Checklist for Drafting LLC Operating Agreements

CHECKLIST FOR DRAFTING LLC OPERATING AGREEMENTS

General.

1. Under what state law will the LLC be formed?
2. What is the name of the LLC?
3. Has the name been checked with the Secretary of State?
4. What is the purpose of the LLC?
5. What is the term of the LLC?
6. Is the LLC member managed or manager managed?
7. Who is the manager if manager managed?
8. Who is the agent for service of process?
9. Is the manager a limited liability entity? (You want to avoid an individual being the manager for liability reasons.)

1. What is the initial capital contribution of the managing member?
2. What is the initial capital contribution of the other members?
3. Will members be required to make additional contributions if necessary?
4. What happens if a member fails to make a required capital contribution?
5. What approvals are required to add new members?
6. Are members allowed to withdraw their capital contributions? If so, under what circumstances?
7. Is a member entitled to interest on his or her capital contributions?
8. Does any member have any priority on distributions over any other members?

1. How are distributions to be divided among the members?
2. How are tax allocations made?
3. When are distributions to be made?
4. Will there be special distributions required to be made to at least pay for tax on each member’s pro rate income from the LLC?

1. How broad are the management powers of the manager?
2. What limitations are there on the powers of the manager?
3. If there is more than one manager, what actions require the consent of all of the managers?
4. Is the manager obligated to devote any particular amount of time to LLC matters?
5. Is the manager and its affiliates free to engage in other activities?
6. Is there any limit on the manager’s right to form other entities?
7. Will the manager be broadly protected from liability?
8. Will the manager be indemnified for acts taken on behalf of the LLC?
9. Under what circumstances might the manager be liable to the members for acts or omissions?
10. What specific duties does the manager have?
11. Will the LLC have officers?

1. What fees is the manager entitled to?
2. What reimbursements is the manager entitled to?
3. Is the manager entitled to incentive compensation or a carried interest?

1. What books and records are to be maintained by the LLC?
2. What access rights will the members have to books and records?
3. What reports will the members be required to receive?
4. Who will be the tax matters partner?

1. What voting rights will the members have?
2. What major actions can the manager take without other members’ approval?

1. Where will meetings be held?
2. How can meetings be called?
3. What notices for meetings must be given?
4. What quorum is necessary for meetings?
5. Can actions be taken by written consent of the members?

1. Do the members have the right to assign their interest in distributions?
2. What rights....