Operating Agreement LLC Arizona

An Arizona Limited Liability Company (LLC) Operating Agreement is a contract among the company’s members. It explains how the business is organized, who owns it, and how it is managed. The document functions much like a partnership or shareholder agreement. Its terms guide the relationships between members, managers, and the LLC itself, and generally take precedence over the Arizona Limited Liability Company Act unless the law prohibits otherwise.

Is an Operating Agreement Required?

Arizona law does not require an LLC to have a written Operating Agreement. Still, creating one is strongly advised. The agreement is an internal record, so it is not filed with the Arizona Corporation Commission (ACC) or any state office. Once signed, it binds the members. Without one, the LLC defaults to state rules that may not reflect what members actually agreed to, such as how profits are divided or who controls daily operations.

Benefits of a Written Agreement

Having a written Operating Agreement offers several practical benefits:

• Protects limited liability: Shows that the business operates separately from its owners, which can help in court.
• Prevents disputes: Clarifies ownership, voting power, and management roles to reduce internal conflict.
• Maintains continuity: Outlines what happens if a member dies, leaves, or sells their share.
• Helps with taxes: Defines how the LLC will be taxed, whether as a partnership or corporation. In community-property states like Arizona, married co-owners may choose to file as a Qualified Joint Venture.
• Supports daily operations: Banks often require the agreement when opening accounts or granting loans.

Even a single-member LLC benefits from this document. It can confirm ownership in legal matters and maintain limited liability. A “springing member” clause may also prevent automatic dissolution if the sole owner dies.

Management Structures

The agreement should specify how the LLC is managed:

• Member-managed: All members share authority to make decisions and handle operations. Votes usually follow ownership percentages.
• Manager-managed: One or more appointed managers run the company. Members act mainly as investors but retain voting rights on major decisions, such as admitting new members or removing managers.

Core Elements

A sound Operating Agreement generally includes:

• Identification details: LLC name, start date, purpose, duration, and registered agent in Arizona.
• Ownership and contributions: Member names, addresses, ownership percentages, and initial capital. Additional contributions apply only if agreed in writing.
• Governance and voting: Roles of members and managers, voting methods, meeting rules, and approval thresholds.
• Finances: Profit and loss allocation, distribution policies, and tax classification.
• Membership changes: How to add, remove, or buy out members and manage ownership transfers.
• Amendments: The process for revising the agreement, often requiring unanimous consent.