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Multi-Member LLC Operating Agreement Template

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Updated on July 5th, 2022

A multi-member LLC operating agreement is a document that outlines the operations of an entity consisting of two (2) or more members. Without executing this type of contract, the entity is governed in accordance with the rules and standards established by the state in which it is formed, which may or may not align with the company’s goals.

By State

Contents

What is a Multi-Member LLC?

A multi-member LLC operating agreement is a business form used to provide the framework of an LLC where ownership is shared between two (2) or more people.

The agreement is a legally-binding company guide that contains the member structure, ownership, and rules of governance by which all members are bound. The form itself will often vary from one company to the next but in general they all maintain a similar overall structure.

What It Covers

The operating agreement contains the following fundamental sections:

  • Basic entity details (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. However, if modifications will be made, it is recommended that sections be reworded instead of being deleted altogether; some provisions 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 (i.e., partnership), there is no limit to the number of members 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 (or be extremely similar to) another entity 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 in which it is formed may also consider certain words off-limits, such as “Bank,” City,” “Insurance,” and so on.

LLC Laws by State

Who can act as the registered agent?

Like rules regarding naming, each state places restrictions on the appointment of a registered agent. For the majority of states, the agent needs to meet the following criteria:

  • An adult (18 years or older) or a corporation (however, the LLC can’t be their own agent);
  • They must live in the state in which the entity is being formed; and
  • They must be readily available at their address (to receive communications, important documents, etc.).