Limited Liability Company Operating Agreement

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LIMITED LIABILITY COMPANY AGREEMENT 

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LIMITED LIABILITY COMPANY AGREEMENT

 

 

THIS LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”) is entered into the   ____    day of        _________          , 20  __   , by and among                                                                                                                           . (the “Members”). In consideration of the mutual promises contained herein, the parties agree as follows:

ARTICLE 1: FORMATION OF THE COMPANY

1.01 Formation. The parties have formed a            _____                             limited liability company under the name                                                                                                    (the “LLC”) upon the terms and conditions provided in this Agreement, subject to the provisions of the            __________              Limited Liability Company Act, as amended (the “Act”).  If there is a conflict between the provisions of this Agreement and the Act and if permitted by law, the provisions of this Agreement shall control except that if the conflict is with respect to a provision that would cause the LLC to be taxed as an association for federal income tax purposes, then the provisions of the Act shall control. The parties intend that the LLC shall be taxed as a partnership.

1.02    Certificate of Formation.  The Members acting through one of its Members,

                                                                     , filed a Certificate of Formation (“Certificate”) for record in the office of the Secretary of State of the State of                                           (“Secretary of State”), on                             , thereby creating the LLC.

1.03 Business. The business of the LLC shall be (a) to invest in and develop real property

located in                     _____      County,                                       (“Property”); (b) in connection with the Property, to buy, take, lease, borrow, purchase or otherwise acquire, and to own, use, hold, sell, convey, exchange, improve, develop, lease, manage, dispose of, pledge or mortgage real or personal property, or any interests therein or any services associated therewith; (c) to form, invest in and hold stock or interests in corporations, partnerships or other entities through which the LLC elects to carry on its business; (d) to obtain financing and refinancing to accomplish the foregoing purposes; and (e) to do any and all other things necessary, desirable or incidental to the foregoing purposes.  The LLC may sell or otherwise dispose of all or substantially all of its assets, subject to any restrictions set out in this Agreement, and any such sale or disposition shall be considered to be within the scope of the LLC’s business.

1.04  Offices; Agent. The LLC’s place of business shall be                          

                                                                      or such other place in                                         as the Members may select from time to time. The LLC’s registered agent for service of process shall be     _____________  , and the registered office of the LLC in ____                                    is                                                                                .

1.05  Term. The LLC commenced on       __                                   , the date the original Certificate of Formation was filed in the Secretary of State’s office, and will continue until dissolved as provided for in Article 9.

1.06 Fiscal/Tax Year. The LLC’s fiscal and tax year shall end December 31.

ARTICLE 2: MEMBERS

2.01 Initial Members. The initial Members of the LLC are identified at Exhibit “A”.

2.02 New Members. Other persons may become members only as set out in this Article 2.02 as follows.  In the case of a person acquiring a LLC interest directly from the LLC, new members may be admitted only upon the consent of a majority of the Members.  In the case of an assignee of a LLC interest, new members may be admitted only upon compliance with Article 7.

ARTICLE 3: MANAGEMENT

3.01 Managers. The Members have delegated the responsibility for managing the LLC to Manager(s), subject to the limitations set out in Article 3.03. The Members shall elect the Manager(s) by majority vote and can remove the Manager(s) by majority vote. The Manager(s) shall have the authority to take all necessary and proper actions in order to conduct the business of the LLC, as set out in Article 1.03. Except for decisions concerning distributions, any one Manager (if more than one) can take any appropriate action on behalf of the LLC, such as signing checks, executing leases, and signing loan documents. In determining the timing and total amount of distributions to the Members under Article 4.06, however, the action of the Managers (if more than one) shall be based on a majority vote of the Managers, with or without a meeting.

3.02 Initial Managers. There shall be three initial Managers. The initial Managers are:

                                                                   ,                                                                  , and                                                       l. These Managers shall serve until any successors or successor are elected by the Members.

3.03 Prohibited Actions.  Notwithstanding anything above, the Manager(s) cannot take any of the following actions without the consent of a majority of the Members: (a) sell or encumber (but not lease) the LLC Property (as defined in Article 1.03), or (b) incur debt, expend funds, or otherwise obligate the LLC if the debt, expenditure, or other obligation exceeds $50,000.00.

3.04 Compensation.  The Manager(s) may receive a reasonable compensation for their services as agreed to by a majority of the Members.

ARTICLE 4: CONTRIBUTIONS PROFITS & LOSSES. AND DISTRIBUTIONS

4.01 Percentage Interests. Each Member’s share of contributions, profits and losses, and distributions shall be based on the Member’s percentage interest in the LLC. The percentage interest shall be based on the amount of cash or other property that the Member has contributed to the LLC.

4.02 Initial Contributions.  The initial contributions of the Members are as set out in Exhibit “A”. The Members’ initial percentage interests in the LLC are based on the initial contributions and are also set out in Exhibit “A”.

4.03 Additional Contributions.  Additional contributions will not be made except as provided in this Article 4.03.  The Managers may call on the Members to make additional cash contributions as may be necessary to carry on the LLC’s business.  The amount of any additional cash contribution shall be based on the Member’s then existing percentage interest.  To the extent a Member is unable to meet a cash call, the other Members can contribute the unmet call on a pro rata basis based on the Members’ percentage interests at that time, and the percentage interest of each Member will be adjusted accordingly.

4.04 Record of Contributions/Percentage Interests.  Writings setting out the amount of cash and a description and statement of the value of other property contributed by each Member shall be kept at the LLC’s place of business.  Exhibit “A” to this Agreement, which sets out the Members’ initial contributions and percentage interests in the LLC, shall be updated to accurately reflect any subsequent contributions of cash or other property by the Members, and shall also be updated to accurately reflect any assignments or other changes in ownership of LLC interests.

4.05 Profits and Losses. The profits and losses and all other tax attributes of the LLC shall be allocated among the Members on the basis of the Members’ percentage interests in the LLC.

4.06 Distributions. Distributions of cash or other assets of the LLC (other than in dissolution of the LLC) shall be made in the total amounts and at the times as determined by a majority of the Managers.  Any such distributions shall be allocated among the Members on the basis of the Members’ percentage interests in the LLC.

4.07 Change in Interests.  If during any year there is a change in a Member’s

percentage interest, the Member’s share of profits and losses and distributions in that year shall be determined under a method which takes into account the varying interests during the year.

ARTICLE 5: VOTING; CONSENT TO ACTION

5.01 Voting by Members. Each Member shall be entitled to vote on any matter entitled to be voted on by the Members.  Voting shall be based on the percentage interest owned by each Member.

5.02 Majority Required. Any action that requires the vote or consent of the Members may be taken upon a majority vote of the Members based on the Members’ percentage interests unless unanimous consent is required by this Agreement.  The action may be taken with or without a meeting.

5.03 Written Consent. Any vote or consent required by the Members, or a majority thereof, shall be evidenced by a writing signed by each consenting Member, with or without a meeting.

5.04 Meetings. Meetings of the Members shall be held as determined by the Managers or as may be called by a majority of the Members.

ARTICLE 6: DISSOCIATION OF MEMBERS

6.01 Termination of Membership.  A Member ceases to be a Member of the LLC upon the occurrence of one or more of the following events:

(a) The Member withdraws by giving 30 days’ written notice to the LLC.  A withdrawal by a Member will not be considered a breach of the Certificate of Formation or this Agreement

(b) The Member ceases to be a Member due to an assignment of his entire (but not partial) interest in the LLC as provided in Article 7.

(c) The Member dies or there is an entry of an order by a court of competent jurisdiction adjudicating the Member incompetent to manage his person or  his estate.

(d) In the case of an estate that is a Member, the distribution by the fiduciary of the estate’s entire interest in the LLC.

(e) Unless the action is consented to by a majority of the other Members, the Member (1) makes an assignment for the benefit of creditors; (2) files a voluntary petition in bankruptcy; (3) is adjudicated a bankrupt or insolvent; (4) files a petition or answer seeking for himself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law or regulation; (5) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against him in any proceeding of the nature described in this paragraph; (6) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of the Member or of all or any substantial part of his properties; or (7) if any creditor permitted by law to do so should commence foreclosure or take any other action to seize or sell any Member’s interest in the LLC.

(f) Unless the action is consented to by a majority of the other Members, if one hundred twenty (120) days after the commencement of any proceeding against the Member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation, the proceeding has not been dismissed, or if within ninety (90) days after the appointment without his consent or acquiescence of a trustee, receiver, or liquidator of the Member or of all or any substantial part of his properties, the appointment is not vacated or stayed or within ninety (90) days after the expiration of any stay, the appointment is not vacated.

(g) Any of the events provided in applicable code provisions that are not inconsistent with the dissociation events identified above.

6.02 Effect of Dissociation. Any dissociated Member shall not be entitled to receive the fair value of his LLC interest solely by virtue of his dissociation. A dissociated Member that still owns an interest in the LLC shall be entitled to continue to receive such profits and losses, to receive such distribution or distributions, and to receive such allocations of income, gain, loss, deduction, credit or similar items to which he would have been entitled if still a Member.  For all other purposes, a dissociated Member shall no longer be considered a Member and shall have no rights of a Member.  (See Article 8 for dissociated Member’s obligation to sell upon the occurrence of the dissociation event.)

ARTICLE 7: RESTRICTIONS ON TRANSFERABILITY OF LLC INTEREST; SET PRICE FOR LLC INTEREST

7.01 LLC Interest. The LLC interest is personal property.  A Member has no interest in property owned by the LLC.

7.02 Encumbrance. A Member can encumber his LLC interest by a security interest or other form of collateral only with the consent of a majority of the other Members.  Such consent shall not be withheld if the proceeds of the encumbrance are contributed to the LLC to respond to a cash call of the LLC under Article 4.03.

7.03 Assignment. A Member can assign his LLC interest only as follows:

(a) If a Member desires to assign his interest, in whole or in part, he must first offer the interest to the LLC which shall have the option to buy the offered interest at the then existing Set Price as provided in Article 7.04.  The assigning Member shall give written notice to the LLC of his desire to sell all or part of his interest.  The LLC shall have thirty (30) days from the receipt of the assigning Member’s notice to give the assigning Member written notice of its intention to buy all, some, or none of the offered interest.  The decision to buy shall be made by a majority of the Members.  Closing on the sale shall occur within sixty (60) days from the date that the LLC gives written notice of its intention to buy.  The purchase price shall be paid in cash at closing unless the total purchase price is in excess of $100,000.00 in which event the purchase price shall be paid in twelve (12) equal quarterly installments beginning with the date of closing.  The installment amounts shall be computed by applying the following interest factor to the principal amount: interest compounded quarterly at the Quarterly Federal Short_Term Rate existing at closing under the Applicable Federal Rates used for purposes of Internal Revenue Code § 1 274(d), or any successor provision.

(b) To the extent the LLC does not buy the offered interest of the assigning Member, the non_assigning Members shall have the option to buy the offered interest at the Set Price on a pro rata basis based on the Members’ percentage interests at that time.  If any non_assigning Member does not desire to buy up to his proportional part, the other non_assigning Members can buy the remaining interest on the same pro rata basis.  The non_assigning Members shall have fifteen (15) days from the date the LLC gives its written notice to the assigning Member under Article 7.03(a) to give the assigning Member notice in writing of their intention to buy all, some, or none of the offered interest.  Closing on the sales shall occur within sixty (60) days from the date that the nonassigning Members give written notice of their intention to buy.  The purchase price from each purchasing Member shall be paid in cash at closing.

(c) To the extent the LLC or non_assigning Members do not buy the offered interest, the assigning Member can then assign the interest to a non_member.  The assigning Member must close on the assignment within ninety (90) days of the date that he gave notice to the LLC under Article 7.03(a).  If he does not close by that time, he must again give the notice and options to the LLC and the non_assigning Members as set out in Article 7.03(a) and (b) before he assigns the interest.

(d) A non_member assignee cannot exercise any rights of a Member unless a majority of the non_selling Members consent to him becoming a Member.  The non_member assignee will be entitled, however, to share in such profits and losses, to receive such distributions, and to receive such allocation of income, gain, loss, deduction, credit or similar items to which the assignor would be entitled, to the extent of the interest assigned, and will be subject to calls for contributions under Article 4.03.  The assignor by accepting the assignment agrees to be subject to all the terms of this Agreement as if he were a Member.

7.04 Set Price.  The Set Price for purposes of this Article and Article 8 shall be a price fixed by consent of a majority of the Members.  The Set Price shall be memorialized and made a part of the LLC records.  The initial Set Price for each Member’s interest is the amount of the Member’s contribution(s) to the LLC as set out in Exhibit “A” as updated under Article 4.04.  Any future changes in the Set Price by the Members shall be based upon net equity in the assets of the LLC (fair market value of the assets less outstanding indebtedness), considering the most recent appraisal obtained by the LLC for its assets, as may be adjusted by the Members in their discretion.  The initial Set Price shall be adjusted no later than   ____________     . This basis for determining the Set Price shall remain in effect until changed by consent of a majority of the Members.  The Members will consider revising the basis for determining the Set Price at least annually.

ARTICLE 8: OBLIGATION TO SELL ON A DISSOCIATION EVENT CONCERNING A MEMBER

8.01 Dissociation. Except as provided in this Article 8.02, upon the occurrence of a dissociation event with respect to a Member under Article 6, the LLC and the remaining Members shall have the option to purchase the dissociated Member’s interest at the Set Price in the same manner as provided in Article 7 as if the dissociated Member had notified the LLC of his desire to assign all of his LLC interest.  The date the LLC received the notice under Article 7.03(a) and (b) triggering the options shall be deemed to be the date that the LLC receives actual notice of the dissociation event.  Notwithstanding anything in this Article 8.02, the dissociation events set out in Article 6.01(c) or (d) shall not trigger the options to purchase set out in this Article 8.02.

            ARTICLE 9: DISSOLUTION

9.01 Termination of LLC. The LLC will be dissolved and its affairs must be wound up only upon the written consent of a majority of the Members.

9.02 Final Distributions. Upon the winding up of the LLC, the assets must be distributed as follows: (a) to the LLC creditors; (b) to Members in satisfaction of liabilities for distributions; and (c) to Members first for the return of their contributions and secondly respecting their LLC interest, in the proportions in which the Members share in profits and losses.

ARTICLE 10: TAX MATTERS

10.01 Capital Accounts. Capital accounts shall be maintained consistent with Internal Revenue Code § 704 and the regulations thereunder.

10.02 Tax Matters Partner.  The Members hereby designate

                                                                     as the “tax matters partner” for purposes of representing the LLC before the Internal Revenue Service if necessary.

10.03 Partnership Election.  The Members elect that the LLC be taxed as a partnership and not as an association taxable as a corporation.

ARTICLE 11: RECORDS AND INFORMATION

 

  __    11.01 Records and Inspection. The LLC shall maintain at its place of business the Certificate of Formation, any amendments thereto, this Agreement, and all other LLC records required to be kept by the Act, and the same shall be subject to inspection and copying at the reasonable request, and the expense, of any Member.

11.02 Obtaining Additional Information. Subject to reasonable standards, each Member may obtain from the LLC from time to time upon reasonable demand for any purpose reasonably related to the Member’s interest as a Member in the LLC: (1) information regarding the state of the business and financial condition of the LLC; (2) promptly after becoming available, a copy of the LLC’s federal, state, and local income tax returns for each year; and (3) other information regarding the affairs of the LLC as is just and reasonable.

ARTICLE 12: MISCELLANEOUS PROVISIONS

 

    __  12.01 Amendment.  Except as otherwise provided in this Agreement, any amendment to this Agreement may be proposed by a Member.  Unless waived by the Members, the proposing Member shall submit to the Members any such proposed amendment together with an opinion of counsel as to the legality of such amendment and the recommendation of the Member as to its adoption.  A proposed amendment shall become effective at such time as it has been approved in writing by all of the Members.  This Agreement may not be amended nor may any rights hereunder be waived except by an instrument in writing signed by the party sought to be charged with such amendment or waiver, except as otherwise provided in this Agreement.

12.02 Applicable Law. To the extent permitted by law, this Agreement shall be construed

in accordance with and governed by the laws of the State of              ____                             .

12.03 Pronouns, Etc. References to a Member or Manager, including by use of a pronoun, shall be deemed to include masculine, feminine, singular, plural, individuals, partnerships or corporations where applicable.

12.04 Counterparts. This instrument may be executed in any number of counterparts each of which shall be considered an original.

12.05 Specific Performance. Each Member agrees with the other Members that the other Members would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that monetary damages would not provide an adequate remedy in such event. Accordingly, it is agreed that, in addition to any other remedy to which the nonbreaching Members may be entitled, at law or in equity, the nonbreaching Members shall be entitled to injunctive relief to prevent breaches of this Agreement and, specifically, to enforce the terms and provisions of this Agreement in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction thereof.

12.06 Further Action.  Each Member, upon the request of the LLC, agrees to perform all further acts and to execute, acknowledge and deliver any documents which may be necessary, appropriate, or desirable to carry out the provisions of this Agreement.

12.07 Method of Notices.  All written notices required or permitted by this Agreement shall be hand delivered or sent by registered or certified mail, postage prepaid, addressed to the LLC at its place of business or to a Member as set forth on the Member’s signature page of this Agreement (except that any Member may from time to time give notice changing his address for that purpose), and shall be effective when personally delivered or, if mailed, on the date set forth on the receipt of registered or certified mail.

12.8 Computation of Time.  In computing any period of time under this Agreement, the day of the act, event or default from which the designated period of time begins to run shall not be included.  The last day of the period so computed shall be included, unless it is a Saturday, Sunday or legal holiday, in which event the period shall run until the end of the next day which is not a Saturday, Sunday or legal holiday.

WHEREFORE, the parties have executed this Agreement on the dates stated below their signatures on the attached signature page for each individual party.

EXHIBIT “A”

   __   Initial                        Percentage Interest

   __    Member           Contribution     in LLC

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Inside Limited Liability Company Operating Agreement