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Single Member LLC Operating AgreementThe single member LLC is a popular business entity for small businesses. In this article, we take a look at what goes into a single member LLC operating agreement in California. The modern limited liability company, better known as an LLC, is an immensely popular business entity with small business owners. Why? It provides the protection of a corporation against debts with the tax advantageous positions of a partnership. On top of this, the entity requires much less administrative upkeep than a corporate entity. There are rules and regulations that must be followed in any business entity. These rules and regulations are reduced to writing and give the parties involved in the business express direction on how the company will be run, what will be allowed and what will not be allowed. They also designate voting structures, how distributions will be made and other sticky issues that can arise. These rules and regulations are called Bylaws in a corporation and an Operating Agreement in an LLC. The single member LLC is available as a business entity choice in a number of states of which California definitely is one. As the name suggests, the entity can be formed with a single owner. This owner is conveyed an ownership interesting in the company. In California, the owner is called a “member” and the ownership interest is known unsurprisingly as a “membership interest.” Now the problems start. The single member LLC is a peculiar beast because there is only one owner. As a result, how can you have meetings and votes? Is the annual meeting just you sitting in front of a mirror? For a long time, attorneys were forced to tell their clients to hire a member to sit on the board just so meetings could be held! It was ludicrous and made the single member LLC look like more than just a bit of a sham. This is no longer the case. The single member LLC operating agreement is designed to deal with these issues. The primary element of the agreement is the reorganization of the perspective. No longer is there an assumption of multiple parties in the ownership group. Instead, it is understood that there will be no need for committees, meetings and such. The operating agreement thus becomes much shorter and much simpler. It also prevents claims of the LLC being a sham by suing parties since the operating agreement actually applies to the single owner situation. The single member operating agreement is a god send for individuals opening a small business. If you are in need of such a document for your California LLC, do not hesitate to contact me. ******************* Nothing in this article is intended to create an attorney-client relationship. Please contact me if you have any questions. |
