Multi-member LLC operating agreement

4 Replies

Haven't found many materials that cover key clauses in multi-member LLC operating agreements. For equal % members, how do you determine contributions, distributions and exits? For instance if a member decides to take some cash out of the LLC down the road but the others don't how do you determine the new equity splits? TIA!!

@George Liu

An attorney should draft the operating agreement for you.  Although non-prorata distributions are permissible with a partnership, contributions and distributions should be done in harmony with the operating agreement, which is what all members ultimately agree to.

@Christopher Smith

If you want it to be respected as a loan by the Service and the courts, it needs to be bonafide.  That is -- fair market interest rate, executed loan agreement and repayment schedule.  Just making a journal entry and calling it a loan doesn't make it a loan.

Originally posted by @Eamonn McElroy :

@Christopher Smith

If you want it to be respected as a loan by the Service and the courts, it needs to be bonafide.  That is -- fair market interest rate, executed loan agreement and repayment schedule.  Just making a journal entry and calling it a loan doesn't make it a loan.

Correct: That's why I indicated to treat it as a loan not simply call it a loan