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Written by : Herlinda Boreland
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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 Francesca Eidem, have a nice day.
- Herlinda Boreland, Staff Member
the number one question I get when it comes to an operating agreement is do I need to file the operating agreement with the secretary of state or do I need to file the operating agreement with some sort of government agency the answer to that question is no the operating agreement is not filed with any sort of government agency in fact the operating agreement is a internal legal document that entrepreneurs need to keep safe that entrepreneurs need only keep in a safe place if entrepreneurs have questions as to how the mlc is supposed to be operated they can then refer to their operating agreement which should be saved in a safe place follow for more business videos and I will see you in the next one
Thanks manjairaV your participation is very much appreciated
- Herlinda Boreland
About the author
I've studied partial differential equations at University of North Florida in Jacksonville and I am an expert in arthropodology. I usually feel indifferent. My previous job was costume attendant I held this position for 25 years, I love talking about dog training and bonsai. Huge fan of Adam Driver I practice pommel horse and collect match-related items.
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