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Multi-Member LLC Operating Agreement Template

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A Multi-Member LLC Operating Agreement is a document that establishes how an entity with two (2) or more members will be run. Without putting the contract into place, the entity is governed in accordance with the rules and standards established by the state, which may or may not align with the company’s goals.

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Contents

What is a Multi-Member LLC?

A Multi-Member LLC Operating Agreement is a business form used for spelling out the details of an LLC that shares ownership among two (2) or more people.

The agreement is a legally-binding company guide that contains the agreed-upon member structure, ownership, and rule sets that all members are bound by. The form itself will often vary from one company while maintaining the overall structure.

What It Covers

The operating agreement contains the following important sections:

  • Basic details of the entity (name, state of incorporation, founding date, etc.)
  • Capital contributions (what each member paid to fund the company)
  • Profit and loss allocation
  • Indemnification
  • The duties and powers of managers
  • Salaries, taxes, and accounting
  • Transfer of a member’s interest (ownership)
  • Dissolution (closing of a company)
  • General company provisions
  • Signatures of all members

By downloading the form in the Word (.docx) format, one can easily modify the document’s language and add or remove sections. Be forewarned, however, as it is often better to re-word sections instead of deleting entire paragraphs altogether, as some contain important language necessary for the legal protection of the entity and its members.

Frequently Asked Questions

How is a Multi-Member LLC Taxed?

Multi-member LLCs do not have their own tax class. By default, they are taxed as a partnership. All income from the entity “flows through” to the owners, requiring each owner to pay their fair share of taxes in alignment with their ownership in the company.

The LLC can opt to be taxed as an S corporation or C corporation if they wish. In order to do this, they must file Form 2553 with the IRS.

How Many Members can Exist in the Entity?

For LLCs that keep their original tax designation (partnership), there is no limit to the number of employees it can have. However, if the entity is taxed as an S-corporation, it cannot have more than one-hundred (100) members.

What Can I Name the LLC?

There are (generally) two (2) rules for naming an LLC:

  1. The name can’t be in use by another entity (or be extremely similar) in the state; and
  2. It needs to end with “LLC”, “L.L.C”, “Limited Liability Company”, “Ltd. Liability Co.”, and so on.

The state may also place certain keywords off-limits, such as “Bank”, “City”, “Insurance”, and so on.

View state LLC laws

Who Can Act as the Registered Agent?

Like rules regarding naming, the state places restrictions on naming a registered agent. For the majority of states, the agent needs to be:

  • An adult (18 years or older) or a corporation (the LLC can’t be their own reg. agent);
  • They must live in the state the entity is being formed in; and
  • They must be readily available (to receive packages, for instance) at their address.