Llc Operating Agreement Clauses

Summary

Creating an LLC operating agreement involves defining management structure, voting rights, profit distribution, and buyout provisions. For equal equity among three members, ensure equal capital contributions. If contributions differ, consider adjusting equity, offering preferred returns, or treating excess as a loan. Ensure voting rights align with equity distribution.

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Member capital contribution and equity. The members what the equity to be */3rd. Note there are * members forming the LLC. And hence the capital contribution must be equal too.
It sounds like you're forming an LLC with equal equity distribution among three members. To ensure a fair and balanced operating agreement, consider addressing these points:
- Capital Contribution: Clearly define each member's financial contribution.
- Equity Allocation: State that each member holds */3rd equity.
- Profit and Loss Sharing: Align with the equity distribution.
- Decision Making: Ensure equal voting rights.
Do you need guidance on specific clauses or potential legal issues related to this setup?
But what happens when one member's contribution is higher than the others
If one member's contribution is higher than the others, you might consider adjusting the equity distribution or implementing additional clauses to address the disparity:
- Adjust Equity: Modify equity shares to reflect the higher contribution.
- Preferred Returns: Offer preferential returns to the contributing member.
- Loan Agreement: Treat excess contribution as a loan with interest.
- Voting Rights: Adjust voting rights if necessary.
Do any of these options appeal to you?
Help me draft a clause
Case Rating: *
Here's a draft clause you can consider for your LLC operating agreement:
Capital Contribution and Equity Clause:
Each member shall contribute capital equally, and hold one-third equity in the LLC. If a member contributes more, the excess may be treated as a loan with agreed interest, preferred returns, or adjusted equity shares subject to mutual agreement. Voting rights will remain equal unless otherwise agreed.