Your Essential Billing Terms and Conditions Template for Banking

Billing terms and conditions template for Banking

hi my name is Chris Jackson I'm a business law attorney I've been one for over 25 years today we're going to go over how to create your own llc's operating agreement online I'm going to take you through the process step by step I'm going to answer the questions along the way so you can make a decision about what to include and what not to include in the operating agreement at the end of this video you're going to be able to download that operating agreement right onto your computer for free and you're going to have an operating agreement ready to go for your LLC as you can see my dog Jax is sitting behind me on my chair here but it's not really impacting my ability to deliver this presentation so I hope you think it's okay first question is why do you need an operating agreement I would cover this in other videos I've also covered what should be in an operating agreement suffice it to say you need one and you need one whether you are a single member LLC or a multi-member LLC if the LLC gets sued you want to make sure that your liability over here as the owner of that LLC and member of that LLC is limited to what you invested in this llc at the outset if you're operating your limited liability company correctly and one of the most significant elements of demonstrating that is that you have an operating agreement and you're abiding by it then that's going to make it very difficult for the plaintiff that's suing your limited liability company to then go through the limited liability company and get beyond the assets the limited liability committee to your personal assets over here which could be your house your car money in your bank account other things that are potentially exposed if you don't have an operating agreement this is true of a single member LLC it is true of a multi-member LLC bottom line is you need an operating agreement so let's get right to it I'm going to direct you to the description section under my video there's a link in there that will take you to law Depot there will also be a link in the comments section of my video Just note that when you follow this link you have a 10 discount on anything that you choose beyond the free version you're not required to choose anything beyond the free version but if you do number one you're going to get a 10 discount by using my link number two it is an affiliate link of mine so I will get a slight commission it helps support my channel I appreciate I just want you to know that if you're not comfortable doing either you can get to La Depo in any way that you want but having said that let's jump right into it I'm going to now take you step by step and walk through through the setting up of a limited liability company operating agreement online at the end of the video as I said you will be able to download your operating agreement you'll be ready to go [Music] okay so we're going to jump right into the screen share I'm assuming that you selected the link in the description under my video or in the comment section that I've pinned at the top of the comments if you did it would have brought you to this page here where you can see at law Depot create your LLC operating agreement and that is what we are going to do and at the end you're going to be able to print or download your agreement okay so I'm choosing the state of California but here you can see there's a drop down menu of all the different states so for California that is going to be my choice I can go over other states like common ones like Wyoming and Delaware in a separate video today I'm going to go over California a lot of the concepts will be the same first page after that is company purpose what is the primary business purpose for this company and you'll see some of this information is filled in I wanted to save some time but let me explain it in general as I recommend it in my video what to include in your operating Grant you want to have a broad purpose there's no reason to narrow your purpose to something too specific it's possible the purpose for your LLC is going to evolve or change over time if it does you do not want to have to go back in a menu operating agreement to make sure that the purpose is Broad enough to Encompass whatever purpose that your LLC evolved into it's better just to start broad you can actually do whatever you like with a broad purpose you'll see here that I'll give you an example in California the purpose of this LLC is to engage in any lawful act or activity for which an LLC may be organized under the California revised uniform limited liability company Act I recommend just saying the purpose of this LLC is to engage in any lawful act or activity for which an LLC may be organized that way can apply to any state it is also possible you may form your LLC in one state and then migrate it to another state so let's keep it Broad okay company details I'm presuming that if you're setting up this operating agreement now and you're following this video you've already created your LLC I've used this example in the past Chris Jackson mobile dog grooming LLC that's going to be the name of my company pick out your principal office so this is your office address save and continue will this company have more than one class of members I'm going to say that for 99 of you the answer to this question is no however if you have an LLC where you want the members to have different profit distribution rights or different voting rights for example maybe the founders of the LLC have super voting rights they can every one of their votes equals 10 votes Etc or their different profit distribution rights depending upon the class of the membership interest your operating agreement is going to get more complicated the operation of your LLC is going to get more complicated and I really recommend you discuss this type of provision with an attorney in your state I'm not giving legal advice here I want to make that clear I am not also vouching for these documents at law Depot I can just tell you that law Depot has a long and good reputation they've been around for many many years all right so I'm going to select no this will this company have more than one class of members no they're all going to have the same profit distribution rights and voting rights membership details who are the members is it an individual or individuals a corporation a partnership trust or LLC so a limited liability company can have all different types of members however if you have elected or you will be electing to have your LLC tax as an S corporation just keep in mind you can only have individual members just like an S corporation can only have individual shareholders there are some exceptions you can have a trust as a member of an LLC that's taxes an S corporation and there's certain types of single member llc's where you can also have the single member LLC as a member of an LLC taxes and S corporation for this exercise I'm assuming that your members are going to be individuals and if you're going to have entities as members that you're not going to be electing to be taxed as an S corporation right now I'm saying there's one individual member and that's me and I'm an individual you can add another member down here and if you add another member in a later stage you're going to have to determine what member owns what percentage of the entity keep that in mind in my case it's just a single member LLC I'll move into the next page Capital contributions what are the capital contributions of each member so a member is required to contribute Capital to the LLC this can come in the form of say Services provided or Sweat Equity or the time you've spent setting up the LLC or getting the business ready to be put in an LLC it can also include cash or it could include a combination of both here I have decided to make it a combination so I put a thousand dollars cash into the LLC bank account from my own personal account that was part of my contribution I'm also going to state that I put in some Sweat Equity you can see here they give you an example the total value so the value of my thousand dollars in Cash Plus Sweat Equity which I'm valuing at a one thousand dollars is a total value of two thousand dollars if another member was going to make a capital contribution on the same percentage of the LLC as me that member would have to put in say for example if they had no Sweat Equity two thousand dollars in cash save and continue additional contributions could additional contributions be required in the future I recommend you answer yes to this question keep that open there may be an occasion where you have to go out and get additional contributions from the members rather than raising additional cash through debt offerings save and continue admitting new members can new members be admitted later I would recommend you say yes and the reason is you want to have that flexibility even if you're a single member LLC and you don't Envision having another member you may need a Capital Partner down the line a year or two down the road you have you're going through an expansion phase you don't want to take on too much debt you'd rather have additional cash come in as Equity you go out and you find a member who maybe is going to be silent partner Etc go ahead and allow yourself the opportunity to bring in a new member later don't close that off in your operating agreement now you don't have to bring in a new member but have that option what is the voting requirement to admit a new member you can say either unanimous or majority I'm going to choose majority and you see here this pops up note that this will kind of give an explanation as to what your options are so if I don't cover something here then you at least you have that why am I choosing majority I'm choosing the majority of members to approve the adding of new members is because in general I don't like the idea of one member and I'm assuming for example in this scenario that it's a multi-member LLC maybe you have one member that is not being cooperative or they don't like the idea of any change whatsoever but the majority of the other members want to make certain decisions in this one member because you're requiring unanimous approval is essentially vetoing all your decisions but you don't want to be held hostage by one minority member that's why I'm choosing majority all right so describe all conditions there's one condition which I have copied and pasted from below and it states new members must provide a capital contribution in an amount and on such terms as the members determine and agree to be appropriate based upon the net value of the company's assets so essentially what that means is they're going to determine the the value of the assets of the company or the value of the company and if the new member is going to come in and say own 20 of the entity they have to contribute 20 percent uh of the value so even continue can a member voluntarily withdraw from the company I am going to say no here you may want to give them the right to voluntarily withdraw but that may mean that you have to give them their Capital contribution back or give them what's left in their Capital account back at that time it's like permitting you know the equivalent of a run on the bank I don't know that that's necessarily a good idea we want our members to be there for the long term if they don't want to be a member then they have the right to sell their membership interest to another potential member and that should be their way that they withdraw rather than you having to pay them to leave save and continue member meetings how often will members hold regular meetings I recommend here for the reasons I recommended llc's over corporations you know I recommend less formalities and limited liability company that's one of the main reasons I like llc's I don't want to have to require formalities in order for the owners of an entity to protect themselves from the liability of that entity that is the case in a corporation you have to have regular meetings board meeting shareholder means Etc if you don't you risk what's called piercing the corporate veil or a plaintiff and a lawsuit can get to your personal assets right go through the corporation not be limited to the assets of the corporation but come after your personal assets they can do the same thing in a limited liability company if for example you're supposed to be having regular meetings and you're not in other words you're not treating The Entity as separate from yourself I don't like that I like the lack of formalities in LLC and if you don't engage in those formalities you should still be protected so I'm going to choose only as required now certain laws on certain States may require the members hold meetings and that's fine we say only as required but if you choose weekly monthly quarterly or annually and they are not required and you don't have them again that subjects you to potentially personal liability which I don't want for you okay how will the member votes be determined I'm choosing by ownership share for myself again I'm not giving you legal advice but I do want to tell you why I'm choosing this it's simply because I want to make sure that a minority owner of the entity doesn't have too much power when it comes to votes so let's just say I put in ten thousand dollars and that ten thousand dollars entitled me to 50 of the limited liability company then I got this other member who put in five thousand dollars and he's got 25 percent of the LLC so he has 25 percent I have 50 percent I don't want his vote to be equal to mine it's not right I put in more money I put more at risk I should have more voting power than him or her I'm going to choose by ownership share rather than equal vote of each member saving continue management details who will manage the company the members or one or more appointed managers I've covered this in a video whether to choose a manager managed LLC or a member manager LLC I'm not going to rehash it but suffice it to say I choose manager managed llc's for many reasons and I encourage you to watch that video so you make the right decision here there are occasions where a member managed LLC makes a lot of sense for example if everyone wants equal right to participate in the management of the company every one of the members and that may be the case under certain circumstances but if it's not I would choose a one or more appointed managers option how will a new manager be appointed majority vote of members again I do not like unanimous photo members unless absolutely required by law because I do not want one member vetoing decisions period who is the manager okay so you can have one or more managers here's an option to add managers in my case I'm going to make just myself a manager if you do add another manager we want to make sure that you address how decisions are made must the decisions be made by both managers or you can have three managers and have a tie-breaking vote that is up to you I'm going with one manager save and continue what are the duties and responsibilities of your managers I just left it very General here manage the day-to-day operations of the company we're going to cover later who has to vote on what save and continue okay accounting how should this company be classified for tax purposes as I stated earlier for most LLCs I like to have them taxed as an S corporation that is what I'm going to choose here okay so you also have the option of choosing disregard entity that is an option for single member llc's only that would mean that I'd have to pay what's called a 15.3 percent Federal self-employment tax reason of choosing to be taxes s corporations because I don't want to pay that tax so I'm choosing Corporation if you had more than one member you could also choose to be taxed as a partnership I don't want to give tax advice seek that advice from your accountant but I am choosing Corporation do you wish to include your fiscal year end so I just want to make it clear here that my fiscal year end is also the calendar year end so I'm going to say yes and it's December 31st if for some reason and this is an accounting issue also you want a different fiscal year in than the calendar you're in then make sure you specify that here so I'm just choosing December 31st as I stated annual report so this is an obligation that you have in my case as the manager because I'm managing the company to provide reports to the members now they give you the option of an income statement a balance sheet a cash flow statement of profit and loss summary keep in mind that you can provide whatever you want you can provide all of these I don't like putting the obligation in the operating agreement to provide every single one of these I don't know if you're gonna have a cash flow statement in addition to an income statement a balance sheet these two here are pretty standard you should have them anyway so I have a problem including those I'm going to leave out a cash flow statement profit and loss summary that's basically a summary of the income statement I don't think it's necessary I'm going to choose those two save and continue will the company be dissolved if one member leaves my answer is no so let's say for example you have two members and one of the member leaves whether you've chosen to allow them to voluntarily withdraw or you've let them withdraw I don't want that to automatically dissolve the LLC if I'm going to continue on the business even though that member is gone so I'm going to choose no that's my personal preference are members allowed to sell their share to non-members yes they should have the opportunity to sell their shares you will see that you as a member will have the right of first refusal to buy those shares when I say shares I mean that share their membership interest in the LLC so I'm going to give them and you as a member the option to sell your membership interest finding the company in contract who can sign contracts on behalf of the company any manager any manager or member specify groups or individuals in my case I'm stating any manager that is one of the benefits of a manager managed LLC you can sign contracts and you can sign documents as the manager of the LLC it is a title it makes it easier rather than a member managed LLC you have to have all the members sign every document some may be unwilling to do so so I'm choosing any manager okay duty of loyalty our members or managers allowed to compete with the company I'm going to say no I do not want my members or the managers to compete with the company and then the next question is how long are members or managers restricted from competing with the limited liability company and it really depends upon what is allowed in your state I cannot give you legal advice here I know some states are different than others I certainly want to discourage a member from saying selling their interests or membership interest in the LLC and then setting up shop in the same geographic area to compete with me especially since they have access to confidential information about the limited liability company so I'm not sure what the courts are going to allow La Depo says I can choose up to a five-year non-competition period I feel a little more comfortable with two years so that's what I'm going to go with okay we're at actions that requiring unanimous consent this is the unanimous consent of the members what actions by the LLC and or the manager are going to require unanimous approval of the members as I've stated before I don't really like the idea of unanimous approval I don't want a minority member that owns say five percent of the LLC be in a position to block what the company wants to achieve that maybe the majority of the members or even the super majority which is normally two-thirds of the members want to achieve simply because it requires unanimous consent of the members there are certain items like dissolution of the company that require unanimous consent by law in certain States that's just an example so let's let the law dictate what requires unanimous consent let's not make the operating agreement more restrictive so I'm not going to choose any of these okay managerial actions that require majority consent so these are the actions of the manager that will require approval of the majority of the members I pre-filled these there's three of them that I would recommend generally speaking there may be more this is really up to you the first one is incurring a single transaction expense in excess of 25 000 you can see that was an example under the first one they used five thousand I'm saying twenty five thousand so if I the manager want to enter into a transaction that's going to cost the company more than twenty five thousand I have to go get majority member approval for that transaction you can change this number to whatever you're comfortable with I recommend limiting the manager's discretion there with some cap number two a sale of substantially all the company's assets this may be covered by the law in your state but essentially what this means is if the manager wants to basically sell most of the assets of the company and wind down the business then the manager needs to get approval of a majority of the members and the last one is a merger or acquisition transaction of the company so in order for a the manager to enter into a merger agreement or an agreement to acquire another company uh which would actually be covered by number one or to be acquired by another company the manager must first go get member approval these are pretty standard I recommend you have some limitations on what your manager can do additional Clauses do you want to include any additional terms or information that says they're not needed unless you have anything in particular that you want to address in the operating agreement uh you can do that but I'm selecting no specify the date I'm putting today's date well you have witnesses sign this agreement the answer is no Witnesses generally are not necessary but if you'd like to have witnesses just to make sure that no one's going to question whether you in fact were the person who signed it that's up to you you can add some witnesses you can select yes and there's going to be some lines for witness signatures in your operating agreement I'm saying no okay so this is your operating agreement and you can preview it here you can go through the different Provisions if you determine that you want to make a change you can always just go back everything's saved automatically but you can go back and make changes and then you go to the next page which is select a license and you have three options number one the trial subscription is free for one week it says right here so if you select this you do have to enter your credit card information but you will get the operating agreement for free as long as you cancel your trial subscription within the one week period the other option is you can pay fifty Seven dollars as a one-time charge keep in mind if you choose this option or this option over here by using my link you get a 10 discount on these which will show up when you check out if you choose a fifty Seven dollar option you have five years within which you can go back in and make changes to the operating agreement it will be here for you to make changes it is something you might need to do if you expect to say add members or make other changes to your operating agreement as your business grows or you could choose a one-year Pro subscription which is essentially the equivalent of 8.99 a month if you prepay it for one year what this entitles you to is not only the ability to go in and make edits to your operating agreement during the subscription period but you can also go in and find other contracts and print those out and make changes to those as well they have hundreds of documents to choose from that you will have access to if you choose this option here I'm going to select free so in this page you put in your credit card information and press submit and you will be done you will have your operating agreement downloadable well I hope you enjoyed the walkthrough of creating your own operating agreement if you like the video I encourage you to give me the thumbs up and just let me know that you liked it if you have any questions about what I did if I didn't cover anything or you have a question about something I covered please put comment below in the comments section of the video I will try to get to each and every comment as quickly as possible and by the way I'm going to generate other videos like this I'm going to walk you through other types of contracts for example employment agreements or non-disclosure agreements so if you are interested in that kind of content I encourage you to subscribe to my channel is something I'm going to be doing on a regular basis thank you very much I wish you and your LLC all the best foreign [Music]