Get an Operating Agreement for your new LLC

Why Do I Need a Series LLC Operating Agreement?

The LLC Operating Agreement is the core document that is referred to when issues concerning the LLC need to be resolved. The LLC Operating Agreement is the most important document for your LLC. The LLC Operating Agreement reflects the agreement among the members with respect to the affairs and management of the LLC essentially governing the relationship among the members of the LLC.

The standard LLC Operating Agreement will not meet the requirements for your Series LLC. A Series LLC Operating Agreement must specifically provide for the establishment of various series with differing assets, and separate liabilities. The Series LLC Operating Agreement should make clear that each series will own separate assets, have separate rights and powers as set forth in the Operating Agreement, as well as have separate investment or business purposes. In addition, the Series LLC Operating Agreement should establish a designated series of members, managers or LLC interests having separate rights, powers, or duties with respect to specified property or obligations of the LLC or profits and losses associated with specified property or obligations.

It is extremely important to have a properly prepared Operating Agreement to fit the needs of your Series LLC and meet the requirements of the relevant state’s Series LLC statute.

What to include in your Series LLC Operating Agreement so that the separateness of each LLC Series is respected

It is extremely important that a Series LLC have a well drafted Series LLC Operating Agreement. The Series LLC Operating Agreement should cover the following items to help maintain the separateness of each LLC Series:

Language stating the debts, liabilities, and obligations incurred, contracted for, or otherwise existing with respect to Series shall be enforceable against the assets of such Series only, and not against the assets of the Series LLC or other Series.
Language stating that each LLC series shall maintain separate and distinct records and the assets associated with any Series will be held as separate and distinct (directly or indirectly, including through a nominee or otherwise) and accounted for in such separate and distinct records separately from the other assets of the Series LLC, or any other Series
Each Series shall maintain a separate capital table identifying the capital contributions and ownership interests of the Series members.
Language stating who will manage the LLC and who, if any, will manage each Series LLC
Language addressing how management decisions for each Series LLC will be made.
Language that requires that each LLC Series file a fictitious business name statement in each county where it owns property.
Language stating that each LLC Series should have its own name and the filing should emphasize the ownership of that LLC Series. This is largely done to put any creditors on notice.
Language stating that all contracts, deeds, notes, etc. should be signed in the name of the LLC Series.
Language stating that a separate bank account should be maintained for each LLC Series.
Language stating that each Series may maintain a separate office.
Language stating that each Series may have different fiscal years.
Language stating that any loans between LLC Series should be properly documented.
Language that indicates that each LLC Series will be adequately capitalized.
Language stating that any transactions between LLC Series should be conducted in an arms’-length manner at fair market prices using appraisals.
Language stating that the distribution of available cash may be determined for each LLC Series separately, if appropriate.
Language stating that the allocation of profits and losses may be determined for each LLC Series separately, if appropriate.
Language stating the dissolution of one Series will not dissolve the LLC or the other Series.