By Joseph W. Boucher
Excerpted from Drafting LLC and Partnership Agreements
The sample LLC Checklist provided in the following section [Form 1-1] can be used to collect critical information and to identify certain matters that must be covered in an LLC Operating Agreement.
For a more detailed and complete LLC Checklist, see the LLC Formation Checklist prepared by the American Bar Association. [See LLC Subcommittee of the ABA Commission on LLCs, P’ships and Unincorporated Entities, Model LLC Organizational Checklist (Final Subcommittee draft, publication forthcoming).]
§1:91 LLC Agreements Are Industry Specific
The LLC Checklist [Form 1-1] is not business or transaction specific. However, a final LLC Operating Agreement needs to be drafted to reflect the characteristics of the business of the LLC.
Specific samples of LLCs for different types of businesses are provided in the Chapters 2 through 13, relating to specific businesses.
Form 1-1 LLC Checklist
LLC Checklist
A. Client
1. Client is (describe, e.g., Member; LLC; Manager; Member and LLC; More Than One Member):
_______________________________________________________________________________
_______________________________________________________________________________
2. Name and Address of Client(s):
a. ___________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
3. Engagement Letter and Waivers: ________________________________________________
4. Client/Matter Number: _________________________________________________________
5. Accountant: _________________________________________________________________
B. Information for Articles of Organization
1. State of Organization: _________________________________________________________
2. Name of LLC: _______________________________________________________________
3. LLC will be: Member Managed; Manager Managed; Other
4. Name of Registered Agent: _____________________________________________________
5. Address of Registered Agent: ___________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
6. Principal Address of LLC: ______________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
7. Name and Address of Organizer (describe): _______________________________________
_______________________________________________________________________________
_______________________________________________________________________________
8. Effective Date of Organization: __________________________________________________
9. Professional LLC: Yes No
10. Formed by Conversion or Merger: Yes No
11. Special Provisions: __________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
12. Operating Agreement to be Signed by LLC: Yes No
13. Operating Agreement to be Signed by Managers: Yes No N/A
C. Information for Articles of Organization
1. Member #1:
Name: _______________________________________________________________________
United States Person: Yes No
If entity: form of entity, jurisdiction of organization and tax status: _________________________
_______________________________________________________________________________
State(s) of Residence or Residence In Which Taxable: ________________________________
Taxpayer Identification Number: ___________________________________________________
Address: _____________________________________________________________________
Telephone Number: _____________________________________________________________
Fax Number: __________________________________________________________________
E-mail Address: ________________________________________________________________
Member #2:
Name: _______________________________________________________________________
United States Person: Yes No
If entity: form of entity, jurisdiction of organization and tax status: _________________________
_______________________________________________________________________________
State(s) of Residence or Residence In Which Taxable: ________________________________
Taxpayer Identification Number: ___________________________________________________
Address: _____________________________________________________________________
Telephone Number: _____________________________________________________________
Fax Number: __________________________________________________________________
E-mail Address: ________________________________________________________________
Member #3:
Name: _______________________________________________________________________
United States Person: Yes No
If entity: form of entity, jurisdiction of organization and tax status: _________________________
_______________________________________________________________________________
State(s) of Residence or Residence In Which Taxable: ________________________________
Taxpayer Identification Number: ___________________________________________________
Address: _____________________________________________________________________
Telephone Number: _____________________________________________________________
Fax Number: __________________________________________________________________
E-mail Address: ________________________________________________________________
Member #4:
Name: _______________________________________________________________________
United States Person: Yes No
If entity: form of entity, jurisdiction of organization and tax status: _________________________
_______________________________________________________________________________
State(s) of Residence or Residence In Which Taxable: ________________________________
Taxpayer Identification Number: ___________________________________________________
Address: _____________________________________________________________________
Telephone Number: _____________________________________________________________
Fax Number: __________________________________________________________________
E-mail Address: ________________________________________________________________
If Member is a trust, estate, or other entity, provide key information.
2. Tax Classification:
a. Is this a single member LLC: Yes No
b. If LLC is to be taxed other than as a partnership under Subchapter K, describe how and why:
________________________________________________________________________________
________________________________________________________________________________
D. General Provisions
1. General Provisions:
a. Effective date of operating agreement: _________, 20__
b. Statement of LLC’s purpose: ___________________________________________________
________________________________________________________________________________
c. Fiscal year Calendar year Other: __________________________________________
2. Financial Statements; Accountant; Accounting Method; Audits:
a. Describe how often financial statements will be given to Members: _____________________
________________________________________________________________________________
b. Name of accountant and contact information:
(Name) ______________________________________________________________________
(Firm) ________________________________________________________________________
(Address) _____________________________________________________________________
______________________________________________________________________________
(Phone) ______________________________________________________________________
(E-mail) ______________________________________________________________________
c. Accounting method: Cash Accrual
d. Certification of membership interests: Yes No
3. Capital Contributions:
a. Initial contributions:
Member Form of Contribution (if debt, how secured?) Value
1. ________ __________________________________________ ________
2. ________ __________________________________________ ________
3. ________ __________________________________________ ________
4. ________ __________________________________________ ________
b. Representations and warranties regarding debt and title related to contributions (Title Insurance required by LLC?) (Consider preparation of separate contribution agreement):
________________________________________________________________________________
________________________________________________________________________________
4. Additional Contributions:
a. Are additional contributions required? Yes No
b. If agreed in advance:
Form of Contribution Value Date or Conditions of Making Contributions
1. _____________________ __________ ________________________________________
2. _____________________ __________ ________________________________________
3. _____________________ __________ ________________________________________
4. _____________________ __________ ________________________________________
c. Are additional capital calls permitted? Yes No
(i) What triggers events then? (describe): ___________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
d. Describe consequences of failure to fund: _________________________________________
______________________________________________________________________________
Suggestions:
(i) Reduction in share of profits
(ii) Reduction in share of profits and reallocation of capital
(iii) Preferential distributions to other members
(iv) Loan from company at ____%
(v) Loan from non-defaulting member (and interest rate)
(vi) Personal liability on the part of member
(vii) Opportunities for other members to make up and defaulting member is diluted
(viii) Suspension of management authority or voting rights
(ix) Right to purchase defaulting member’s interest in the LLC
(x) Forfeiture of defaulting member’s interest in the LLC
(xi) Automatic diversion of distributions to make up deficit (lien like)
e. Adjustment of capital accounts: _________________________________________________
5. Issuance of Equity Interests to Service Provider:
a. Equity interests offered as compensation for services? Yes No
b. Describe specifics: ___________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
6. Are Members Guaranteeing LLC Obligations? (describe): _________________________
______________________________________________________________________________
______________________________________________________________________________
7. Describe Distributions:
a. General: ____________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
b. Proceeds from capital transactions: ______________________________________________
______________________________________________________________________________
______________________________________________________________________________
c. Liquidating distributions: _______________________________________________________
______________________________________________________________________________
______________________________________________________________________________
d. In kind: _____________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
e. Tax distributions: _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
8. Describe Maintenance of Capital Accounts. Capital accounts will be maintained in accordance with Treas. Reg. §1.704-1(b)(2)(iv): Yes No
______________________________________________________________________________
______________________________________________________________________________
9. Describe Allocations of Profits and Losses: _____________________________________
______________________________________________________________________________
______________________________________________________________________________
10. Allocation of Debt (if any): ___________________________________________________
11. Describe Loans From Members: _____________________________________________
______________________________________________________________________________
______________________________________________________________________________
12. Transfers of Membership Interests:
a. Voluntary transfers:
(i) Absolutely prohibited
(ii) Permitted, but assignee is not admitted without consent of ____% of the other members
(iii) Permitted only with consent of ____% of the other members
(iv) Permitted to (describe): ________________________________________________
b. Involuntary transfers:
(i) Assignee is not admitted without consent of all other members
(ii) Assignee not admitted without consent of ____% of the other members
c. Rights of first refusal/offer (describe): ____________________________________________
_____________________________________________________________________________
13. Describe Member Termination Arrangements:
a. Type of arrangement – describe (Put/Call/ Buy-Sell): ________________________________
_____________________________________________________________________________
b. Describe circumstance for exercise of disengagement: ______________________________
_____________________________________________________________________________
c. Price:
(i) Set by agreement by the members or managers on a regular basis
(ii) “Book” value
(1) As kept for tax purposes (prepared by the Company’s regular employed accountant)
(2) “Booked up” to fair market value of Company assets
(iii) “Fair market” determined by appraisal periodically or at time of call, etc.
(1) As kept for tax purposes
(2) “Booked up” to fair market value of Company assets
(iv) Formula: _______________________________________________________________
14. Dissociation:
a. Describe voluntary withdrawal of a member: _______________________________________
_____________________________________________________________________________
b. Describe death, disability, dissolution or bankruptcy of a member:______________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
c. Describe dissolution/termination of a member’s existence as a member: ________________
_____________________________________________________________________________
_____________________________________________________________________________
15. Describe Consent for Approval of Amendments to Operating Agreement: __________
_____________________________________________________________________________
_____________________________________________________________________________
16. Will the LLC Go Public? Yes No
17. Dissenters’ Rights in the Event of Merger: Yes No
18. Derivative Actions: Yes No
19. Tax Matter Partner: ________________________________________________________
E. General Member Information
1. Describe Classes of Members: ________________________________________________
______________________________________________________________________________
2. Describe Manner of Consenting: ______________________________________________
______________________________________________________________________________
F. Information for Operating Agreement if Member-Managed
1. Describe Methods of Measuring Level of Authorization or Consent: _______________
_____________________________________________________________________________
_____________________________________________________________________________
G. Information for Operating Agreement if Manager-Managed
1. Describe Initial Managers: ____________________________________________________
______________________________________________________________________________
2. Describe Qualification of Managers: ___________________________________________
______________________________________________________________________________
3. Describe Selection of Managers: ______________________________________________
_____________________________________________________________________________
4. Describe Election or Appointment of Managers: _________________________________
______________________________________________________________________________
5. Describe Removal of Managers: ______________________________________________
_____________________________________________________________________________
6. Describe Manner of Consenting: ______________________________________________
______________________________________________________________________________
7. Describe Methods of Measuring Level of Consent: ______________________________
8. Managers to Sign Operating Agreement: Yes No
9. Describe Duties of Managers: ________________________________________________
_____________________________________________________________________________
H. Other Matters
1. Foreign Qualifications: Yes No
Describe: _____________________________________________________________________
2. Capital Contribution Agreement Needed: Yes No
Describe: _____________________________________________________________________
3. Business Already in Operation as a General/Limited Partnership or Sole Proprietorship:
Yes No
a. Describe transfer of documents of assets in exchange of capital contribution: ____________
_____________________________________________________________________________
_____________________________________________________________________________
b. Tax considerations for initial contribution (book-up, taxable event, etc.): __________________
______________________________________________________________________________
______________________________________________________________________________
4. Trade Name Registrations With Secretary of State: ______________________________
______________________________________________________________________________
______________________________________________________________________________
5. Advice Given That Name Registration of Company and of Trade Name Does Not Give Trademark Protection: Yes No
Intellectual Property Work Referred to: __________________________________________
6. Describe Domain Name: _____________________________________________________
_____________________________________________________________________________
7. Name of Accountants; Other Legal Advisors:
a. Tax Advisor: _________________________________________________________________
b. Estate Planning Attorney: ______________________________________________________
c. Financial Advisor: ____________________________________________________________
d. Other Advisor: _______________________________________________________________
I. Dissolution, Winding Up and Termination
1. Describe Voluntary Dissolution: _______________________________________________
______________________________________________________________________________
2. Describe Involuntary Dissolution: _____________________________________________
______________________________________________________________________________
J. Dispute Resolution
1. Mediation Required: Yes No
2. Arbitration: Yes No
Describe: _____________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
K. Representations and Warranties
1. For Any Member That is an Entity, Due Formation and Valid Existence
2. Member Has Read the Agreement
3. Member Not Named on OFAC SDN List
4. Representation of Accredited Investor Status and Other Disclosures Required Pursuant to Applicable Federal and State Securities Laws
5. ___________________________________________________________________________
6. ___________________________________________________________________________
7. ___________________________________________________________________________
| Task | Party Responsible | Deadline |
| Articles/Certificate of Organization |
||
| File Immediately? Yes/No |
Delayed Effective Date?
Yes/No Operating Agreement Capital Contribution
Agreement Manager Employment
Agreement(s) Member Employment
Agreement(s) Equity Compensation
Documents Subscription Agreements Bills of Sale for Capital
Contribution Assignments for Capital
Contribution Tax Identification Number
(SS-4) State Revenue Initial
Filing Registration Company Minute Book Foreign State
Qualifications
Joseph W. Boucher practices business and tax law in Madison, Wisconsin, at Neider & Boucher. He focuses on business entity planning and early stage business formation. He has served as a chair of the Wisconsin state committee on LLC legislation, and lectures on business law to graduate and undergraduate students at the University of Wisconsin-Madison Business School.
Since 1994 he has been a co-author of the State Bar’s Wisconsin Limited Liability Handbook, and since 1991 he has been a co-author of Organizing a Wisconsin Business Corporation. Milwaukee magazine and Super Lawyers has named him one of the best business lawyers in Wisconsin. Mr. Boucher is a CPA, and received his MBA and JD from University of Wisconsin-Madison.