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New Mexico LLC Operating Agreement
Written by: Coralee Bechteler
Coralee is a business writer with experience in administrative services, education, and software testing.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on July 15, 2022
Updated on May 7, 2023
In New Mexico, 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 New Mexico 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 of New Mexico, but instead remains private. It’s advisable to hire an attorney to ensure your operating agreement is thorough and legally binding.
We’ve provided two operating agreement templates for your use. One is for a single-member LLC if you are the sole member, and the other is for a multi-member LLC if your LLC has two or more members. The documents are customizable and should be adjusted for New Mexico state and your business. These documents are for your internal use and are not filed with any governing body.
Download FREE Operating Agreement Templates
Disclaimer: These documents may need to be adjusted based on your circumstances and may not cover all situations. Your document also may need to be adjusted over time as your business evolves. These documents should not be considered legal advice. You should have your version of the document reviewed by your attorney to make sure that all necessary provisions are included to fit your business situation.
What Should Your New Mexico LLC’s Operating Agreement Include?
Here are some important elements that your operating agreement should include:
- Purpose: Clearly state the purpose of the LLC and the specific business activities it will engage in.
- Formation and Membership:
- Formation: Specify the date and method of the LLC’s formation.
- Members: List the names and addresses of all initial members.
- Member Interests: Outline the percentage of each member’s interests in the LLC.
- Capital Contributions and Equity:
- Initial Contributions: Specify the initial capital contributions made by each member.
- Additional Contributions: Outline any requirements for future capital contributions.
- Capital Accounts: Describe the accounting methods for maintaining capital accounts.
- Profit Allocations: Detail how profits and losses will be allocated among members, including any preferred returns or special allocations.
- Management and Decision-Making:
- Management Structure: Define the management structure of the LLC, such as member-managed or manager-managed.
- Management Roles: Outline the roles and responsibilities of each member in the management of the LLC.
- Voting Rights: Specify the voting rights of each member, including any voting thresholds or special voting requirements.
- Decision-Making Procedures: Establish the process for making important decisions, such as approval of new members, major contracts, or amendments to the operating agreement.
- 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:
- Meetings: Describe the rules and procedures for holding meetings, including frequency and notice requirements.
- Voting Procedures: Outline the voting procedures for decision-making in meetings, including the required majority or supermajority.
- Transfer of Membership Interests:
- Transfer Restrictions: Define the rules and restrictions regarding the transfer of membership interests, including rights of first refusal or approval by other members.
- Buyout Provisions: Specify the procedures and mechanisms for valuing and buying out a member’s interest in the event of a sale or transfer.
- Member Withdrawal, Dissociation, and Events of Termination:
- Voluntary Withdrawal: Establish the procedures and consequences for a member’s voluntary withdrawal from the LLC.
- Involuntary Dissociation: Address the events that may lead to a member’s involuntary dissociation, such as breaching the operating agreement or bankruptcy.
- Disability or Death: Outline the procedures and consequences when a member becomes disabled or dies.
- Dissolution and Winding Up:
- Dissolution: Specify the events that would trigger the dissolution of the LLC.
- Winding Up: Describe the procedures for winding up the LLC’s affairs, including the distribution of assets and addressing any liabilities.
- Books and Records:
- Record-Keeping: Establish the record-keeping requirements, including the maintenance of financial and business records.
- Member Access: Outline the rights of members to inspect and access the LLC’s books and records.
- Dispute Resolution:
- Mediation or Arbitration: Include provisions for resolving disputes among members through mandatory mediation or arbitration, to avoid costly litigation.
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 New Mexico 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.
Remember that this guide is intended to provide a comprehensive overview, and it’s important to consult with an attorney or legal professional to tailor the operating agreement to the specific needs and requirements of your New Mexico LLC and ensure compliance with state laws.
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.
Though not legally required in New Mexico, 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.
New Mexico LLC Operating Agreement
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