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California LLC Operating Agreement

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SAMPLE LLC OPERATING AGREEMENT

CA-00LLC-1

This agreement is a sample operating agreement and should be modified to meet your needs. It provides for the LLC to be operated by one or more managers OR by the members. You will have to decide how you want your LLC to operate.

Read carefully and make appropriate changes to suit your individual needs and purposes.

OPERATING AGREEMENT OF

A CALIFORNIA LIMITED LIABILITY COMPANY

THIS OPERATING AGREEMENT ("Agreement") is entered into the day of , 20 , by and between the following persons:

1.

2.

3.

4.

hereinafter, ("Members" or “Parties”).

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the Parties covenant, contract and agree as follows:

ARTICLE I

FORMATION OF LIMITED LIABILITY COMPANY

1. Formation of LLC. The Parties have formed a California limited liability company named ("LLC"). The operation of the LLC shall be governed by the terms of this Agreement and the applicable laws of the State of California relating to the formation, operation and taxation of a LLC, including the California Revised Uniform Limited Liability Company Act (California Corporation Code Section 17701.01-17701.17) hereinafter referred to as the "Act". To the extent permitted by the Act, the terms and provisions of this Agreement shall control if there is a conflict between such Act and this Agreement. The Parties intend that the LLC shall be taxed as a partnership. Any provisions of this Agreement, if any, that may cause the LLC not to be taxed as a partnership shall be inoperative.

2. Articles of Organization. The Members acting through one of its Members, filed Articles of Organization, ("Articles") in the records of the California Secretary of State on , thereby creating the LLC.

3. Business. The business of the LLC shall be:

a)

b) To conduct or promote any lawful businesses or purposes within California or any other jurisdiction which a limited liability company is legally allowed to conduct or promote.

4. Registered Office and Registered Agent. The registered office and place of business of the LLC shall be and the registered agent at such office shall be . The Members may change the registered office and/or registered agent from time to time.

5. Duration. The LLC will commence business as of the date of filing and will continue in perpetuity.

6. Fiscal Year. The LLC's fiscal and tax year shall end December 31.

ARTICLE II

MEMBERS

7. Initial Members. The initial members of the LLC, their initial capital contributions, and their percentage interest in the LLC are:

Initial Members

Percentage Interest in LLC

Capital Contribution

8. Additional Members. New members may be admitted only upon the consent of a majority of the Members and upon compliance with the provisions of this agreement.

ARTICLE III

MANAGEMENT

9. Management. The Members have elected to manage the LLC as follows (check as appropriate):

The management of the LLC shall be vested in the Members without an appointed manager. The members shall elect officers who shall manage the company. The President and Secretary may act for and on behalf of the LLC and shall have the power and authority to bind the LLC in all transactions and business dealings of any kind except as otherwise provided in this Agreement.

The Members hereby delegate the management of the LLC to Manager(s), subject to the limitations set out in this agreement.

The Members shall elect and may remove the Manager(s) by majority vote.

A Manager shall serve until a successor is elected by the Members.

The Manager(s) shall have the authority to take all necessary and proper actions in order to conduct the business of the LLC.

Except for decisions concerning distributions, any Manager can take any appropriate action on behalf of the LLC, including, but not limited to signing checks, executing leases, and signing loan documents.

In determining the timing and total amount of distributions to the Members, the action of the Manager shall be based on a majority vote of the Managers, with or without a meeting.

The compensation to the Manager(s) shall be in the discretion of the majority of the Members of the LLC.

There shall be initial Managers.

The initial Manager(s) is/are:

10. Officers and Relating Provisions. In the event the Members elect to manage the LLC, rather than appointing a manager, the Members shall appoint officers for the LLC and the following provisions shall apply:

(a) Officers. The officers of the LLC shall consist of a president, a treasurer and a secretary, or other officers or agents as may be elected and appointed by the Members. A Member may hold more than one or all offices.

(b) Election and Term of Office. The officers of the LLC shall be elected annually by the Members by a majority vote.

ARTICLE IV

CONTRIBUTIONS, PROFITS, LOSSES, AND DISTRIBUTIONS

11. Member Only Powers. Notwithstanding any other provision of this Agreement, only a majority of the Members may: (a) sell or encumber (but not lease) any real estate owned by the LLC, or (b) incur debt, expend funds, or otherwise obligate the LLC if the debt, expenditure, or other obligation exceeds $.

12. Interest of Members. Each Member shall own a percentage interest (sometimes referred to as a share) in the LLC.

ARTICLE V

VOTING; CONSENT TO ACTION

19. Voting by Members. Members shall be entitled to vote on all matters which provide for a vote of the Members in accordance with each Member’s percentage interest.

20. Majority Required. Except as otherwise provided and delegated to the Officers or Managers, a majority of the Members, based upon their percentage ownership, is required for any action.

ARTICLE VI

DUTIES AND LIMITATION OF LIABILITY MEMBERS, OFFICERS, AND PERSONS SERVING ON ADVISORY COMMITTEES; INDEMNIFICATION

24. Duties of Members: Limitation of Liability. The Members, Managers and officers shall perform their duties in good faith, in a manner they reasonably believe to be in the best interests of the LLC.

25. Members Have No Exclusive Duty to LLC. The Members shall not be required to participate in the LLC as their sole and exclusive business.

ARTICLE VII

MEMBERS INTEREST TERMINATED

28. Termination of Membership. A Member’s interest in the LLC shall cease upon the occurrence of one or more of the following events:

A Member provided notice of withdrawal to the LLC thirty (30) days in advance of the withdrawal date.

A Member assigns all of his/her interest to a qualified third party.

A Member dies.

There is an entry of an order by a court of competent jurisdiction adjudicating the Member incompetent.

ARTICLE VIII

RESTRICTIONS ON TRANSFERABILITY OF LLC INTEREST; SET PRICE FOR LLC INTEREST

32. Sale of Interest. A Member can sell his LLC interest only as follows:

(a) The purchase price shall be paid in cash at closing unless the total purchase price is in excess of $ in which event the purchase price shall be paid in equal quarterly installments.

ARTICLE IX

OBLIGATION TO SELL ON A DISSOCIATION EVENT CONCERNING A MEMBER

34. Dissociation. Upon the occurrence of a dissociation event with respect to a Member, the LLC and the remaining Members shall have the option to purchase the dissociated Member's interest at the Set Price.

ARTICLE X

DISSOLUTION

35. Termination of LLC. The LLC will be dissolved and its affairs must be wound up only upon the written consent of a majority of the Members.

ARTICLE XI

TAX MATTERS

37. Capital Accounts. Capital accounts shall be maintained consistent with Internal Revenue Code § 704 and the regulations thereunder.

38. Partnership Election. The Members elect that the LLC be taxed as a partnership and not as an association taxable as a corporation.

ARTICLE XII

RECORDS AND INFORMATION

39. Records and Inspection. The LLC shall maintain at its place of business the Articles of Organization, any amendments thereto, this Agreement, and all other LLC records required to be kept by the Act.

40. Obtaining Additional Information. Subject to reasonable standards, each Member may obtain from the LLC from time to time upon reasonable demand information regarding the business and financial condition of the LLC.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

41. Amendment. Except as otherwise provided in this Agreement, any amendment to this Agreement may be proposed by a Member.

42. Applicable Law. To the extent permitted by law, this Agreement shall be construed in accordance with and governed by the laws of the State of California.

43. Pronouns, Etc. References to a Member or Manager, including by use of a pronoun, shall be deemed to include masculine, feminine, singular, plural, individuals, partnerships or corporations where applicable.

44. Counterparts. This instrument may be executed in any number of counterparts each of which shall be considered an original.

45. Specific Performance. Each Member agrees with the other Members that the other Members would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms.

46. Further Action. Each Member, upon the request of the LLC, agrees to perform all further acts and to execute, acknowledge and deliver any documents which may be necessary.

47. Method of Notices. All written notices required or permitted by this Agreement shall be hand delivered or sent by registered or certified mail.

48. Facsimiles. For purposes of this Agreement, any copy, facsimile, telecommunication or other reliable reproduction of a writing or signature may be substituted for the original.

49. Computation of Time. In computing any period of time under this Agreement, the day of the act, event or default from which the designated period of time begins to run shall not be included.

WHEREFORE, the Parties have executed this Agreement on the dates stated below their signatures on the attached signature page for each individual Party.

NOTICE: EACH MEMBER HEREBY CERTIFIES THAT HE OR SHE HAS RECEIVED A COPY OF THIS OPERATING AGREEMENT AND FORMATION DOCUMENT OF

, A CALIFORNIA LIMITED LIABILITY COMPANY. EACH MEMBER REALIZES THAT AN INVESTMENT IN THIS COMPANY IS SPECULATIVE AND INVOLVES SUBSTANTIAL RISK.

Members:

Print Name of Member:

Address:

City, State, Zip:

Phone:

Print Name of Member:

Address:

City, State, Zip:

Phone:

Print Name of Member:

Address:

City, State, Zip:

Phone:

Print Name of Member:

Address:

City, State, Zip:

Phone:

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What the California LLC Operating Agreement Is

A California LLC Operating Agreement is a private contract among the members of a limited liability company that governs ownership, management, capital contributions, profit and loss allocations, voting rights, transfer restrictions, and dissolution procedures. While California does not require filing the operating agreement with the Secretary of State, having a written agreement establishes internal rules, clarifies member expectations, documents economic rights, and helps preserve limited liability by demonstrating separation between the entity and its owners. Carefully drafted agreements reduce disputes and support compliance with state and federal requirements.

Why a Written Operating Agreement Matters

A written Operating Agreement clarifies governance, reduces member disputes, and documents economic and voting arrangements; it also helps preserve limited liability and supports enforceability under ESIGN (15 U.S.C. ch. 96) and UETA when signed electronically.

Why a Written Operating Agreement Matters

Who typically prepares and relies on this document

The Operating Agreement is used by members, managers, and their advisors to set expectations, manage risk, and document roles within the LLC.

  • Founding members and managers who set ownership, capital contributions, and management structure.
  • Outside investors, lenders, and escrow agents reviewing ownership and control provisions for financing or sale.
  • Attorneys and accountants who draft, review, and ensure tax and regulatory compliance for the LLC.

Keep the agreement accessible to members, lenders, and professional advisors; update it when ownership or control changes.

Typical signer profiles

Member

Individual or entity that holds an ownership interest; signs to accept capital, voting, and profit allocations and to acknowledge fiduciary duties and other obligations under the agreement.

Manager

Person or entity authorized to manage LLC affairs under the agreement; signs to accept management authority, limits on power, indemnification clauses, and any delegated signing authority.

Core sections to include in a professional agreement

A complete Operating Agreement addresses formation facts, economic terms, governance, transfer rules, dispute resolution, and exit mechanics; these sections reduce ambiguity and support consistent decision-making.

Formation Details

State full LLC name, principal place of business, effective date, and reference to Articles of Organization to anchor the agreement to public records.

Capital Structure

Define member capital accounts, initial contributions, future capital calls, and procedures for recording or adjusting contributions over time.

Management and Voting

Specify member-managed or manager-managed structure, voting thresholds for routine and major actions, and process for appointing or removing managers.

Profit & Loss Allocations

Describe how profits, losses, and distributions are allocated among members, and any preferred returns or guaranteed payments.

Transfers and Restrictions

Include buy-sell provisions, right of first refusal, drag-along/tag-along rights, and conditions for admitting new members or transferring interests.

Dissolution and Exit

Detail winding-up procedures, priority of distributions, creditor claims, and member procedures for voluntary or involuntary dissolution.

Essential information to collect and protect

EIN: Employer Identification Number
Member SSN/EIN: Tax ID for reporting
Registered Agent: Name and address
Member Addresses: Current mailing addresses
Capital Records: Contribution dates and amounts
Signature Dates: Execution date for each signer

Step-by-step: completing a California Operating Agreement

Follow this sequence to prepare, execute, and preserve the Operating Agreement for legal and administrative use.

  • 01
    Assemble records: Gather Articles of Organization, EIN, member IDs, and capital contribution details.
  • 02
    Draft terms: Write governance, economic, transfer, and dissolution provisions tailored to member needs.
  • 03
    Obtain approvals: Have members review, approve, and sign per the agreed execution method.
  • 04
    Record and store: Keep the signed original with company records and distribute copies to members and lenders.

How execution and distribution typically work

Execution workflows can be in-person, via remote notarization, or electronic signing; pick procedures that match risk tolerance and any lender or investor requirements.

  • Prepare document: Finalize text and add signature/date fields prior to routing.
  • Choose signing method: Decide between wet ink, RON, or e-signature with authentication.
  • Collect signatures: Route to members in order or as parallel signers depending on control needs.
  • Distribute copies: Provide executed PDF copies and retain the original for records.

Recommended digital workflow settings

Set up signing and storage options to match required authentication, audit, and retention controls when using an eSignature platform.

Field Configuration
Signature Method Electronic signature with audit trail
Authentication Email plus optional SMS code or ID verification
Routing Order Sequential or parallel as required
Storage Location Secure cloud with access controls

Technical compatibility and integrations

Choose a signing platform that supports required file types, integrations, and security controls for your workflow.

  • File formats: PDF, DOCX accepted
  • Integrations: NetSuite, Google Workspace, Salesforce
  • Security: Audit trail and encryption

Common mistakes to avoid when preparing the agreement

  • Using informal or ambiguous language for capital commitments, which leads to disputes about member obligations and valuation.
  • Failing to define voting thresholds for major decisions, causing deadlocks when members disagree on sales or refinancing.
  • Not aligning tax allocations with IRS reporting requirements, which can create audit exposure and corrective adjustments.
  • Allowing transfers without clear restrictions, enabling unintended membership changes and dilution of control rights.

Key risks and potential legal consequences

Piercing risk: Loss of liability protection
Breach claims: Fiduciary duty litigation
IRS penalties: IRS penalties for misreporting (IRC §6721)
Contract disputes: Forced dissolution or buyout
Notary issues: Invalid acknowledgements where required
State compliance: Administrative fines and fees

Comparing eSignature vendor pricing and core capabilities

Cost and feature profiles vary across vendors; signNow appears first for direct comparison of starting price, trial availability, bulk send, audit features, HIPAA compliance, and envelope limits.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Trial available Trial available Trial available Trial available
Bulk Send Yes (Business Premium) Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No
Envelope Cap No cap 100 envelopes/user/year limit No cap No cap No cap

Download, format, and supporting documents to keep with the agreement

Store executed copies in formats that preserve signatures and audit trails; include related corporate records for clarity and evidence.

Preferred Formats

Save signed copies as PDF/A for long-term preservation; retain native DOCX for editable master copies and change logs.

Supporting Documents

Attach Articles of Organization, EIN confirmation letter, member consent forms, and capital contribution receipts as exhibits to the agreement.

Audit Trail

Preserve the signing certificate or audit log showing signer identity, timestamps, and authentication method for enforceability.

Backup Storage

Keep encrypted backups offsite or in secure cloud storage with access controls and versioning enabled.

Dates and recurring checks to track after execution

Mark key dates in a shared calendar and align corporate filings, tax reporting, and membership events to avoid missed obligations.

Effective Date:

The date operations or obligations begin per the agreement

Member Admission Dates:

Record dates for new member admissions and capital contributions

Annual Review:

Review terms annually or upon material business changes

Tax Reporting:

Align allocations to tax year and required IRS filings

Statement of Information:

File California LLC Statement of Information within 90 days of formation and every two years

Frequently asked questions about California Operating Agreements

Answers to common questions on enforceability, signatures, notarization, amendments, and recordkeeping for California LLC Operating Agreements.


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