Wednesday, July 9, 2008

LLC Articles of Organization

I've noticed occasional confusion between two LLC forms: (a) Articles of Organization and (b) the Operating Agreement. Here are two sample LLC articles of organization from the states of California and Florida. The articles of organization is the document filed with the state (usually in the office of the secretary of state) that initiates the legal existence of your LLC (usually the same day the articles are filed). Almost every state has a pre-printed form for articles of organization. They ask for rather basic information: LLC name, registered agent, location of headquarters, location of business, the LLC managers, and some ask for the LLC members. For links to articles of organization forms for all 50 states (that have forms), click on your state from this page. In two or three states (Arizona being the most notable), those who form an LLC are required to publish this fact in a newspaper in general circulation in the state shortly after the LLC is formed. In other states, the filing of the articles of organization is all that is legally required to legally bring an LLC into being.

Then what is the purpose of the operating agreement? This is the contract between members recording agreement upon such issues as ownership, voting, admission of new members, division of profits and losses, et alia. It is analogous to a partnership agreement. In single members LLCs, it is not uncommon for there to be no operating agreement. Why have an operating agreement in a single member LLC? In most states, a list of members is only filed with the state annually. An LLC operating agreement definitely sets out who are the members and who has the authority to act on behalf of the LLC. It is standard procedure for banks and other lenders / suppliers doing new business with an LLC to ask for a copy of the operating agreement regardless of the number of members.

7 comments:

CB said...

I formed an LLC with 2 others. It didn't work out, but we didn't create our own Operating Agreement. Is there a "default" one operating agreement?

jjray said...

CB, sorry but you really haven't given enough information to comment in response. I answer selected questions regarding LLCs here: Ask a Lawyer. You might find a prior response there useful. This section of the web site has a search feature as well.

Anonymous said...

I'm incorporated in state of Delaware. I want to get business bank account and bank is asking for Articles of Organization, that is something i should fill out to incorporate but Delaware has only certificate of formation to incorporate and that is different of article of organization so how can i get article of organization should i make one and send it to may registered agent to sign it?

Anonymous said...

We formed a llc and things went badly because of my partner not pulling his weigth, just waiting on his millions. we do not have a opertation agreement between us and when we did make some money he had it sent to his house no the agreed company address. Can I protest this move.

Janelle said...

can my current business partner refuse to give me our LLC article of organization? he's saying since I'm not the one signed on the article he's not obliged giving it to me. I bought my 50% share of our LLC after his first partner left. I never signed the article of organization nor did I signed an operating agreement.I'm interested in selling my share due to relocation and now he's trying to force me to sell it to him in a very low price. where do I take it from here?

jjray said...

Janelle, I can't tell you how to "take it from here"; however, the articles of organization should be on file with the state. The other member's refusal to share the articles of organization with you is completely frivolous. The LLC Act of every state has a provision stating that the members have access to the books and records of the LLC. The articles of organization are "books and records". For example, this is a link to the section of the Florida LLC Act providing for open access to LLC records.

jjray said...

Operating agreement are not filed with the state. They are in the nature of a private contract. I wrote the template for this online operating agreement.
http://www.medlawplus.com/forminfo/llc.htm

However, whenever you buy a legal form online the only way you can gain assurance that it fits your intended purpose is to have the document reviewed by an attorney.