What this form is for
This form establishes the ownership structure, management rules, and operating procedures for your limited liability company. You need it to define each member's capital contributions, profit-sharing percentages, voting rights, and procedures for adding or removing members.
Before you start
- Your LLC's exact legal name and the state where you filed Articles of Organization
- Each member's full legal name, mailing address, and percentage ownership
- The dollar amount or asset description each member contributed as initial capital
- Your chosen profit and loss allocation method (by ownership percentage or another formula)
- Meeting and voting requirements you want to adopt (simple majority, unanimous, supermajority thresholds)
Step-by-step
1. Select your governing state at the top of the form. State law controls default rules for member withdrawal, dissolution, and fiduciary duties, so this choice affects enforceability.
2. Fill in the formation date and registered agent information exactly as shown on your filed Articles of Organization. Mismatches create recordkeeping red flags.
3. Complete the member schedule listing each owner's name, address, capital contribution (cash or property), and ownership percentage. Verify percentages add to 100 percent.
4. Document the capital contribution details. If a member contributed equipment or real estate, attach a separate schedule with fair-market valuations and dates.
5. Define management structure. Confirm the LLC is member-managed (all owners participate in decisions) and specify which actions require unanimous consent versus majority vote.
6. Set profit distribution terms. Indicate whether distributions follow ownership percentages or a different allocation, and specify the frequency (quarterly, annual, or as-decided).
7. Establish member meeting requirements, including notice periods, quorum rules, and whether remote participation is allowed.
8. Address transfer restrictions. Most banks expect buy-sell provisions that restrict members from selling interests to outsiders without consent.
9. Detail withdrawal and dissolution procedures, including buyout valuation methods (book value, appraised value, or multiple of earnings).
10. Collect signatures and dates from all members. Unsigned agreements have no legal weight with lenders or courts.
What lenders look for
- Banks scrutinize ownership percentages and capital contributions to verify you and your co-owners have real equity at risk. Sweat equity or promissory notes in place of cash contributions weaken your application.
- Underwriters check for personal-guarantee language and restrictions on distributions. If the agreement lets members drain cash without limits, lenders see repayment risk and may decline or require stricter covenants.
- Missing or inconsistent operating agreements are top reasons for loan-document delays. Have all members sign before you approach lenders, and keep one original in your corporate records binder.