Create Your LLC Operating Agreement


Virginia

This LLC Operating Agreement will be tailored to meet the laws of the Commonwealth of Virginia.
Common Questions

What is an LLC Operating Agreement?This Operating Agreement forms a binding agreement between the LLC’s owners. However, unlike the Articles of Organization used to create the LLC, the Operating Agreement does not need to be filed with the government.

Company Name

A company name is required to produce a valid document.

Common Questions

Why is a company name required?Without a company name, a valid LLC Operating Agreement cannot be formed. You can return to this step at any time if you don’t currently have a name to use.Professional LLC examplesA professional service is one which requires the practitioner to obtain a state license before their service can be offered to the public.

For example, dentists, lawyers, accountants, real estate agents, etc.
The name of the company cannot contain any of the following terms: corporation, incorporated, limited partnership, corp., inc., L.P., or LP.

The name of the company must be distinguishable from the name of any other organized entity (corporation, LLC, partnership, etc.), reserved name, on the records of the Secretary of State unless written authorization is obtained from that entity.
The name of the company must contain one of the following terms: limited company, limited liability company, L.C., L.C.C., LC, or LLC.

Company Purpose

Provide a statement of business purpose or statement that the purpose is for lawful activity.
e.g. The company’s purpose is to provide cleaning services.
Common Questions

(e.g. pharmacists, optometrists, physical therapist, physical therapist assistant, practitioners of the healing arts, nurse practitioners, practitioners of the behavior sciences, veterinarian, surgeon, dentist, architect, professional engineer, land surveyor, certified landscape architect, certified interior designer, public accountant, certified public accountant, attorney-at-law, insurance consultant, audiologists, speech pathologist, and clinical nurse specialists.)The professional service offered by the company must be the sole and specific purpose of the company. The following groups of professions are deemed to be offering the same professional service:
-architect, professional engineer, and land surveyor
-practitioners of the healing arts, nurse practitioners, optometrists, physical therapist, practitioner of behavioral sciences, and clinical nurse specialists

All members of the limited liability company must be a duly licensed professional with at least one member being duly licensed to practice in this commonwealth, except for architects, professional engineers, land surveyors, certified landscape architect, and certified interior designer. For these professions at least 2/3 of the members must be licensed to practice within this commonwealth.
What is meant by company purpose?A limited liability company may be organized for any (lawful) purpose.

Provide a brief description of what your business will do.

Company Address

Principal Office Address



Common Questions

Principal office definitionThe company’s principal office is the primary location of the business. The strongest indicator is where the management works or the books/records are kept.

In contrast, the registered office is the official address of the business used to register with the state. Its primary purpose is to ensure official communications can always be received during regular business hours.
The principal office MAILING address can be a street address or a post office box.

Members

members

Member Information




e.g. Member #1 will contribute $25,000 cash and provide bookkeeping service.

Common Questions

What is a member contribution?A member contribution is any kind of asset invested by a member in the company. It can include any combination of cash, property, or services.

New Members



Member Removal


e.g. 30 days

e.g. 6 months


e.g. 1 year

Meetings




e.g. 1 week

Voting


e.g. 51%

Profits/Losses


e.g. Distributions will be made every 3 months.

Common Questions

Distribution limitsState law often restricts the amount of company distributions in order to ensure the company remains solvent.

For example, some states have a distribution limit that prevents the company’s liabilities from exceeding assets after a distribution is made.

Management


Issues Requiring Agreement

Select any issues that require unanimous member agreement:

Common Questions

Benefits of requiring unanimous agreementRequiring unanimous consent is typically reserved for issues critical to the company. By requiring unanimous consent, the interests of all members are protected from majority decisions.

Financials


What else do you want to include in your annual report?
 Federal income tax report
Common Questions

Choosing your tax treatment categoryIt is important to note that how the LLC is taxed differs from the legal protections the LLC provides. For example, an LLC could be set up to be taxed like a sole proprietorship while still offering the protection of the LLC.

  • 1 Member LLC
    An LLC with 1 member will be treated as a disregarded entity by default. This means the LLC will be taxed as a sole proprietorship.

  • 2+ Member LLC
    An LLC with 2 or more members will be taxed as a partnership by default. If you choose to be taxed as a partnership, the income from your LLC passes through to the members and is declared as personal income. In this way income is only taxed once but the personal income tax rates paid by the members may be much higher than the applicable corporate rate.

Additionally, any LLC has the option to be taxed as a corporation. A disadvantage of a corporate tax model is double taxation - where you pay taxes on the income of the company and also on personal income that members receive as dividends. The advantage of the corporate tax model is that if most of the profits of the LLC can be retained in the company then double taxation can be minimized and overall tax paid at a lower corporate tax rate.

Your choice of taxation method should result in the lowest taxes. If you have any further questions you should contact a local tax lawyer or accountant.
What is a Tax Matters Partner?The Tax Matters Partner (Member) is the Member selected by the LLC to represent the company to the Internal Revenue Service and to make decisions on behalf of the LLC concerning taxation issues. The Internal Revenue Code requires that the company designate a Member for this purpose.

Authority


Additional Clauses

No additional clauses are needed for most agreements.

Do not use several names or words to refer to the same person or thing as it could cause confusion and ambiguity by appearing to introduce new or different people or items.

Certain words were capitalized and defined already in this Agreement. For example, a member is called the "Member". Use the same predefined terms in your additional clauses.

Do not use pronouns such as: they, us, we, our, you, or me. Pronouns may be ambiguous and can cause confusion. e.g.:
  • Wrong: If a Member's ownership interest becomes available for sale, we have a right to first purchase:
  • Right: If a Member's ownership interest becomes available for sale, the remaining Members have a right to first purchase.
Plain English means language that is simple and conveys ideas with the greatest possible clarity and avoids using legalese.

Legalistic StylePlain English
at the present time now
due to the fact that because; since
during such time aswhile
for the duration ofduring
inasmuch asbecause; since
in the event thatif
notwithstanding the fact that although; even if
prior to before
pursuant to under; in accordance with
subsequent toafter
that certaina
with reference toabout

Do not abbreviate words.

Use numerals, not words, to denote amounts.

Try not to repeat or contradict what has already been stated in the Operating Agreement.

Only put one paragraph per additional clause.

Order your additional clauses in a logical sequence.

Make sure your meaning is clear.

Spell-check your clause.

Execution Date



Common Questions

Execution date definitionExecution date is the date when the agreement will be signed by all Members and the agreement becomes effective.Witness signatures required?It is a good idea to have your signatures witnessed even though most documents and contracts do not require a witness for them to be legally valid.

Many banks and other institutions have their own internal policies about signing requirements, and may refuse to accept unwitnessed documents despite the fact the documents are legally valid. If you want to avoid bureaucratic hold-ups, it may be a good idea to have your document witnessed.
Choosing a witnessGenerally, the person you choose to witness a document should be a neutral third party with no financial or other interest in the agreement.

Ideally, a witness will observe the parties signing the document and sign the document as proof that they witnessed the parties signing. The witness is not usually required to know or understand the contents of the document.
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