A Limited Liability Company (LLC) is a separate legal entity that can conduct business just like a corporation with many of the advantages of a partnership. It is taxed as a partnership. Its owners are called members and receive income from the LLC just as a partner would. There is no tax on the LLC entity itself. The members are not personally liable for the debts and obligations of the entity like partners would be. Basically, an LLC combines the tax advantages of a partnership with the limited liability feature of a corporation.
An LLC is formed by filing articles of organization with the secretary of state in the same type manner that articles of incorporation are filed. The articles must contain the name, purpose, duration, registered agent, and principle office of the LLC. The name of the LLC must contain the words Limited Liability Company or LLC. An LLC is a separate legal entity like a corporation.
Management of an LLC is vested in its members. An operating agreement is executed by the members and operates much the same way a partnership agreement operates. Profits and losses are shared according to the terms of the operating agreement.
The District of Columbia Operating Agreement is an essential legal document governing the operations of limited liability companies (LCS) located in the District of Columbia that have adopted the Uniform Limited Liability Act (UCLA) or the Revised Uniform Limited Liability Act (SULLA). This agreement outlines the internal workings, management structure, and financial arrangements of an LLC. The District of Columbia Operating Agreement, specific to states that have adopted the UCLA, serves as a comprehensive guide for LLC members to define their rights, responsibilities, and obligations. It covers various aspects, including the allocation of profits and losses, voting rights, decision-making processes, and rules for admitting or withdrawing members from the LLC. Furthermore, the District of Columbia Operating Agreement caters to states that have adopted the SULLA. This version of the agreement incorporates updated provisions aligned with the changes made in the revised act. It streamlines the internal operations of LCS and provides clarity on issues such as fiduciary duties, dissociation, distributions, and member rights. Key elements typically found in a District of Columbia Operating Agreement include: 1. Identification of Members: The agreement identifies all members of the LLC and their respective ownership percentages. It outlines the rights and privileges of each member, including their voting powers and capital contributions. 2. Management Structure: The agreement specifies whether the LLC will be managed by its members (member-managed) or if management will be delegated to designated managers (manager-managed). It also defines the powers and responsibilities of managers, if applicable. 3. Profit and Loss Allocation: The agreement outlines how profits and losses will be distributed among members. This provision may be based on the capital contributions or outlined differently agreed upon by the members. 4. Decision-Making Processes: The agreement establishes the decision-making procedures for major issues affecting the LLC, such as the addition or removal of members, changes in the nature of the business, or amendments to the operating agreement itself. It clarifies whether decisions will require unanimous consent or a majority vote. 5. Dissociation and Withdrawal: The agreement outlines the process for a member's dissociation or withdrawal from the LLC, including any buyout provisions or restrictions on transferring ownership interests. 6. Distributions and Capital Accounts: The agreement specifies how distributions will be made among members and how capital accounts will be maintained. It may establish a hierarchy for repayment of capital contributions and provide guidance on distributing surplus funds. 7. Dispute Resolution: The agreement can include mechanisms for resolving disputes among members, such as mediation or arbitration, to prevent costly litigation. 8. Lifecycle Provisions: The agreement may address issues related to the dissolution or termination of the LLC, including procedures for winding up affairs and distributing assets. By customizing the District of Columbia Operating Agreement to align with either the UCLA or the SULLA, LCS can establish a clear framework for their internal operations and limit disputes among members. It is imperative for LCS to consult with legal professionals to ensure compliance with the specific regulations and requirements of the District of Columbia jurisdiction.
