LLC Custom Operating Agreement  

An LLC operating agreement allows you to structure your financial and working relationships with the other members in a way that suits your business. In your operating agreement, you and the other members establish percentage of ownership in the LLC, share of profits (or losses), rights and responsibilities, and provisions for the change or transfer of membership.

While Nevada does not legally require your LLC to have an operating agreement, it's foolish to operate an LLC without one, even if you're the sole member of the LLC: An operating agreement guards your limited liability status, heading off financial and management misunderstandings, and making sure your business is governed by your own rules -- not default rules set out in the Nevada Revised Statutes.

The main reason the members should adopt an operating agreement is as simple as it is important: It helps ensure that courts will respect your limited personal liability. This is particularly key in a one-person LLC where, without the formality of an agreement, the LLC will look a lot like a sole proprietorship. Having a formal written operating agreement will lend credibility to your LLC's separate existence.

There's a host of issues you must be covered in the operating agreement including:

In other states creditors have become creative and tried actions such as foreclosure, in an attempt to control the management of the LLC and seize LLC assets. Nevada laws eliminate any "creditor creativity". Nevada has the toughest laws in the country with regard to creditors. In Nevada, per NRS 86.401 a charging order against a membership interest in an LLC is the EXCLUSIVE remedy by which a judgment creditor of a member may satisfy a judgment.

Recent developments in Nevada case law have given Nevada Judges the opportunity to confirm the intention of the legislators when they passed the toughest laws in the country with regard to creditors:

In Paladin Commerce Center, LLC, Debtor, General Electric Credit Equities, Inc. v. Barry Thalden, a Nevada Bankruptcy Judge held that despite the fact that a creditor (GE Credit) had obtained 100% of the membership interest of a Nevada LLC (the members pledged their membership for a $3.6 million business loan, then defaulted), that the creditor was to remain ONLY an assignee of the economic and membership rights in the LLC and DID NOT obtain managerial and voting rights in the LLC because the ONLY method by which an assignee or transferee of a membership interest could obtain voting and management rights is pursuant to the Operating Agreement. Upon appeal, the district court affirmed the decision of the Bankruptcy Court.

In this case, the Operating Agreement of the LLC required the following in order to admit a “substituted member” with “voting rights”:

(a) the consent of the Managers approving such admission.
(b) the transferee was required to execute such instruments as the Managers may deem reasonably necessary to effectuate such admission;
(c) the transferee had to agree in writing to accept and adopt all terms and conditions of this Operating Agreement, as the non-transferring Members may reasonably determine.

In this case “Manager Consent” could be withheld because the “manager” and the “member” (who pledged the asset to the Bank) were not the same person. This under-scores the value of our Nominee Manager Service as not just a privacy tool, but also as an important legal protection tool.

The Operating Agreement of your LLC should include the important provisions listed above in order to avail the members of this extremely powerful protection, as provided in this case. Our standard Operating Agreement includes similar provisions and is included in the annual records service.

As a result of the passing of SB60 2013, Nevada Statutes (NRS 78.105) and (NRS 86.241) require all Entities to maintain records at their Registered Office and all Nevada Registered Agents to maintain records on their Corporate clients. These requirements now include maintaining copies of Operating Agreements/Bylaws as well as the Stock Ledger and/or Membership Listing for an LLC. In lieu of the stock ledger the corporation may keep a statement setting out the name of the custodian of the stock ledger, and the complete mailing or street address where the stock ledger is kept. Registered Agents now face fines for non-compliance as well as their company registration being revoked NRS 77.443.

Effective October 1, 2013 NRS 86.246 the Secretary of State may now request copies of Operating Agreements/Bylaws as well as the Stock Ledger and/or Membership Listing from the Registered Agent....... But don't worry! (sarcastic)..... The Secretary Of State promises to keep the information confidential, and only release it in certain circumstances and to certain parties NRS 76.160 ... such as...The I.R.S., any agency of any state charged with the administration or enforcement of laws relating to workers’ compensation, unemployment compensation, public assistance, taxation, labor or gaming and to any law enforcement agency in the course of a criminal investigation, or to any agency or political subdivision of any State or the United States in the course of an enforcement action......Additionally, many other Government Agencies continue to use 3rd Party Record Keeper Summons to obtain this ownership information from the Registered Agent. The Registered Agent is an easy target since every company must have one, and they must be listed in the public record and must be available to receive service of process.

OUR SOLUTION: - In line with our philosophy and our internationalization we have improved our Nominee Service to include an Offshore Custodian of Stock Ledger: If your package includes this service, upon request, the Secretary of State will simply receive a statement setting out the name of the custodian of the stock ledger, and the complete mailing or street address where the stock ledger/membership listing is kept. In this case by the Secretary of your Company (that happens to be located in a secure offshore jurisdiction). The Bylaws and Operating Agreement (also improved) contain no personal information, just the rules and Regulations regarding the Company management. The capitalization and membership of the LLC is listed in a separate document that is not a part of the Operating Agreement.