An operating agreement for a limited liability company in Kentucky is similar in scope and fashion to the bylaws of a corporation. It should include several key provisions to ensure clear governance and smooth operation. Although some of the following items may not be relevant to every LLC, these are some essential provisions to consider:
- Basic Information:
- Name of the LLC
- Principal place of business
- Purpose of the LLC
- Duration of the LLC
- Membership Information:
- Names and addresses of all members
- Initial capital contributions of each member
- Ownership percentages
- Management Structure:
- Whether the LLC is member-managed or manager-managed
- Roles and responsibilities of members and managers
- Procedures for appointing and removing managers
- Voting Rights and Decision-Making:
- Voting rights of members (e.g., one vote per member or based on ownership percentage)
- Procedures for making major decisions (e.g., majority vote, unanimous consent)
- Quorum requirements for meetings
- Profit and Loss Distribution:
- How profits and losses will be allocated among members
- Timing and method of distributions
- Membership Changes:
- Procedures for admitting new members
- Restrictions on transferring membership interests
- Buy-sell provisions for handling the departure, death, or incapacity of a member
- Meetings and Record-Keeping:
- Frequency and location of member meetings
- Notice requirements for meetings
- Record-keeping requirements and access to records
- Dispute Resolution:
- Methods for resolving disputes among members (e.g., mediation, arbitration)
- Governing law and jurisdiction
- Dissolution and Winding Up:
- Events that trigger dissolution of the LLC
- Procedures for winding up the LLC’s affairs
- Distribution of remaining assets after liabilities are settled
- Fiduciary Duties and Obligations:
- Duties of loyalty and care owed by members and managers
- Provisions for indemnification and limitation of liability
- Amendments:
- Procedures for amending the operating agreement
- Required approval for amendments (e.g., majority or unanimous consent)
- Miscellaneous Provisions:
- Confidentiality clauses
- Non-compete clauses
- Any other provisions specific to the LLC’s needs and goals
Including these provisions in an operating agreement helps ensure that the LLC operates smoothly, protects the interests of its members, and provides a clear framework for handling various situations that may arise. If you need help drafting an operating agreement for an LLC, contact Fred Simon Law at (502) 558-8576 for assistance.