Arizona LLC Operating Agreement Template

In Arizona, your limited liability company (LLC) is not required to have an operating agreement in place. But it’s highly recommended, as an effective operating agreement can help avoid disputes and lawsuits that could threaten the stability of your LLC. 

What is an LLC Operating Agreement?

An Arizona LLC operating agreement is an important legal document that details who owns the business and provides essential information pertaining to member duties. An LLC operating agreement establishes the financial relationship between members and the basics of the working relationships between those members and the managers who oversee daily operations. 

The operating agreement is not filed with the state, but instead remains private. It’s advisable to hire an attorney to ensure your operating agreement is thorough and legally binding.

What Should Your Arizona LLC’s Operating Agreement Include?

Here are some important aspects to consider including in your Arizona LLC’s Operating Agreement:

1. Basic Information:

• The LLC’s name and principal place of business
• The purpose of the LLC
• The duration of the LLC, if not perpetual

2. Ownership Structure:

• The names and addresses of the members
• Ownership percentages for each member
• Initial capital contributions made by each member
• How future capital contributions, if any, will be made

3. Management Structure:

• Determine whether the LLC will be member-managed or manager-managed
• Define the roles and responsibilities of members and/or managers
• Outline the decision-making process and voting rights
• If the LLC has a board of directors, the operating agreement will also include the role and responsibilities of the board members and how they are compensated. 

4. Profit and Loss Allocation:

• Define how profits and losses will be allocated among members
• Specify the method and frequency of distributing profits

5. Membership Changes:

• Detail the procedures for adding or removing members
• Define the process for transferring membership interests
• Address the right of first refusal, if applicable

6. Dissolution and Winding Up:

• Outline the conditions under which the LLC may be dissolved
• Specify the process for winding up the LLC’s affairs and distributing assets

7. Record-keeping and Reporting:

• Describe the LLC’s record-keeping and reporting requirements
• Specify the location where records will be kept

8. Dispute Resolution:

• Include a provision for dispute resolution, such as mediation or arbitration

9. Indemnification and Liability:

• Address the limitations of liability for members and managers
• Include indemnification provisions to protect members and managers from certain liabilities

10. Amendments and Governing Law:

• Detail the process for amending the Operating Agreement
• Specify that the agreement is governed by Arizona law

11. Miscellaneous Provisions:

• Include any other relevant provisions, such as confidentiality or non-compete clauses

It is highly recommended to consult with an attorney or legal professional when drafting your Arizona LLC’s Operating Agreement to ensure it complies with applicable laws and addresses the unique needs of your business.

How Much Does an Operating Agreement Cost? 

Creating an operating agreement is free if you just draw it up yourself. Alternatively, you can pay for guidance from an online business advisory like ZenBusiness.

This is an extremely important document, so it’s recommended that you hire a professional service or law firm. If you choose to use an attorney to help you create this document, the price will be around $500 for a single-member LLC and $2,500 for a multi-member LLC. 

Who Needs my LLC Operating Agreement?

One of the key reasons to have an operating agreement in place is that it makes your LLC more appealing to financial backers. Banks are likely to request to see your operating agreement when you apply for a loan. If you seek funding from investors, they will also want to see your operating agreement. 

Conclusion 

Though not legally required in Arizona, an operating agreement is a crucial document for LLC operations, ensuring your company is able to access adequate financing and settle any disputes. Keep in mind, you do not need to file your operating agreement with any state body. You simply need to take certain steps to ensure it’s legally binding and keep it in your records.

Comments