What this form is for
This form establishes the internal governance rules and ownership structure for your California limited liability company. Use it when forming a new LLC or formalizing an existing one, especially before applying for business credit or loans where lenders require proof of member authority and profit-sharing arrangements.
Before you start
- Articles of Organization filing number and date from the California Secretary of State
- Full legal names, addresses, and ownership percentages for all LLC members
- Federal Employer Identification Number (EIN) from the IRS
- Decision on profit and loss distribution method (pro-rata by ownership or another formula)
- Names of members authorized to sign contracts and bind the LLC financially
Step-by-step
1. Complete the header section with your LLC's exact legal name as filed with California, formation date, and principal business address.
2. Fill in Article 1 by listing each member's full name, mailing address, initial capital contribution amount, and ownership percentage. Verify percentages total exactly 100 percent.
3. In Article 2, specify management structure. For member-managed (most common for small businesses), list which members have signing authority for contracts, loans, and bank accounts.
4. Complete Article 3 covering capital contributions. Document what each member contributed (cash, property, services) and the agreed dollar value. California requires accurate valuation for tax purposes.
5. Address Article 4 on distributions and allocations. State whether profits and losses follow ownership percentages or use a different formula. Include timing of distributions if predetermined.
6. Fill out Article 5 regarding meetings and voting. Specify percentage needed for major decisions (loan applications typically require notation here). California default is majority, but you can require supermajority.
7. Complete transfer restrictions in Article 6. Most lenders prefer right-of-first-refusal clauses that prevent members from selling interests without LLC approval.
8. Review California-specific provisions in Article 7, including requirements for annual statements to members and California Franchise Tax Board filings.
9. Have all members sign and date the signature page. California does not require notarization for operating agreements, but some lenders prefer it.
10. Attach schedules listing initial capital contributions with supporting documentation (bank statements, property appraisals).
What lenders look for
- Banks scrutinize the signing authority section closely. Ensure the person applying for credit is explicitly authorized to incur debt on behalf of the LLC. Ambiguity here delays loan approval.
- Lenders flag operating agreements without clear capital contribution records. Document each member's investment with bank statements or receipts, particularly for California Franchise Tax purposes.
- Avoid generic templates that omit California-required provisions about member access to financial records. Complete, state-compliant agreements signal operational maturity and reduce underwriting friction.