A Kansas LLC Operating Agreement, to put it succinctly, is like a custom-drawn plan for your LLC offering a lucid outline for its functioning. Picture us sipping on our coffees as I explain it to you: it's your tailored handbook demarcating the operational rules of your business, stipulating elements such as the dispersion of ownership, the course of decision-making, and succession tactics.
Within the scope of Kansas's LLC legislative guidelines, this agreement is your space to highlight vital facets including the responsibilities of members, the progression of decision-making, and mechanisms for dispute resolution. Consider it your business’s compass, adept at eliminating potential misinterpretations and ensuring the steady progress of your entrepreneurial venture.
No, it's not legally required in Kansas under § 17-76,134. Single-member LLCs need an operating agreement to preserve their corporate veil and to prove ownership. And multi-member LLCs need one to help provide operating guidance, determine voting rights and contributions.
Read on to learn more about Kansas operating agreements, including:
Here are some key components that are typically included in a Kansas LLC operating agreement:
Well, let's explore the usual provisions and provide some examples to assist you.
At this stage, you've likely decided on your LLC's name (it's the name you used when you registered your LLC formation documents). Here, you'll also want to clarify the purpose of your LLC. You don't need to go into excessive detail. A broad statement gives you the freedom to branch out into new business opportunities without redoing paperwork.
OPERATING AGREEMENT of [COMPANY NAME]
This operating agreement is adopted as of [Date] (the “Effective Date”), by [Member’s Name] , an individual and the sole member (the “Member”) of [Company Name] (the “Company”).
The Member hereby adopts this agreement as the operating agreement of the Company, which agreement sets forth the entire understanding of the Member regarding its subject matter and supersedes all prior understandings and agreements regarding its subject matter.
The purpose of the Company is [ Company Purpose] , and the conduct of other activities as may be necessary or appropriate to promote the stated purposes, and to engage in any other lawful business or activity for which a limited liability company may be organized under the Act.
This is the section where you specify whether your LLC will be managed by its members or an appointed manager. It also details each member's rights and responsibilities, encompassing capital contributions, voting rights, and management structure. Even if you're the sole member, defining these things is pivotal in legitimizing your single-member LLC.
The business and affairs of the Company will be managed by the Member. The vote, action, decision, or consent of the Member will constitute a valid decision of the Member and the Company. The Member may appoint one or more officers (including the Member, if the Member is an individual) who will have such powers and authority to act on behalf of the Company granted to them by the Member.
The business and affairs of the Company will be managed by the manager of the Company and any successor thereto appointed by the Member, which manager may also be referred to as the Company’s president (the “Manager”). The initial Manager will be [Manager Name] , who will serve until the Manager’s death, removal by the Member (for any reason or no reason), or resignation. The Manager will have the right and authority to manage the affairs of the Company and make decisions and take action with respect thereto without further approval or consent of any kind by the Member. Except as otherwise required by this agreement and in lieu of any limitations set forth in [State Name] ’s laws for limited liability companies (the “Act”), the Manager will be solely responsible for and is hereby authorized to manage and operate the business of the Company. Except to the extent that the authority of the Manager is expressly limited by the Member, the vote, action, decision, or consent of the Manager will constitute a valid decision of the Manager and the Company.
The registered agent is the individual entrusted with receiving and handling important documents on your company's behalf. Some LLC operating agreements include this point, but it's not mandatory as your organizing state has this detail in the formation documents you file.
The Company’s registered agent in State is: Registered Agent Name , Address . The members may designate other registered agents or offices at any time in this state or, if necessary, in other states.
The "term of an LLC" can be considered as the lifespan of your Limited Liability Company. It describes the duration your LLC is intended to exist as stated in your formation documents. While several business owners establish LLCs with the plan of them operating indefinitely, you also have the option to define a fixed period or end date for your LLC.
In Kansas, like in many states, LLCs are perceived as "perpetual" by default, implying they can exist as long as you wish. The majority of Kansas LLCs opt for a perpetual duration.
The duration of the Company will be perpetual.
Capital contributions refer to the funds, property, or services you inject into your LLC to get its operations underway. This can be treated as an initial investment you make to set your business in motion. For single-member LLCs, capital contributions can solely be from you as the owner, meaning you have complete autonomy to decide the amount of money or assets you want to invest.
Properly documenting your capital contributions is critical. This offers a transparent view of your business's financial structure and is beneficial for taxation purposes.
The Member’s capital contribution(s) to the capital of the Company for the Member’s membership interest in the Company will be reflected on the books and records of the Company.
The members have made or shall make the contributions of cash, property or services to the LLC as set forth on Exhibit A attached
Indemnification provisions in an LLC's Operating Agreement serve as a safety cushion protecting the company's members from certain expenses tied to legal problems that might arise from their involvement with the company. In essence, the LLC will foot the bill for any legal fees or damages if a member is sued in connection to their duties for the business.
The agreement should explicitly outline when and under which circumstances the LLC will grant this protection, together with any exceptions. Generally, indemnification doesn't cover intentional wrongdoing or gross negligence. Tailoring these terms to risks unique to your business is key to ensure comprehensive protection.
The Member, the Manager, the officers, and the organizer of the Company and their respective affiliates, stockholders, members, managers, directors, officers, partners, employees, agents, trustees, and representatives (individually, an “Indemnitee”) will be indemnified by the Company against any and all losses, claims, damages, liabilities, expenses (including legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits, or proceedings, civil, criminal, administrative, or investigative, in which the Indemnitee may be involved, or threatened to be involved, as a party or otherwise by reason of the Indemnitee’s status as any of the foregoing, which relates to or arises out of the Company or its assets, business, or affairs, if in each of the foregoing cases (A) the Indemnitee acted in good faith and in a manner the Indemnitee believed to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful, and (B) the Indemnitee’s conduct did not constitute gross negligence or willful or wanton misconduct. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere, or its equivalent, will not, of itself, create a presumption that the Indemnitee acted in a manner contrary to that specified in clause (A) or (B) above. Any indemnification under this section 5 will be made only out of the assets of the Company, and the Member will not have any personal liability on account thereof.
Your Kansas LLC can be taxed in one of four ways: as a sole proprietorship, partnership, S corporation, or C corporation. The tax treatment of your LLC depends on the number of members and what tax status your business picks with the IRS.
Your LLC's operating agreement should comprise sections related to tax status. They shed light on your chosen tax status, elucidate how you can modify it, and how to manage tax returns and allocations (if applicable). This equips your LLC with a strategy for handling financial matters, including profits, losses, dividends, and taxes. The goal is to provide an unambiguous roadmap for navigating administrative matters associated with taxes.
The Company will be disregarded for federal and state income tax purposes. The admission of one or more additional members, however, will cause the Company to be recognized for tax purposes, and to be taxed, as a partnership.
The Member acknowledges that the Company has elected to be taxed as a corporation for federal tax purposes pursuant to the regulations currently in effect under Section 7701 of the Code, and to be taxed as an electing small business corporation under the provisions of Subchapter S of the Code. Notwithstanding such tax treatment, the Member acknowledges and agrees that the Company will be a limited liability company, for state law purposes, under the provisions of the Act, the Articles of Organization, and this operating agreement.
The Member acknowledges that the Company has filed or will timely file a Form 2553 (Election by a Small Business Corporation) with the Internal Revenue Service and that the election made pursuant to the filing is or will be in force and effect covering all periods since the date of this operating agreement. Except as otherwise provided in this operating agreement, during the term of this operating agreement and the continuation of the Company’s “S” corporation election under Section 1362 of the Internal Revenue Code, no Member shall take any action which would cause the revocation or termination of the Company’s “S” election (under Section 1362(a) of the Internal Revenue Code) and any attempt to take such an action will be null and void and without effect. Without limiting the foregoing, and notwithstanding any provision hereof to the contrary, any transfer or attempt to transfer any membership interest to any of the following will be null, void, and without effect:
(a) a person whose ownership thereof would cause the Company to have a number of Members and assignees of membership interests (shareholders of an “S” corporation) greater than the number permitted by Section 1361(b)(1)(A) of the Internal Revenue Code;
(b) an individual who is not a United States citizen or resident;
(c) a trust (or the trustee thereof) which fails to satisfy the requirements of Section 1361(c)(2)(A) or 1361(d) of the Internal Revenue Code;
(d) a corporation; and
(e)any other entity whose ownership would cause the termination or revocation of the Company’s tax status as an “S” corporation.
Your profit and loss distributions clause basically indicates when your LLC will distribute the income it generates. This doesn't hold a lot of water for single-member LLCs. However, for multi-member LLCs, you must specify when, what is required, and how the distributions will take place.
As the sole member of the LLC, the Member is entitled to all profits of the LLC and is responsible for all its losses. Profits and losses shall be determined annually and will be allocated to the Member's capital account. Distributions of cash or other assets will be made at such times and in such amounts as deemed appropriate by the Member.
What if you need to change something in your LLC? It's pretty straightforward - just adhere to your LLC amendment clause. This process is a lot easier for single-member LLCs. However, for multi-member LLCs, you need to deliberate over this and figure out the essential aspects concerning voting percentages and what's required to modify the operating agreement.
This agreement and the articles of organization of the Company may not be altered, modified, or changed, and no provision of this agreement may be waived, except by an amendment or waiver, as applicable, approved by the Member.
LLCs, by their very design, typically aren't obligated to adhere to corporate formalities. That's primarily a corporation's domain. Yet, in some circumstances, not following formalities could risk jeopardizing your corporate shield. Hence, we recommend incorporating a waiver of all formalities within the operating agreement to counter this.
The failure of the Company or the Member to observe any formalities or requirements relating to the exercise of its powers or management of its business or affairs under this operating agreement or the laws in the state in which the Company is which govern limited liability companies will not be grounds for imposing personal liability on the Member for liabilities of the Company.
This section is your contingency plan if things don't go as planned. It directs you on how to dissolve your LLC and determine who will take charge of the LLC under unforeseen circumstances such as your demise.
Upon the occurrence of any event which terminates the continued membership of the Member in the Company, the Company will not be dissolved, and the business of the Company will continue. The Member hereby specifically consents to such continuation of the business of the Company upon any such event. The Member’s legal representative, assignee, or successor will automatically become an assignee of the Member’s interest and will automatically become a substitute Member in place of the withdrawn Member.
Your agreement's effective date is the day when your operating agreement goes live. Another way to understand it -- it's the day the agreement becomes operational or "takes effect."
Good news! Unlike your Articles of Organization (or Certificate of Formation, based on your home state), your operating agreement is an internal document that you keep secured in your own company's records. Just sign it and save a copy. The aim is to have it handy when you need it. That's all there is to it!
Many small business owners aspire to expand their business to a level that exceeds their individual capacity. If you find yourself in this wonderful situation ready to welcome another member to your LLC, you'll need to revisit the aforementioned paperwork according to the agreement between yourself and the new partner. Chances are, you'll have to draft a totally new agreement as a multi-member LLC operating agreement greatly differs from a single-member LLC operating agreement.
Remember; the process might seem cumbersome, but every step is about ensuring you and your Kansas LLC are guided, protected, and set up for success.
