What is Single Member LLC Operating Agreement Drafting?
A single member LLC operating agreement is an internal document that explains aspects of company ownership and management for businesses which only have one owner.
Although you might think you don’t need to draft a single member LLC operating agreement, it makes your entity formal and provides liability protections by defining your LLC as its own entity.
Read the rest of this article to explore what key terms occur in a single member LLC operating agreement, how to draft it accurately, and how a qualified lawyer can help you with the drafting process.
What Key Terms are in a Single Member LLC Operating Agreement?
Some core sections that appear in a single member LLC operating agreement include the following:
- Company details. This states information such as the official business name, the location from where it operates, and its purpose.
- Capital. This outlines the owner’s capital contributions and ownership percentage.
- Management. It’s important to clarify how decisions will be made and if the owner or a manager handles the business operations on a daily basis.
- Profits and losses. This specifies how money is injected into and leaves the business.
- Dissolution. Should the business need to be closed, the agreement should specify what steps the owner must follow.
What are Tips for Drafting a Single Member LLC Operating Agreement?
There are some important things to consider when drafting a single member LLC operating agreement. First things first, make sure you have prepared the LLC as an entity which exists prior to drafting the agreement. This involves filing Articles of Organization with your state and appointing a registered agent.
After having your filing approved, depending on your specific business operations, the IRS will send you what’s known as an EIN federal tax ID that enables you to open a business bank account and file taxes. This applies in certain situations, such as if you plan on hiring employees or the bank requires an EIN during account formation.
Here are some tips to consider when you’re ready to draft your single member LLC operating agreement.
Include the Company and Member Details
Provide the LLC’s legal name and its address, as well as the member’s name. This is basic but important so that you accurately establish the owner and business.
Clarify Ownership
As a sole member or owner, you’ll state in your agreement that you own 100 percent of the LLC. Mention your capital contribution, such as if you invested cash or property in the business.
Outline the Management Structure
You want to clarify if you will run the LLC yourself or if you’re going to hire a manager to do it for you. If it’s the latter, you want to be clear about what authority that person has, such as when signing contracts.
Explain Liability and Indemnification
It’s important to specify that the owner isn’t liable to cover company debts as the LLC is a separate entity.
Consider the Business Future
You want to explain what will happen if the business is sold or you pass away. You’ll cover your bases and prevent ambiguity by having solid plans in place. When doing this, refer to other business documents, such as contracts and estate plans, to ensure consistency.
How Does a Lawyer Help You With Single Member LLC Operating Agreement Drafting?
While drafting a single member LLC operating agreement might seem straightforward, hiring a lawyer for assistance is advisable. A lawyer will help you assess any hidden risks and make sure you comply with relevant laws. They’ll also assist you in the following ways:
- Clearly defining the LLC purpose and ownership in specific language.
- Considering how money will move in and out of the LLC, such as by outlining owner contributions, loans, and other distributions.
- Establishing rules for adding members to the LLC in future.
- Including steps to follow should the owner become incapacitated or die.
- Ensuring the agreement isn’t in conflict with the LLC’s tax status.
- Including protections for disputes.
- Providing details that you won’t get in a generic agreement template, which serves to customize the agreement for your situation.
- Reviewing a single member LLC operating agreement that you’ve drafted so you don’t miss anything important that could result in issues later.
Where to Find a Lawyer for Single Member LLC Operating Agreement Drafting
If you’ve decided you want to hire a lawyer to draft your single member LLC operating agreement, you might wonder where to find one who’s reputable and experienced. Instead of asking people you know for lawyer recommendations, online legal platforms make finding a lawyer easy.
ContractsCounsel is one of the largest online legal marketplaces that gives you access to a curated network of professional lawyers. All lawyers on the platform have been vetted and possess expertise in contract drafting and review.
To request that a lawyer on the platform drafts your single member LLC operating agreement, here are the steps to follow online.
- Go to the ContractsCounsel marketplace.
- Post your project for free. Include a few details to help you find the most suitable lawyer, such as the type of business you own.
- Receive multiple bids from lawyers directly on the platform who have the experience to help you.
- Review the lawyers’ profiles. ContractsCounsel provides lawyer data to help you select the best one to work with. Take some time to go through the information, such as their location, client ratings for previous projects, expertise, and credentials.
- Connect with a lawyer you think is best suited to your requirements and hire them to draft your single member LLC operating agreement for a flat fee.
