Operating Agreement LLC Arizona

An Arizona Limited Liability Company (LLC) Operating Agreement is an internal document that explains how the company will operate. It outlines ownership rights, management responsibilities, and the rules that guide decision making within the business. Some refer to it as an Arizona Operating Agreement or Arizona LLC Company Agreement. Regardless of the term used, it functions as the primary internal governance record for the LLC.

Many LLC owners create an Operating Agreement at formation, while others adopt one later as the business structure evolves. The document is kept internally and is not filed with the state.

Is an Arizona Operating Agreement Required?

Arizona does not legally require LLCs to have an Operating Agreement. Under the Arizona Limited Liability Company Act, an Operating Agreement may be written, oral, or implied. Although optional, a written agreement is strongly recommended. Without one, the LLC defaults to Arizona’s statutory provisions, which may not reflect how members intend to run the company.

Why an Arizona Operating Agreement Matters

Maintains limited liability protection

A written Operating Agreement helps demonstrate that the LLC is separate from its owners. Courts may review internal documents when assessing whether limited liability protections should apply. Single member LLCs especially benefit from clearly documented separation.

Establishes internal rules and expectations

Arizona’s statutory rules apply only when an Operating Agreement is silent. A written agreement helps define management roles, voting procedures, financial practices, and conflict resolution.

Required by financial institutions and third parties

Banks, lenders, and accountants often ask for an Operating Agreement to confirm ownership, managerial authority, and operational structure.

Addresses Arizona-specific publication requirements

Newly formed Arizona LLCs must meet the Newspaper Publication Requirement unless located in a county where publication is waived. The Operating Agreement can assign responsibility for ensuring compliance.

Key Provisions to Include in an Arizona Operating Agreement

Basic Company Details

• LLC name
• Stated business purpose
• Principal office location
• Duration of the LLC
• Federal tax classification

Arizona requires LLC names to include Limited Liability Company, LLC, or a permitted abbreviation.

Statutory Agent Information

• Name and address of the Arizona statutory agent
• Requirements for changing the agent or agent address
• Filing obligations with the Arizona Corporation Commission

Member Information

• Names and addresses of all members
• Ownership percentages
• Initial capital contributions

Capital Contributions

• Description of contributions made by each member
• Rules for future contributions
• Statement that interest does not accrue on contributions

Management Structure

• Whether the LLC is member managed or manager managed
• Assignment of managerial duties and authority
• Procedures for appointing or removing managers

Profit and Loss Allocation

• Method for allocating profits and losses
• Frequency and conditions for distributions
• Confirmation that distributions may only occur when the LLC can meet its financial obligations

Tax Election

• Federal tax classification for the LLC
• Note that certain elections require IRS filings

Voting Procedures

• Voting rights of members
• Quorum rules
• Percentage thresholds required for approving decisions

Most Arizona LLCs base voting power on ownership percentages unless stated otherwise.

Transfers of Interest

• Rules governing admission of new members
• Procedures for transferring interests among members
• Treatment of ownership interests upon withdrawal, death, or expulsion

Records and Bookkeeping

• Maintenance of financial records, tax filings, and operational documents
• Identification of who maintains the books
• Arizona Corporation Commission compliance responsibilities

Compensation

• How members, managers, or officers will be compensated
• Policies for reimbursing expenses

Dissolution

• Events that can trigger dissolution
• Steps for distributing assets and settling liabilities
• Filing a Statement of Dissolution with the Arizona Corporation Commission

Amendments

• Procedures for modifying the Operating Agreement
• Requirement for written consent unless otherwise specified

Management Options for Arizona LLCs

Member Managed

Members share responsibility for managing daily operations and have authority to bind the company. This structure suits LLCs whose owners participate actively. Voting is typically based on ownership percentages unless modified by agreement.

Manager Managed

Members appoint one or more managers to handle daily operations. Managers may be members or outside individuals. Members maintain authority over major decisions while delegating daily responsibilities.

Creating and Maintaining the Arizona Operating Agreement

Drafting and Signing

The Operating Agreement takes effect once adopted by the members. Arizona allows written, oral, and implied agreements, but a written document ensures clarity and reduces disputes.

Recordkeeping

Members should store the agreement with other company records at the principal office. Arizona requires compliance with statutory filing obligations, including potential publication requirements, making accurate documentation important.

Amending the Agreement

Members may modify the agreement by following the amendment procedures stated in the document. If any amendment affects filed information, such as statutory agent details, the LLC must notify the Arizona Corporation Commission.