Operating Agreement
(Single Member, Member-Managed) (CA LLC)


Summary

This Operating Agreement (Single Member, Member-Managed) (CA LLC) template is for use by a California limited liability company (LLC) that is member-managed with a single member. Since the company has only one member, issues relating to voting and transfers are less prominent in this agreement than clauses typically found in the operating agreement for limited liability companies with multiple members. This template includes practical guidance, drafting notes, and an optional clause. California does not require an LLC to have a written operating agreement. Note, however, that the basic approach of the California Revised Uniform Limited Liability Company Act is to respect the contractual arrangement among members for an LLC's operation. See Cal Corp Code §§ 17701.07 and 17701.10. The Act itself provides a set of default rules where the operating agreement is silent. Great latitude is generally afforded to limited liability companies in their internal management and economic matters. A written operating agreement is therefore strongly recommended to memorialize an LLC's management, financial, and other arrangements. Careful consideration should be given to the particular needs of a given enterprise. Counsel is advised to consult with the LLC's tax and/or accounting service providers to ensure the tax and accounting provisions are appropriate for the LLC. This template has been updated as needed to reflect the revised Internal Revenue Code provisions governing IRS tax audits of partnerships and other entities taxed as partnerships; these rules were passed in the Bipartisan Budget Act of 2015 and took effect on January 1, 2018. For further information, see Partnership Tax Audit Rules. See also Partnership and Other Pass-Through Entities Taxation and Partnership Tax Audit Clauses (Bipartisan Budget Act of 2015). For a detailed checklist presenting key issues for consideration when drafting an operating agreement for a California LLC, see Operating Agreement Checklist (CA LLC). For more general information relating to LLCs under the laws of California, see Formation and Qualification (CA LLC).