What this form is for
This form establishes the ownership structure, profit distribution, management responsibilities, and operational rules for your California limited liability company. You'll complete this during LLC formation or when adding new members, and lenders require it to verify who controls the business and how decisions get made.
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
- Each member's capital contribution amount (cash, property, or services already contributed)
- Your LLC's federal Employer Identification Number (EIN) from the IRS
- California business licenses and any professional licenses if your industry requires them
Step-by-step
1. Complete the header section with your exact LLC legal name as filed with California, the formation date, and the principal business address.
2. Fill in Article I with each member's information including full name, mailing address, initial capital contribution amount, and exact ownership percentage. These percentages must total exactly 100 percent.
3. In Article II, specify the management structure. For member-managed LLCs, list which members have signing authority and whether decisions require unanimous consent or majority vote by percentage ownership.
4. Article III covers capital accounts. Record each member's starting capital balance and indicate whether additional contributions are required or voluntary. California requires you maintain accurate capital account records for tax purposes.
5. Complete Article IV on profit and loss allocation. Typically this matches ownership percentages, but you can specify different allocation formulas if members agree in writing.
6. Article V addresses distributions. Specify the timing (quarterly, annual, or as-decided) and whether distributions are mandatory or discretionary based on available cash.
7. Fill in Article VI transfer restrictions, including whether members need approval to sell their interests and any right-of-first-refusal provisions for remaining members.
8. Article VII covers dissolution triggers and wind-down procedures. California requires specific language about statutory dissolution events.
9. Have every member sign and date the signature page. California does not require notarization for operating agreements, but some banks prefer it.
10. Attach Schedule A listing all members with their current ownership percentages and capital account balances.
What lenders look for
- Banks scrutinize ownership percentages and signing authority because they need to know who can legally bind the LLC to loan agreements. Any member with 20 percent or greater ownership typically must personally guarantee commercial loans.
- Missing or outdated operating agreements are red flags. If your member roster or percentages changed since formation but the agreement was never amended, lenders question your business governance and may delay approval.
- California operating agreements should reference compliance with the California Revised Uniform Limited Liability Company Act. Generic templates from other states create legal ambiguity that underwriters dislike.