small company or an LLC
Thanks youngdriversS your participation is very much appreciated
- Michell Easterwood
About the author
I've studied data mining at Washington Adventist University in Takoma Park and I am an expert in outdoor education. I usually feel dark. My previous job was real estate lawyer I held this position for 2 years, I love talking about philately and organizing. Huge fan of Rachel Maddow I practice rowing and collect bicycles.
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