What this form is for
This form establishes the ownership structure, management rules, and operating procedures for your member-managed LLC. You need this when forming a new LLC or formalizing an existing one, and lenders often require it to verify ownership percentages and authority to sign loan documents.
Before you start
- Each member's full legal name, mailing address, and Social Security number or EIN
- Agreed ownership percentages for all members (must total 100%)
- Your LLC's exact legal name as filed with the California Secretary of State and your California SOS file number
- The LLC's principal business address and your registered agent's California address
- Initial capital contributions from each member (cash amounts and/or property descriptions with fair market values)
Step-by-step
1. Complete the formation details section with your LLC name, formation date, California SOS file number, principal place of business, and registered agent information.
2. List all members in the membership section with full legal names, addresses, ownership percentages, and initial capital contribution amounts. Verify percentages add to exactly 100%.
3. Fill in the management structure section confirming this is member-managed (not manager-managed). In California, member-managed means all members can bind the LLC unless you specify voting thresholds.
4. Define voting rights and specify what percentage vote is required for major decisions like taking loans, admitting new members, or selling substantial assets. Most choose majority (over 50%) or unanimous.
5. Complete the capital contributions section documenting what each member contributed at formation and how future contributions will be handled.
6. Address the distributions section explaining how and when profits will be allocated (typically according to ownership percentages unless you specify otherwise).
7. Fill in transfer restrictions detailing whether members can sell their interests and any right-of-first-refusal provisions for other members.
8. Complete the California-specific tax classification section indicating whether you elect to be taxed as a partnership, S-corp, or C-corp. Note that California requires annual LLC fees based on gross receipts.
9. Have every member sign and date in the signature section. California does not require notarization for operating agreements, but some lenders prefer it.
What lenders look for
- Banks scrutinize the signature authority section to confirm who can legally obligate the LLC to debt. If loan applications show one signer but your operating agreement requires multiple approvals, your loan will stall.
- Lenders verify that capital contribution amounts match or exceed the loan request. If you are borrowing 100,000 but total member contributions are only 5,000, expect requests for additional collateral or personal guarantees.
- Avoid leaving the dispute resolution section blank. California courts favor arbitration clauses, and lenders view complete operating agreements as evidence of professional business management.