LLC Operating Agreement Member Managed (14 Pages)

This document is an Operating Agreement of a Member-Managed LLC. Rather than appointing a Manager to act as a chief executive officer, the Members retain the management role for themselves. The Agreement provides for a majority rule by the Members (by interest in the LLC) to govern decision-making. Since all of the Members are involved in management, it becomes likely that all will be required to pay self-employment tax on their shares of income. In some cases, where the Members’ activities are limited, a manager-managed LLC is used to limit the self employment tax responsibilities to only the manager. If the Members are actively involved in the LLC’s business operations, self-employment tax will be required regardless of who is managing the business.

The Agreement includes restrictions on transfer of a Member’s interest, requiring a right of first refusal to the LLC and then to the other Members. If a Member is allowed to sell his or her interest to an outsider, a majority of the remaining Members must agree to allow the outsider to be admitted as a Member, notwithstanding the outsider’s entitlement to distributions, etc.

The Agreement contemplates that the Members will periodically revalue the LLC to indicate a Set Price which may be used to pay Members who die, withdraw, etc.

Author:
Steven G. Siegel is president of The Siegel Group, a Morristown, New Jersey - based national consulting firm specializing in tax consulting, estate planning and advising family business owners and entrepreneurs. Mr. Siegel holds a BS from Georgetown University, a JD from Harvard Law School and an LLM in Taxation from New York University.
He is the author of several books, including: Planning for An Aging Population; Business Entities: Start to Finish; Taxation of Divorce and Separation; Income Taxation of Estates and Trusts, Preparing the Audit-Proof Federal Estate Tax Return, Putting It Together: Planning Estates for $5 million and Less, Family Business Succession Planning, Business Acquisitions: Representing Buyers and Sellers in the Sale of a Business; Dynasty Trusts; Planning with Intentionally-Defective Grantor Trusts; The Federal Gift Tax: A Comprehensive Analysis; Charitable Remainder Trusts, Grantor Trust Planning: QPRTs, GRATs and SCINs, The Estate Planning Course, The Retirement Planning Course, Retirement Distributions: Estate and Tax Planning Strategies; The Estate Administration Course, Tax Strategies for Closely-Held Businesses, and Tort Litigation Settlements: Tax and Financial Issues.

Mr. Siegel has lectured extensively throughout the United States on tax, business and estate planning topics on behalf of numerous organizations, including National Law Foundation, AICPA, CCH, National Tax Institute, National Society of Accountants, and many others.  He has served as an adjunct professor of law at Seton Hall and Rutgers University law schools.
The Siegel Group provides consulting services to accountants, attorneys, financial planners and life insurance professionals to assist them with the tax, estate and business planning and compliance issues confronting their clients. Based in Morristown, New Jersey, the Group has provided services throughout the United States. The Siegel Group does not sell any products. It is an entirely fee-based organization. Contact the Siegel Group through its president, Steven G. Siegel, e-mail: [email protected].