As you may know, a “corporate kit” includes a pre-made form of limited liability company operating agreement.  There is no telling how complete these are and whether or not they were prepared by a corporate attorney.  Certainly an off-the-shelf operating agreement is not customized for your needs.  I recommend having a New York Small Business Attorney (corporate attorney or startup lawyer) review and/or draft and negotiate the operating agreement — especially when you have two or more members.  Here is a checklist of some of the items to consider addressing in your operating agreement (for that matter, these are some of the items that you should consider addressing in a shareholder agreement or a partnership agreement).

  • General Provisions
    • Purpose of LLC — Will this be a special purpose entity?
    • Scope of activity — Geographic boundaries, etc.
    • Limitations on operations — Incurrence of indebtedness, other?
    • How many classes of membership?  What are the membership rights and obligations of each class?
  • Capital Contributions to the LLC
    • Have there been any to date?
    • Percentages
    • Additional contributions
      • Ability to call
      • Default provisions (straight dilution or penalties?)
  • Governance of the Limited Liability Company
    • Day-to-day management of the LLC
    • Company opportunities
    • Conflicts of interest
    • Major decisions
    • Indemnification
    • Resolution of deadlocks
      • Arbitration
      • Buy/Sell
        • Methodology for determining price — By Triggering member, Appraisal, or Arbitration?
  • Distributions of Profits / Allocation of Losses
    • Timing
    • Amount
    • Capital vs. profits
    • In-kind distributions
  • Admission of Additional Member(s) to the LLC
    • Any new members contemplated?
    • Terms and conditions of admission
  • Withdrawal of Member from the LLC
    • Ability to withdraw
    • Confidentiality
    • Non-compete
    • Other considerations?
  • Transfers of LLC Membership Interests
    • Permitted?
    • To estate planning vehicles
    • To family members/affiliates
  • Third party transfers
    • Right of first offer/right of first refusal
    • Other conditions to transfer
  • Termination of the Company
    • Fixed term?
    • Trigger events?
    • Standard (involuntary bankruptcy, court order, etc.)

Of course, it is best to discuss the above New York LLC Operating Agreement Checklist with a New York Startup Attorney or Business Lawyer.