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LLC Operating Agreement

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SAMPLE OPERATING AGREEMENT - KENTUCKY PLLC

KY-PLLC-1

This agreement is a sample operating agreement and should be modified to meet your needs.

It provides for the PLLC to be operated by one or more managers OR by the members.

INSERT THE NAME OF YOUR PROFESSION/PRACTICE INTO THE BLANKS.

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

OPERATING AGREEMENT

OF

A KENTUCKY PROFESSIONAL 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 PLLC. The Parties have formed a Kentucky professional limited liability company named ("PLLC").

2. Articles or Organization. The Members acting through one of its Members, , filed Articles of Organization for record in the office of the Kentucky Secretary of State on , thereby creating the PLLC.

3. Business. The business of the PLLC shall be to engage in the practice of and to perform or engage in any act or business in which a limited liability company is allowed to participate in Kentucky.

4. Registered Office and Registered Agent. The registered office and place of business of the PLLC 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 PLLC will commence business as of the date of filing and will continue in perpetuity.

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

ARTICLE II

MEMBERS

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

Initial Members Percentage Interest in PLLC Capital Contribution

8. Membership Restriction.

(a) Each member of the PLLC and each of the employees of the PLLC engaged in the practice of shall be licensed to practice in Kentucky.

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

(c) If the PLLC is managed by managers, each manager shall be licensed to practice in Kentucky.

ARTICLE III

MANAGEMENT

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

The management of the PLLC shall be vested in the Members without an appointed manager.

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

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

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

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

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

e) 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.

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

g) There shall be initial Managers.

h) The initial Manager(s) is/are:

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

(a) Officers. The officers of the PLLC shall consist of a president, a treasurer and a secretary, or other officers or agents as may be elected and appointed by the Members.

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

(c) Removal. Any officer or agent may be removed by a majority of the Members whenever they decide that the best interests of the Company would be served thereby.

11. Member Only Powers. Notwithstanding any other provision of this Agreement, only a majority of the Members may: (a) sell or encumber any real estate owned by the PLLC, or (b) incur debt, expend funds, or otherwise obligate the PLLC if the debt, expenditure, or other obligation exceeds $.

ARTICLE IV

CONTRIBUTIONS, PROFITS, LOSSES, AND DISTRIBUTIONS

12. Interest of Members. Each Member shall own a percentage interest in the PLLC.

13. Contributions. The initial contributions and initial percentage interest of the Members are as set out in this Agreement.

14. Additional Contributions. Only a majority of the Members of the PLLC may call on the Members to make additional cash contributions as may be necessary to carry on the PLLC's business.

15. Record of Contributions/Percentage Interests. This Agreement, any amendment(s) to this Agreement, and all Resolutions of the Members of the PLLC shall constitute the record of the Members of the PLLC and of their respective interest therein.

16. Profits and Losses. The profits and losses and all other tax attributes of the PLLC shall be allocated among the Members on the basis of the Members' percentage interests in the PLLC.

17. Distributions. Distributions of cash or other assets of the PLLC shall be made in the total amounts and at the times as determined by a majority of the Members.

18. Change in Interests. If during any year there is a change in a Member's percentage interest, the Member's share shall be determined under a method which takes into account the varying interests during the year.

ARTICLE V

VOTING; CONSENT TO ACTION

19. Voting by Members. Members shall be entitled to vote on all matters in accordance with each Member’s percentage interest.

20. Majority Required. Except as otherwise provided, a majority of the Members is required for any action.

21. Meetings - Written Consent. Action of the Members or Officers may be accomplished with or without a meeting.

22. Meetings. Meetings of the Members may be called by any Member owning 10% or more of the PLLC.

23. Majority Defined. As used throughout this agreement the term “Majority” of the Members shall mean a majority of the ownership interest of the PLLC.

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.

25. Members Have No Exclusive Duty to PLLC. Members may have other business interests and may participate in other investments or activities.

26. Protection of Members and Officers.

(a) As used herein, the term “Protected Party” refers to the Members and officers of the Company.

(b) A Protected Party acting under this Agreement shall not be liable to the PLLC or to any other Protected Party for good faith reliance on:

(i) the provisions of this Agreement;

(ii) the records of the PLLC; and/or

(iii) information, opinions, reports or statements presented to the PLLC by a qualified person.

27. Indemnification and Insurance.

(a) Right to Indemnification.

(i) Any person who is or was a member or officer of the PLLC may be indemnified and held harmless by the PLLC.

(ii) Any person who is or was a member or officer of the PLLC in a criminal action may be indemnified and held harmless by the PLLC.

(b) Advancement of Expenses.

(c) Non-Exclusivity of Rights.

(d) Insurance.

(e) Effect of Amendment.

ARTICLE VII

MEMBERS INTEREST TERMINATED

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

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

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

(c) A Member dies.

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

(e) In the case of an estate that is a Member, the distribution by the fiduciary of the estate's entire interest in the PLLC.

(f) A Member, without the consent of a majority of the Members, becomes subject to insolvency or bankruptcy proceedings.

(g) If within one hundred twenty (120) days after the commencement of any action against a Member seeking reorganization, the action has not been dismissed and/or has not been consented to by a majority of the members.

(h) If within ninety (90) days after the appointment of a trustee, receiver, or liquidator, said appointment is not vacated.

(i) Any of the events provided in applicable code provisions that are not inconsistent with the dissociation events identified above.

(j) Any member is no longer qualified to practice in Kentucky.

29. Effect of Dissociation. Any dissociated Member shall not be entitled to receive the fair value of his PLLC interest solely by virtue of his dissociation.

ARTICLE VIII

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

30. PLLC Interest. The PLLC interest is personal property.

31. Encumbrance. A Member can encumber his PLLC interest only with the consent of a majority of the other Members.

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

(a) If a Member desires to sell his/her interest, he/she shall give written notice to the PLLC and must first offer the interest to the PLLC.

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.

(b) To the extent the PLLC does not buy the offered interest, the other Members shall have the option to buy on a pro rata basis.

(c) To the extent the PLLC or the Members do not buy the offered interest, the selling Member can then assign the interest to a non-member.

(d) The selling Member must close on the assignment within ninety (90) days.

(e) A non-member purchaser cannot exercise any rights of a Member unless a majority of the non-selling Members consent.

(f) A membership interest may be transferred only to an individual licensed to practice in Kentucky.

33. Set Price. The Set Price for purposes of this Agreement shall be the price fixed by consent of a majority of the Members.

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

36. Final Distributions. Upon the winding up of the PLLC, the assets must be distributed to creditors, then to Members in satisfaction of liabilities, and then to Members for the return of their contributions.

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 PLLC be taxed as a partnership and not as an association taxable as a corporation.

ARTICLE XII

RECORDS AND INFORMATION

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

40. Obtaining Additional Information. Each Member may obtain information regarding the business and financial condition of the PLLC and other reasonable information.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

41. Amendment. Any amendment to this Agreement may be proposed by a Member and approved in writing by a majority of the Members.

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

43. Pronouns, Etc. References to a Member or Manager 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. The nonbreaching Members shall be entitled to injunctive relief to prevent breaches of this Agreement.

46. Further Action. Each Member agrees to perform all further acts and to execute any documents necessary to carry out the provisions of this Agreement.

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. Copies, facsimiles, 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 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 KENTUCKY PROFESSIONAL LIMITED LIABILITY COMPANY.

EACH MEMBER REALIZES THAT AN INVESTMENT IN THIS COMPANY IS SPECULATIVE AND INVOLVES SUBSTANTIAL RISK.

EACH MEMBER IS AWARE AND CONSENTS TO THE FACT THAT THE INTERESTS IN THE COMPANY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY SECURITIES ACT OF THE KENTUCKY.

EACH MEMBER AGREES TO BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND THE FORMATION CERTIFICATE OR ARTICLES.

Members:

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What an LLC Operating Agreement Is and Why It Matters

An LLC Operating Agreement is a private contract among a limited liability company's members that sets out ownership percentages, management structure, voting rights, capital contributions, profit and loss allocation, and procedures for admitting or removing members. Although most states do not require filing the agreement with the Secretary of State, the document governs internal affairs, clarifies tax treatment, and preserves limited liability protection by demonstrating formal governance. Well-drafted operating agreements reduce disputes, provide clear succession and dissolution rules, and support lenders or investors who request evidence of governance.

Why a Clear Operating Agreement Protects Members and the Business

A written LLC Operating Agreement documents member expectations, allocates economic and managerial rights, and creates predictable dispute-resolution paths. It helps enforce limited liability protections and makes tax and banking interactions straightforward.

Why a Clear Operating Agreement Protects Members and the Business

Who Typically Prepares and Signs an Operating Agreement

Attorneys, accountants, and formation services commonly assist with drafting and periodic updates to ensure alignment with state law.

  • Single‑member owners who want to record sole ownership and clarify tax classification.
  • Multi‑member groups establishing percentages, distributions, and voting rules.
  • Investors or lenders requiring governance clarity before providing capital.

Step-by-step: Completing an LLC Operating Agreement

Follow a clear sequential approach: prepare entity details, list members and contributions, set management rules, and include amendment and dissolution procedures.

  • 01
    Enter entity: Provide the exact legal name and formation state.
  • 02
    List members: Add full names, ownership percentages, and capital contributions.
  • 03
    Choose management: Specify member‑managed or manager‑managed structure.
  • 04
    Sign and date: All members sign; include effective date.

Core provisions to include in a professional Operating Agreement

A comprehensive agreement anticipates governance, economic allocations, transfer restrictions, and contingencies for member changes and dissolution.

Formation Details

State the LLC name, principal place of business, formation state, and effective date to establish the entity's basic identity.

Member Rights

Define voting thresholds, consent requirements, and reserved matters that need supermajority or unanimous approval.

Capital & Contributions

Document initial contributions, future capital call procedures, and remedies for unpaid contributions.

Profit Distribution

Specify allocation rules, distribution timing, tax allocations, and preferred returns if applicable.

Management Powers

Describe manager authorities, limitations, indemnities, and any delegated operational procedures.

Dissolution & Exit

Include buyout formulas, member withdrawal rules, dissolution triggers, and wind‑up procedures.

Required information commonly captured in the agreement

LLC Name: Full legal name
Formation State: State of organization
Effective Date: MM/DD/YYYY format
Member Names: Full legal names
Ownership %: Exact percentage shares
Signatures: Member signatures and dates

Consequences and risks from incomplete or incorrect agreements

Loss of clarity: Member disputes likely
Piercing risk: Liability exposure increased
Tax issues: Incorrect allocations possible
Contract challenges: Third‑party reliance problems
Banking delays: Account opening may be blocked
Investor objections: Funding may be withheld

Common mistakes to avoid when preparing an Operating Agreement

  • Using informal language that leaves duties and voting rights undefined, creating ambiguity during disputes.
  • Failing to record capital contributions and valuation methods, which complicates future buyouts and tax reporting.
  • Neglecting transfer restrictions or right of first refusal, enabling unwanted ownership changes without member consent.
  • Omitting amendment and dissolution procedures, which can delay wind‑up and increase litigation risk.

Real examples of teams using eSigning for governance documents

Organizations use eSignature platforms to distribute, sign, and store Operating Agreements securely across devices and teams.

Optica Ventures LLC

Optica adopted electronic signing to streamline member approvals and remote execution.

  • The interface is simple and easy-to-use for our team.
  • The result was faster agreement execution and fewer scheduling delays, allowing investment deals and onboarding to proceed without in-person signatures.

Martin Properties

A real estate owner used online signing for multiple member amendments across properties.

  • I can process and execute all of these documents online with 100% compliance.
  • Digital execution reduced turnaround time for ownership transfers and enabled timely responses to lender and title company requests.

How electronic execution typically works for an Operating Agreement

Electronic signing follows a predictable workflow from upload to signed record with audit trail and downloadable files.

  • Upload document: Add the Operating Agreement PDF or DOCX file.
  • Place fields: Insert signature, date, and initial fields where required.
  • Authenticate signer: Use email link, SMS code, or stronger ID verification.
  • Capture audit: System logs IP, timestamps, and actions.

Recommended online workflow settings for executing agreements

Configure a reproducible template and signer rules to reduce manual steps and ensure consistent compliance.

Field Configuration
Template Create reusable template with fixed clauses
Authentication Email link or SMS code for signer identity
Conditional Fields Show fields only when specific answers apply
Storage Auto-save signed PDF to secure repository

Digital signing and integration considerations

Choose a platform with APIs and storage integrations to automate routing, archiving, and retrieval of signed Operating Agreements.

  • Salesforce: Salesforce integration available
  • NetSuite: NetSuite connector supported
  • Google Workspace: Save to Google Drive

Key timing considerations when creating or updating an Operating Agreement

Although the agreement itself is internal, observe formation and reporting timelines that affect governance and tax obligations.

Adopt at formation:

Execute the agreement when the LLC is formed or before business operations begin.

Initial meeting:

Hold member meeting within 30–90 days to approve organizational matters.

Annual updates:

Review and amend after major ownership or management changes.

State reports:

File any required annual report by the state deadline to remain compliant.

Amendment notice:

Provide notice per agreement terms, often 10–30 days before effective changes.

Milestones from drafting to record retention

Track milestones from initial draft through member approval, execution, and long‑term record retention to maintain legal protection.

01

Drafting

Prepare text covering governance, contributions, distributions, and exit rules.

02

Member approval

Obtain required member consents or written resolutions.

03

Execution

All members sign; capture electronic audit trail and dates.

04

Record retention

Store executed agreement with formation records for required retention period.

Select eSignature vendor comparison for executing Operating Agreements

Compare common capability and pricing dimensions when selecting an eSignature provider; signNow is listed first for direct comparison.

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 Varies by vendor Varies by vendor Varies by vendor Varies by vendor
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Frequently asked questions about Operating Agreements and electronic signing

Answers to common issues when drafting, signing, or storing an Operating Agreement electronically.


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