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LLC Operating Agreement Template

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The California LLC operating agreement is a legal document that is not only used to establish a member-managed business but to also assist in the protection of the members’ personal assets (i.e. members’ homes, cars, even family savings). Assuming that a properly formed entity is in place, should any form of litigation be imposed or should the business fail, the members’ personal assets may not legally be considered a part of the legal processes involved.

If the agreement is not in place, in the event of litigation, the owner(s)/member(s) would become personally responsible for all business debts, demands and/or settlements. Having this agreement in place also provides various tax benefits.

The State of California requires that businesses residing within the State draft this document. Along with this requirement will come annual reports and fees that must be paid. There are, however, some options available with regard to these reports and fees. Therefore, the member(s) must carefully read through the document prior to completion. If the member(s) are unclear with any aspect of the document, they should consider acquiring assistance from a knowledgeable attorney.

Definition – § 17701.02(s)

Laws – Corporations Code 17701.01-17701.17

Table of Contents

• Download
• Forming an LLC in California
• How to Write an Operating Agreement

Types

Multi-Member – This form is for use by companies that would have more than one contributing member and would be member-managed.

Single-Member – To be used by a single-member business whereas only the owner would be the managing member and the sole contributor to the business.

How to Form an LLC in California

All applicants are encouraged to check the availability of their desired business name before attempting to file in the State of California. Conducting an online Business Search will allow you to verify whether or not your chosen name is distinguishable from that of all other active Domestic and Foreign LLCs within the State. You may also file the Name Availability Inquiry Letter as an alternate means of verification.

Step 1 – Articles of Organization/Application to Register a Foreign LLC

Download and complete the Adobe PDF application specific to your entity type. The two available applications are:

• Domestic – Articles of Organization
• Foreign – Application to Register a Foreign LLC

Step 2 – Attach Filing Fee

Applications submitted by mail must include a check or money order made payable to the Secretary of State. Those filing in-person may also pay by credit card. The fee for both a *Foreign and Domestic LLC is $70 (in-person submissions require an additional $15 fee).

*A Certificate of Good Standing issued within the last six (6) months is required for all Foreign LLC applications.

Once the filing fee is attached, you may deliver your documents by mail or in-person to the following address:

Business Entities, P.O. Box 944228, Sacramento, CA 94244-2280

Step 3 – Initial Report and Annual Franchise Tax

LLC owners are required to submit an Initial Report within ninety (90) days of filing with the Secretary of State. Additionally, all LLCs must pay the Annual Franchise Tax on the 15th day of the 4th month after the beginning of the tax year. Failing to submit reports on time will result in late fees and various penalties.

Step 4 – Operating Agreement

The State of California demands that all new LLCs draft an operating agreement to define the duties of the ownership and any other provisions left undocumented when filing the initial registration articles. You may have a verbal agreement or it may be written and distributed between all relevant parties.

Step 5 – Employer Identification Number (EIN)

Newly formed entities should apply for an Employer Identification Number (EIN) following the acceptance of their registration documents. Much like a Social Security Number, an EIN is used by the Internal Revenue Service (IRS) to identify businesses for tax purposes. An EIN may be acquired Online or through the submission of Form SS-4.

How to Write

Step 1 – Once the document has been downloaded, enter the name of the company in the first line of the document.

Step 2 – Establishment of the Agreement – Submit the following:

• • • Provide the date in which the agreement has been entered, in dd/mm/yy format
    • Select and check the applicable box, and complete the required information in the selected section as follows:
      • • • Single-Member – Enter the name of the company
          • Submit the state where the business shall reside (in this case – California)
          • Enter the full name of the owner
          • Provide the full physical address of the single-member (owner)
          • OR
          • Multi-Member – Check the box and enter the names of all members and their addresses

Step 3 – Name and Principal Place of Business – Provide the following:

• • • The name of the company
    • The primary, physical address where business shall be conducted
    • The name of the city inside of the State of California where the business address is located

Step 4 – Formation of the Company – All members must carefully review the following information (enter any required information as needed):

Formation –

• • • Enter the date in which the company was formed in dd/mm/yy format and read the remainder of the paragraph
    • Purpose
    • Term

Step 5 – Member Capital Contributions – Select the applicable box before proceeding.

• • • Single-Member – Read the paragraph provided
    • OR
    • Multi-Member – Check this box and submit the following:
      • • • The names of all contributing members
          • Enter the dollar amount of each member’s contribution (the minimum contribution must be at least $100.00. No member is obligated to provide additional contributions)
          • Distributions – Single and multi-members must read this section entirely
          • Select and check the applicable business type
          • If the business selected in multi-member, read the information behind the selection
          • Enter all member’s names
          • Submit each member’s percentage of interest in the company
          • Continue review of this section until complete

Step 6 – Books, Records, and Tax Returns – Check the appropriate box.

• • • Single-members must check the box and carefully review this section
    • Multi-members must check the multi-member box and require that all members carefully review this section, respectively
    • AND
    • Bank Accounts – to be reviewed  by single and multi-member organizations

Step 7 – Management of the Company –

• • • Select and check the applicable box and read all of the information behind the selection

Step 8 – Meeting of Members – Multi-members, check the box.

• • • Enter the date, annually (dd/mm), when the members will meet at the principal place of business
    • All members must read the remainder of the section
    • AND
    • Assignment of Interest – Multi-Member Only – All members of the business must carefully review all of the information provided in this section
    • AND
    • Ownership of Company Property – Single-Member (owners) Only – Carefully review this section
    • AND
    • Multi-Member Business – Check the multi-member box and carefully review the next five (5) sections as follows:
      • • • Right of First Refusal
          • Admission of New Members
          • Withdrawal Events
    • Dissolution and Liquidation – Check the applicable box and read the information available for the selected option
    • Representations of Member – Multi-Members Only – Check the box and review all of the information provided

Step 9 – Certificates Evidencing Membership – Multiple-Members Only.

• • • Check the box, review the immediate paragraph and enter the following information:
      • • • Submit the name of the company
          • Provide the effective date in dd/mm/yy format

Proceed by checking the applicable boxes and reviewing the following sections and any subsections:

• • • Notices
    • Arbitration
    • Amendments
    • Indemnification
    • Miscellaneous

Step 10 – Signature(s) – Enter the date of the execution of the agreement between members, in dd/mm/yy format.

• • • Enter the name of the company
    • Submit the managing members’ signatures
    • All members must enter their signatures (or the owner, if the business is single-member)

Once the document is completed and signed by the member(s), copies must be provided to each member. This document shall also serve as a Certificate of Membership as required by state law.