Arizona LLC Operating Agreement

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Arizona LLC Operating Agreement (Your LLC's Rulebook)

Create a solid foundation for your LLC with a comprehensive Arizona LLC operating agreement. This essential document outlines ownership, responsibilities, and operating procedures. Download your LLC’s rulebook for free below.

Each Arizona LLC ought to possess an Operating Agreement, but acquiring one doesn’t need to break the bank. You can easily download and personalize your own Operating Agreement with our complimentary template provided below.

Arizona LLC Operating Agreement (Member-managed)

Here is a template for a Member-managed Operating Agreement, offered in three different formats. It is suitable for both Single-Member LLCs and Multi-Member LLCs.

Member-managed LLC Operating Agreement (Word)
Member-managed LLC Operating Agreement (PDF)
Member-managed LLC Operating Agreement (Google Docs)

A Member-managed LLC allows all Members (owners of the LLC) to legally bind the entity in contracts and agreements. Additionally, the Members are responsible for overseeing the business and its daily operations.

Arizona LLC Operating Agreement (Manager-managed)

Here is a template for a Manager-managed Operating Agreement offered in two formats. This document is suitable for both Single-Member LLCs and Multi-Member LLCs.

Manager-managed LLC Operating Agreement (Google Docs)
Manager-managed LLC Operating Agreement (Word)

A Manager-managed LLC is a structure in which one or more appointed individuals, referred to as Managers, possess the authority to legally bind the LLC in contracts and agreements. The Managers are also responsible for overseeing the business and managing daily operations.

The Members do not have the legal authority to obligate the LLC in contracts or agreements. Additionally, they are not involved in the management or daily operations of the business. Rather, they adopt a passive or investor-like role.

Nonetheless, the Members elect the Manager(s) to their roles and must cast votes on specific matters, such as the addition or removal of an LLC Member.

Which option should I select? It ultimately hinges on your preferred management style for your LLC. For further insights, refer to Member-managed vs Manager-managed LLC. If you’re uncertain about which direction to take, we suggest opting for the Member-managed Operating Agreement. This approach is the most prevalent form of LLC management.

Download a free LLC Operating Agreement:

Member-managed: Google Doc | Word | PDF
Manager-managed: Google Doc | Word

(What’s better? See Member-managed vs Manager-managed LLC)

What is an Arizona LLC Operating Agreement?

An Operating Agreement for an Arizona LLC is a formal document that outlines the relationship between the LLC Members (the owners of the LLC). This legal agreement contains comprehensive details regarding the ownership framework of the LLC, identifying the owners of the business and the management structure of the LLC.

Single-Member LLCs and Multi-Member LLCs ought to create an Operating Agreement, maintain it alongside their business documentation, and distribute a copy to each Member.

What should be included in LLC Operating Agreements?

Basic Details

Your Operating Agreement will contain essential details regarding your Limited Liability Company. Certain information will mirror what is outlined in your Arizona LLC Articles of Organization. An Operating Agreement should encompass:

LLC Name
LLC effective date
Arizona Registered Agent (if applicable)
purpose of your LLC
duration of your LLC
and how your LLC will be taxed

LLC Ownership

Your Operating Agreement contains a roster of all LLC Members along with the percentage of ownership each holds in the Limited Liability Company.

The portion of the LLC that a person possesses is referred to as their “LLC Membership Interest.”

LLC membership interest is typically represented as a percentage (such as 5%, 50%, 100%, etc.).

Note: Some individuals incorrectly refer to themselves as “shareholders” in an LLC. This is not correct. The terminology “shares” or “shareholders” is not applicable in the context of LLCs. The word “shares” is specifically associated with ownership in a Corporation.

Initial Capital Contributions (business bank account)

After your LLC gets the green light, it’s crucial to set up an LLC bank account and transfer funds into it. Each member of the LLC is required to make an initial capital contribution. This capital contribution refers to the act of depositing money into the LLC’s bank account.

You will list the initial capital contributions in your LLC’s Operating Agreement.

Pro tip: If you finalize your Operating Agreement prior to establishing an LLC bank account, simply input the amount that the Members intend to contribute. Should the deposit amount change, feel free to update your Operating Agreement with the correct figures at a later time.

Related guide: For additional information on capital contributions, including recommended contribution amounts, visit LLC Capital Contributions.

Statement regarding taxation

You will outline the taxation method for your LLC in the Operating Agreement. There are four typical tax classifications for an LLC:

LLC taxed as a Sole Proprietorship
LLC taxed as a Partnership
LLC taxed as an S-Corporation
LLC taxed as a C-Corporation

Note: Couples operating an LLC may occasionally opt for taxation as a Qualified Joint Venture LLC. For this to occur, the LLC needs to be established in a community property state. Since Arizona qualifies as a community property state, your Arizona LLC has the option to elect taxation as a Qualified Joint Venture.

Voting Privileges for LLC Members

The guidelines for membership voting will be detailed in the Operating Agreement of your Arizona LLC.

If you opt for the Member-managed Operating Agreement, the voting rights correspond to the LLC Membership Interest.

If you opt for the Manager-managed Operating Agreement, the voting rights correspond to the LLC Membership Interest. Subsequently, the Members cast their votes to appoint a Manager or Managers. The Manager(s) then possess the authority to make specific decisions for the LLC (without requiring a vote from the Members).

Nevertheless, specific actions, such as adding or removing a member from the LLC, necessitate a vote among the members (with the manager having no input).

Note:

It’s a common misconception to refer to LLC owners as “shareholders.” In reality, LLCs have “members,” not shareholders, and the term “shares” is specific to corporations.

Ensure that every LLC Member receives a copy.

After you complete your Agreement, ensure that every Member receives a copy.

It is advisable to retain a copy of the Operating Agreement among your LLC’s business documentation.

Frequently Asked Questions

Is an Operating Agreement necessary for an LLC in Arizona?

According to Section 29-3105 of the Arizona LLC Act, an Operating Agreement is not mandatory for an LLC in Arizona.

Although it is not mandatory to have an Operating Agreement for your LLC in Arizona, we highly advise that you prepare one. Moreover, various financial institutions, such as banks, and other entities might request this document to facilitate your business transactions.

Why is it important for an LLC with just one member to still have an Operating Agreement?

Having an Operating Agreement is highly advisable, even if you are the only Member (sole owner) of your Arizona LLC (a Single-Member LLC).

In the event of a court case, an Operating Agreement serves as evidence that your Single-Member LLC operates as an independent legal entity. This, in turn, safeguards your personal assets by strengthening the limited liability protection of the business entity.

Does a Multi-Member LLC require an Operating Agreement?

Having an Operating Agreement is highly recommended, particularly for a Multi-Member LLC. This important document outlines ownership shares, profit allocation, and management duties.

In the event of a legal dispute, an Operating Agreement serves as evidence that your Multi-Member LLC operates as an independent legal entity.

Do I need to submit my Operating Agreement to the state?

No, there’s no requirement to submit your Operating Agreement to the Arizona Corporation Commission or any other governmental body.

Operating Agreements are considered “internal documents.” This means that Members only need to maintain a copy within their business records.

The Operating Agreement is a legally enforceable document for the LLC Members due to the signatures of the Members. It does not require an official endorsement from the Arizona Corporation Commission.

In the future, if your business finds itself in a legal dispute or undergoing an audit, a court or regulatory body may request to review your Operating Agreement.

Furthermore, you might also be required to present this document to:

financial entities when establishing a commercial bank account
financial organizations when you seek a loan for the LLC
a title company when your LLC purchases real estate

Is it necessary for my LLC Operating Agreement to be notarized?

No, there is no requirement for your Operating Agreement to be notarized. It simply needs to be signed by each Member. Once you and any other LLC Members have signed the Operating Agreement, it will be considered a legally binding document.

Is it possible to draft my own Operating Agreement?

Certainly! We suggest utilizing a template for your Operating Agreement.

An Operating Agreement is a formal legal document. However, you are not required to engage an attorney to create one. Utilizing a template ensures that you address all necessary aspects.

We provide complimentary Operating Agreement templates that you can easily download and modify to create your own LLC Operating Agreement.

How can you create a straightforward Operating Agreement?

If you’re looking to create a straightforward Arizona Operating Agreement without relying on a template, it’s entirely possible. Just ensure you consult the Arizona LLC Act to confirm it complies with all necessary stipulations.

For instance, at the very least, you should include your Arizona LLC name, details about your Registered Agent, the purpose of your business, the names of the LLC Members, and data on initial capital contributions.

Nonetheless, there is significantly more information that is crucial to record regarding your LLC.

Starting with a pre-existing template is likely much simpler. On this page, you can download our complimentary Operating Agreement template.

What distinguishes an LLC from an Operating Agreement?

An LLC (Limited Liability Company) represents a specific business structure. This legal entity is established by submitting a document known as the Articles of Organization to the state.

An Operating Agreement is a foundational document that outlines the operational framework of your LLC. It specifies the ownership percentages for each Member, along with other critical information regarding management and taxation.

In other terms, the LLC serves as your legal structure. Meanwhile, the Operating Agreement outlines the established guidelines for the LLC’s operations.

You can establish an LLC without an Operating Agreement (though it’s not advisable). However, an Operating Agreement cannot exist without an LLC.

What are the steps to establish a Limited Liability Company in Arizona?

Here are the procedures for establishing an LLC in Arizona:

Select a name for your LLC and verify its availability.
Select your Arizona Statutory Agent
Submit the Articles of Organization for your Arizona LLC
Finalize and endorse an LLC Operating Agreement
Obtain an Employer Identification Number (EIN) from the IRS
Announce your new business in the local newspaper.
Investigate the prerequisites for obtaining a business license.
Open LLC bank accounts

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