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LLC Formation & Operating Agreements in the United States

The agreement does the work

LLC Formation & Operating Agreements in the United States

Filing an LLC takes minutes. The operating agreement is what actually determines how it works.

GCC business setup specialists

State law gives you defaults you probably do not want

An LLC can be formed with a one-page filing, which is why so many exist without an operating agreement. In that case state default rules govern: how profits are split, who can bind the company, what happens if a member wants out, and what happens on a member’s death. Those defaults are rarely what the members intended, and discovering the gap during a dispute is the expensive way to find out.

  • Operating agreement drafted for your actual arrangement
  • Management structure chosen deliberately
  • Tax classification election considered at formation

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20+

Mainland, free zone and offshore jurisdictions we file in — so the recommendation is based on your activity, not on which authority we happen to be registered with.

7,000+

Companies successfully established.

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Decide these at formation

What the operating agreement should settle

Each has an unattractive statutory default.

IssueWhy it matters
Member-managed or manager-managedWho can bind the company to contracts.
Profit and loss allocationDefault is rarely what members agreed.
Capital contributions and callsWhat happens when more money is needed.
Transfer restrictionsWhether a member can sell to anyone.
Exit and buy-out mechanicsHow a departing member is paid.
DeadlockHow a 50/50 split is broken.

LLC statutes, default rules and tax classification elections differ by state and under federal law, and change. We handle US formation and compliance set-up and co-ordinate with a US tax adviser where advice is needed. We do not give US federal or state tax advice, and any adviser offering US tax conclusions as part of a formation package should be treated with caution.

How it works

Forming the LLC properly

File, then paper it properly.

01

Choose state and structure

The state of formation, whether management sits with members or a manager, and how many members there will be.

02

File and appoint

Certificate of formation filed, registered agent appointed and the tax identification number obtained.

03

Paper the arrangement

Operating agreement drafted to cover management, allocations, transfers and exit, and the tax classification election made if wanted.

Before you form

What we need to know

Member intentions, not just names.

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  • How many members there will be
  • Whether members are individuals or entities
  • Where each member is resident
  • How profits should be allocated
  • Who should be able to bind the company
  • Whether capital calls are contemplated
  • Whether interests should be transferable
  • What should happen on a member exit
  • What should happen on deadlock
  • Whether corporate tax treatment is wanted
  • Which states the business will operate in
  • Expected scale and whether investment will be raised

Scope

What is included, and what is not

Stated plainly, so nothing is added once the engagement starts.

Included in the service fee

  • State and structure recommendation
  • Certificate of formation filing
  • Registered agent arrangement
  • Operating agreement drafted for your arrangement
  • Membership interest records
  • Tax identification number application
  • Guidance on the tax classification election
  • Co-ordination with a US tax adviser where needed

Not included, quoted separately

  • State filing fees, paid at cost
  • Registered agent annual fees
  • US federal and state tax advice
  • Complex multi-class agreements drafted by counsel
  • Investor documentation and subscription agreements
  • Foreign qualification in other states unless quoted
  • Sales tax registrations, quoted separately
  • Bank account opening decisions

Verify independently

Relevant US authorities

We file directly with these bodies on your behalf.

Secretary of State of the state of formationInternal Revenue ServiceState departments of revenueCounty and city licensing officesRegistered agent in each stateState professional licensing boards

Questions

US LLC formation — FAQs

Do I really need an operating agreement?

For a single-member LLC it is still advisable; for a multi-member LLC it is essential. Without one, state defaults decide profit splits, authority and exit terms.

Member-managed or manager-managed?

Member-managed suits a small owner-operated business. Manager-managed suits passive investors or where only certain people should bind the company.

Is an LLC always taxed as a pass-through?

By default it is not taxed at entity level, but an election can be made to be taxed as a corporation. Which is better depends on your facts and is a question for a US tax adviser.

Can a foreign company be a member?

Yes. There is no restriction, though foreign ownership brings specific federal information reporting obligations.

Can I add members later?

Yes, if the operating agreement provides for it sensibly. Retrofitting admission and transfer provisions after a dispute has started is considerably harder.

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