A limited liability company with multiple owners running normal business operations is classified as a multi-member-managed LLC. All LLCs benefit from having an operating agreement (a legally-binding document setting the rules and structure of the LLC), but it’s extra-important for member-managed LLCs—as the multi-owner structure makes one more prone to member conflict than other LLCs.
Operating agreements are approved by member votes at an initial meeting. As internal documents, operating agreements don’t need to be filed with the state. You can write your own agreement, or fill out our attorney-drafted template to generate your multi-member LLC’s operating agreement for free. Our form allows you to easily fill in your company’s details, save your progress as you go, and download it to vote, sign, and date whenever you’re ready.
Not sure if you have the right form? If you have two or more owners who are all going to be involved in the day-to-day operations of running the LLC, you’re on the right page.
Have a different situation? We have other operating agreements for download as well. If you have silent investors or want a non-member manager, you need a manager-managed LLC operating agreement. If you are the one and only one owner of the LLC, you just need a simple single-member LLC operating agreement.
From contributions to dissolution, there’s a lot an operating agreement needs to include. Our comprehensive multi-member LLC operating agreement template covers the following essentials:
This first section of the operating agreement performs four major functions:
Each member makes initial capital contributions by funding the LLC with cash or other assets in exchange for ownership interest. In this section, you’ll enter the total value of all contributions. This article also notes that members are not obligated to contribute more later on.
So when will members see some money? Under Article III, your LLC sets up how profits and losses are determined each year, and the way allocations will be made based on each member’s ownership percentage. You can choose to make distributions annually, or more frequently if the LLC’s expenses and liabilities are paid up (but if the company or membership interest is liquidated, distributions must follow Treasury regulations.)
In a member-managed LLC, members are in charge. But with multiple members, how does business actually get done? 10 people can’t be king at the same time. What if there’s a dispute? Does everything have to be voted on?
This section sets up a system appointing a Chief Executive Member (CEM) for daily decision making and assigning other specific duties to individual members. However, all members have the authority to make decisions when performing duties for the LLC. Any disputes among members (including with the CEM) are decided by majority vote. Any legally binding agreements must be signed by all members. There are also consequences outlined for failing to perform duties.
This article also notes that as long as members are acting in good faith, they’re not liable for losses or damages to the LLC or expenses resulting from lawsuits or other actions against the LLC.
There are situations where the LLC may owe members for services or expenses. This section states that members are entitled to compensation for services—and the value of any service rendered must be unanimously agreed upon. Members will be reimbursed for approved LLC expenses paid out-of-pocket.
Article VI explains how books are kept. Members are responsible for keeping financial records, including separate capital and distribution accounts for each member. This section states that the LLC is to keep books on a calendar year. At the end of the year, the books are closed and a statement for each member is prepared.
This section goes into detail on three important points:
This section is designed to balance a few different potential issues. For instance, it’s important to protect the LLC from losing control to outside members. As such, this section outlines processes for the LLC to give members first shot at buying an exiting member’s interest and allows the LLC to assign interest to current members if there’s no buyer. Also, if a transfer isn’t unanimously approved by the LLC, whoever gets the interest won’t receive participation or management rights.
Another key issue is fair valuation—since it’s of interest to sellers to get high valuations and buyers to get low valuations, this section ensures that both sides have input and can defer to a third-party appraiser in case of dispute.
While everyone may have decision-making power, not everyone needs full access to the company coffers. This section designates a bank and give specific members financial authority for deposits, withdrawals, endorsements, payments, and more.
It’s worth noting that operating agreements are useful and recommended to predetermine how the business is run, but you’ll also find that most banks won’t allow you to start a business bank account without providing a signed and dated copy of your LLC operating agreement.
Members can vote to end the LLC through the process of dissolution. This article notes that upon dissolution, the LLC is responsible for paying debts before making any distributions to members.
This is the signature page. Members sign to acknowledge that they agree to abide by the terms of the agreement.
