Series LLC Basics: The Operating Agreement

In any LLC, Series or regular, the Operating Agreement is crucial. The Operating Agreement defines how your Series LLC is to be structured and operated. This document sets out the following key points (in addition to other administrative functions):

  • The name(s) of the initial Managers and Members of the Series LLC
  • The names of each Cell being established at the time the Series LLC is formed (there’s usually at least one, but not always).
  • The names of the initial Managers and Members for each Cell being established
  • How new Cells are created or dissolved
  • How the Cells relate to the Series LLC, as true subsidiaries or independent entities
  • How the Series LLC Managers are appointed or removed
  • How Cell Managers are appointed or removed
  • The level of control the Series LLC has over the Cells
  • The duties and responsibilities of the Series LLC Managers and the Cell Managers
  • Restrictions on ownership and transfer of Series LLC ownership
  • How and in what circumstances Members may be bought out by the Series LLC, or other Members
  • How the profits and losses are to be distributed amongst the Members
  • What happens in the event of bankruptcy in the Series LLC or any of the Cells
  • How disputes between Series LLC Managers, Members or both are resolved
  • The level of control Series LLC or Cell Managers have over day-to-day operations of the Series LLC or the Cells, and when management actions and decisions require pre-approval by the Members
  • How the Operating Agreement may be changed
  • When the Series LLC may ask Members for additional cash or property contributions, and what happens when Members cannot or refuse to pay
  • How a Cell can separate from the Series LLC and convert itself into a standard LLC

There are many variables when you’re structuring a business. That’s why it’s hard to go through a quick-service website. Unless you talk to someone who’s got some knowledge and experience on both the tax and the legal side, it’s hard to know what you don’t know. And that can leave you vulnerable.

Got questions? Contact us! We’re here for you.

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