November 3, 2007 11:25 AM EDT
Keep in mind the way that you do taxes will change, once you add to the LLC.
Here is an LLC checklist,we made up:
CHECKLIST FOR DRAFTING LLC OPERATING AGREEMENTS
- Under what state law will the LLC be formed?
- What is the name of the LLC?
- Has the name been checked with the Secretary of State?
- What is the purpose of the LLC?
- What is the term of the LLC?
- Is the LLC member managed or manager managed?
- Who is the manager if manager managed?
- Who is the agent for service of process?
- Is the manager a limited liability entity? (You want to avoid an individual being the manager for liability reasons.)
- What is the initial capital contribution of the managing member?
- What is the initial capital contribution of the other members?
- Will members be required to make additional contributions if necessary?
- What happens if a member fails to make a required capital contribution?
- What approvals are required to add new members?
- Are members allowed to withdraw their capital contributions? If so, under what circumstances?
- Is a member entitled to interest on his or her capital contributions?
- Does any member have any priority on distributions over any other members?
- How are distributions to be divided among the members?
- How are tax allocations made?
- When are distributions to be made?
- Will there be special distributions required to be made to at least pay for tax on each member`s pro rate income from the LLC?
MANAGEMENT OF THE LLC
- How broad are the management powers of the manager?
- What limitations are there on the powers of the manager?
- If there is more than one manager, what actions require the consent of all of the managers?
- Is the manager obligated to devote any particular amount of time to LLC matters?
- Is the manager and its affiliates free to engage in other activities?
- Is there any limit on the manager`s right to form other entities?
- Will the manager be broadly protected from liability?
- Will the manager be indemnified for acts taken on behalf of the LLC?
- Under what circumstances might the manager be liable to the members for acts or omissions?
- What specific duties does the manager have?
- Will the LLC have officers?
COMPENSATION TO THE MANAGER
- What fees is the manager entitled to?
- What reimbursements is the manager entitled to?
- Is the manager entitled to incentive compensation or a carried interest?
BOOKS, RECORDS, ACCOUNTS AND REPORTS
- What books and records are to be maintained by the LLC?
- What access rights will the members have to books and records?
- What reports will the members be required to receive?
- Who will be the tax matters partner?
- What voting rights will the members have?
- What major actions can the manager take without other members` approval?
- Where will meetings be held?
- How can meetings be called?
- What notices for meetings must be given?
- What quorum is necessary for meetings?
- Can actions be taken by written consent of the members?
ASSIGNMENT OF INTERESTS
- Do the members have the right to assign their interest in distributions?
- What rights does an assignee of a member`s interest get?
- In what situations will assignment be prohibited?
- What are the procedures for substitution of members?
- What happens on the death, incompetency or bankruptcy of a member?
- Is there a right of first offer or first refusal on transfers of interests?
TERMINATION OF A MANAGER
- Under what circumstances can the manager voluntarily withdraw as the manager of the LLC?
- What are the events that will result in the manager ceasing to be the manager of the LLC?
- Under what circumstances can the members remove the manager?
- What happens to the manager`s interest when it has ceased to be the manager?
DISSOLUTION AND TERMINATION OF THE LLC
- Under what circumstances will the LLC be dissolved?
- Under what circumstances can the LLC continue notwithstanding a technical dissolution?
- How are distributions to be made on liquidation of the LLC?
- Which amendments to the Operating Agreement can be effected solely by the manager, without the consent of the members?
- How are other amendments to the Operating Agreement to be effected?
- When will amendments to the LLC`s Certificate of Organization have to be made?
- What power of attorney is granted to the manager?
- Is there an arbitration clause that governs any disputes among the members?
- Are the members liable in circumstances other than for their capital contributions?
- What competitive activities may the members engage in?
I hope this helps.
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