What is a limited liability company Operating Agreement?
In Arizona, an Operating Agreement is the name given to an agreement between the members (owners) and managers of an Arizona limited liability company that sets forth their rights and obligations with respect to the company. It is the limited liability company equivalent to a partnership’s partnership agreement or a corporation’s stockholder’s agreement. An operating agreement governs relations: • among the members and the managers, and • between the members and managers and the limited liability company It may contain any provision that is not contrary to law and that relates to the business of the limited liability company, the conduct of its affairs, its rights, duties or powers and the rights, duties or powers of its members, managers, officers, employees or agents.
An Operating Agreement for a limited liability company can be oral or written. It is an agreement that can be entered by the members or, in the case of a manager-managed company; an operating agreement is entered between the managers and members. A written operating agreement is not mandatory in Arizona. But if any departures from Arizona’s limited liability company laws are desired, then the instrument is necessary. Standard issues covered in an operating agreement are startup capital, allocation of profits and management rights. Other matters which may be included are buy-out provisions, withdrawal of members, restrictions on transfers of ownership interests, non-compete clauses, and right of first refusal for existing members to acquire a selling member’s share. With every Arizona Operating Agreement which we prepare, the first three pages consist of standard, default Arizona law containing operating rules for an LLC. We can change these provisions if desired, but by reviewing what
