What Is The LLC Operating Agreement In Arizona?
Within the state of Arizona, LLCs need to have their own written contract that circulates among the members. Hence, the LLC Operating Agreement plays a critical role in doing so. The contract typically includes all the important details of each member as well as management and ownership information about the LLC.
In essence, the Agreement will hold the very most basic information for your LLC in Arizona. However, it should be noted that the agreement will also contain a great deal of information from your Articles of Organization. This includes:
* The LLC name
* The effective date of the LLC
* The Statutory agent for Arizona
* The main purpose of your LLC
* The duration of the LLC
* Taxation methods as they apply to the LLC
Ownership Of The LLC
The Operating Agreement of the LLC will be one of the main places where all members will indicate how much of the LLC is owned. Upon doing so, they will then sign the Operating Agreement when these details are finalized. The amount being owned is often referred to as the ownership interest, the ownership units, or even the ownership percentage. However, the ownership percentage is usually expressed in a percentage such as 50%, 10%, or even 100%.
Initial Capital Contribution
After your LLC filings have been approved, there is one major thing that you need to do. Within the state of Arizona, LLC members are required to make their capital contributions. In some instances, these are also listed in the Operating Agreement of the LLC in Arizona.
However, the capital contribution just a deposit into the LLC account by members. The easiest way to do this is by having each member write a check that is made out to the LLC. In essence, this provides the start of record-keeping for the LLC. So, if you’re planning on using a template for your Operating Agreement, you’ll need to ensure that ownership percentages are in line with the initial contributions.
In the case where 2 members each own 50% of the LLC, their initial deposit should be the same. If it’s a different percentage, the deposit should properly reflect the percentage owned.
According to the template for the Operating Agreement, if members are planning to withdraw money from the account for profit distribution, this is better known as a capital distribution. This can also be done when members write checks from the account to themselves and can be done via wire transfer, digital bank transfer, or even other means as long as it is properly recorded for future uses.
If the LLC is owned by multiple members, then the distributions of profit should be done according to the percentage owned. However, capital distributions should not be mixed up for the term salary.
When it comes to the taxation methods of the LLC, this should be stated within the Operating Agreement of the LLC in Arizona.
The Operating Agreement for the LLC also holds the rules as they apply for members to vote. If the template is used, votes are mostly based on the ownership held by members. So, if you’re planning to vote based on majority rules, then someone with 50% or more ownership in the LLC can very well make the final decision.
If you’re the only member of the LLC, then you don’t need to worry because anything you decide goes. The Manager-Managed template for the Operating Agreement also indicates that voting must be done based on the percentages owned by the members of the LLC. Hence, members need to decide on a manager.
While the manager has the power to make critical decisions that favor the LLC, they can freely do so without the input of others. However, adding new members is still a task for member voting and the manager can either accept or decline.
How Does This Apply To Single Member LLC?
These agreements are not only designed for multi-member companies but can also be used by single members as well. So, if you’re the only member of the LLC, then you can easily determine the best practices for the LLC and it is advised that you have an Operating Agreement. In the case where you need to go to court, the Operating Agreement will sever as proof that your LLC is a single-member entity; this protects the assets that you have outside of the LLC.
Does the state require a copy of my Operating Agreement?
Simply put, the state does not need a copy of your LLC Operating Agreement. However, since it is an official document, it should be kept safe as a form of business record between the members of the LLC.
Who Needs A Copy Of My Operating Agreement?
The following entities may need a copy of your LLC Agreement:
* Lending companies and banks
* Title companies
* Lawyers, tax attorneys or professionals, accountants
* The court if you should find your way there
While there are not too many persons on the list, there are still several individuals or companies that may eventually require a copy of the Operating Agreement for the LLC.
Does the Operating Agreement need to be notarized?
No, it does not need to be.
As soon as the Operating Agreement is signed, it then becomes the document that binds all of you to the LLC.
Member Managed Operating Agreement In Arizona
Member managed LLCs are required to ensure that all members or owners can legally bind to agreements and contracts. Members of the LLC are also required to run the daily operations of the LLC. However, most persons prefer to have their LLC member-managed for multiple reasons.
Member-managed LLCs is one of the few entities where only a few trusted persons can be called managers. These managers tend to have the ability to bind both agreements and contracts. These managers of Arizona LLC are also responsible for taking care of daily operations. However, even though members can’t deal with the daily tasks, they are also not permitted to bind any agreement or contract.
Regular members in a manager-managed LLC play a more passive role within the company and they are also allowed to vote members in or out.
Customized Arizona LLC Operating Agreement
If you’re intending on customizing these agreements, then you should run it by the other members. However, it is recommended that your first hire an attorney to aid with these tasks. After you finalize the details of the agreement, each member should have their own copy and the business itself should have a copy for record purposes.