Colorado LLC Operating Agreement Template

In Colorado, 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?

A Colorado 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 Colorado LLC’s Operating Agreement Include?

The operating agreement should clearly define:

• Introduction:
  • Name of the LLC
  • Date of the agreement
• Formation of the LLC:
  • Statement confirming the formation of the LLC under the laws of Colorado
  • Mention of filing Articles of Organization and obtaining an EIN
• Members:
  • List of all members with their names, addresses, and ownership percentages
• Purpose of the LLC:
  • Description of the business activities the LLC will engage in
• Capital Contributions:
  • Details of the capital contributions each member will make to the LLC
• Profit and Loss Allocation:
  • Explanation of how profits and losses will be distributed among the members based on their ownership percentages
• Management and Decision Making:
  • Statement indicating whether the LLC will be manager-managed or member-managed
  • If manager-managed, specify the name(s) of the manager(s) and their authority
  • 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. 
• Meetings and Voting:
  • Information on the frequency of meetings and decision-making processes, including voting rights
• Distributions:
  • Guidelines for distributing profits among the members
• Books and Records:
  • Requirement for the LLC to maintain accurate financial records, including statements and tax records
  • Members’ right to access and inspect these records
• Transfer of Membership Interest:
  • Stipulation that the transfer of ownership interest requires unanimous written consent from the other members
• Dissolution:
  • Conditions under which the LLC may be dissolved, such as unanimous consent or legal provisions
• Governing Law and Jurisdiction:
  • Selection of the state of Colorado as the governing law for the agreement
  • Designation of state or federal courts in Colorado as the jurisdiction for resolving disputes
• Entire Agreement:
  • Confirmation that the Operating Agreement represents the entire agreement between the members and supersedes any previous agreements or understandings

An LLC operating agreement provides legal and financial recourse for a number of situations. If conflicts arise between LLC owners pertaining to any of the above issues, the operating agreement will provide clarity. 

The specific language of the operating agreement lays out exactly how such conflicts will be resolved, how the business is structured, the dynamics of operations, and more. 

Though Colorado has default rules on the books that address some of the issues that might arise between LLC members, your LLC operating agreement would override these default laws and give you greater control. It’s always advisable to consult with a legal professional to ensure compliance with Colorado laws and regulations.

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 Colorado, 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. 

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