A Sample Operating Agreement for LLC Taxed as C Corporation
An LLC, or limited liability company, can be taxed as a C corporation instead of as a partnership or sole proprietorship. This makes the LLC subject to corporate tax rates and allows it to avoid the self-employment tax that is generally applied to sole proprietorships and partnerships. If you`re forming an LLC taxed as a C corporation, it`s important to have an operating agreement in place.
An operating agreement is a legal document that outlines the ownership and management structure of your LLC. It also lays out the rules and policies that govern the operation of your business. Here`s a sample operating agreement for an LLC taxed as a C corporation:
Article I. Formation
This section outlines the name of the LLC, the date of its formation, and the state in which it is registered.
Article II. Purpose
This section defines the purpose of the LLC, which is typically to engage in any lawful business activities.
Article III. Members
This section identifies the members of the LLC and their respective ownership percentages. It also outlines the voting rights of each member.
Article IV. Management
This section defines how the LLC will be managed. It can be managed by the members themselves, by a designated manager, or by a board of directors.
Article V. Meetings
This section outlines the procedures for calling and conducting meetings of the members or managers. It also defines the quorum requirements for voting.
Article VI. Distributions
This section outlines how profits and losses will be allocated among the members. It also defines the procedures for making distributions to the members.
Article VII. Taxes
This section outlines the tax treatment of the LLC, including its status as a C corporation and its potential tax liabilities.
Article VIII. Dissolution
This section outlines the procedures for dissolving the LLC, including the distribution of assets and the payment of debts.
Article IX. Amendments
This section defines the procedures for amending the operating agreement. Typically, amendments require the approval of a majority of the members.
Article X. Miscellaneous
This section includes any other provisions that are important to the LLC, such as indemnification clauses, non-compete agreements, and confidentiality agreements.
In summary, having a well-crafted operating agreement is crucial for any business, especially an LLC taxed as a C corporation. It not only helps clarify the ownership and management structure of the company but also avoids any misunderstandings or conflicts down the line. If you are unsure about how to draft an operating agreement, it`s advisable to consult with a lawyer or a tax professional.