An Oregon LLC Operating Agreement is your go-to guidebook that outlines the structure, operation, and ground rules for your business. Essentially, it's a blueprint designed to help you organize your LLC, detailing aspects like ownership interests, decision-making procedures, and succession planning.
Governed by Oregon's LLC laws, this agreement includes essential elements like member duties, decision-making processes, and ways to tackle conflicts—providing a clear roadmap to minimize future misunderstandings.
No, it's not legally required in Oregon under § 63.057. 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 Oregon operating agreements, including:
Here are some key components that are typically included in a Oregon LLC operating agreement:
Let's dive into the common provisions for such an agreement, with example language for each to help you get started.
You've probably chosen your LLC's name when filing your formation documents with the state. Also, it's crucial to define the purpose of your LLC. Avoid getting too specific—a generalized statement allows you to explore new ventures without needing to refile any documents.
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.
Use this section to specify whether your LLC is member-managed or manager-managed. Outline each member's rights and responsibilities, such as capital contributions, voting rights, and management structure. Even as a single-member LLC, this is an essential step to establish your business.
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.
A registered agent is responsible for handling important documents on behalf of your company. Although some operating agreements include this information, it's not mandatory since it's already in your filed formation documents.
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 refers to its planned lifespan as stated in your formation documents. Many entrepreneurs create LLCs with the intention of running them indefinitely, while others may choose a fixed period or end date for the LLC. In Oregon, most LLCs fall under the "perpetual" category, meaning they can exist as long as you want them to.
The duration of the Company will be perpetual.
Capital contributions are the initial investment made to kickstart your LLC's operations. It may include funds, property, or services. For single-member LLCs, the capital contributions come from you—the sole owner—providing you with the flexibility to decide how to fund your business. Documenting these contributions thoroughly is essential, as it helps establish your business's financial structure and offers crucial details for tax 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 in your LLC's Operating Agreement serves as a safety net, protecting members from specific costs related to legal issues that arise from their work for the company. The LLC covers legal expenses or damages if a member faces a lawsuit related to their duties within the business. Clearly outline when, under which circumstances, and any exceptions regarding when indemnification will apply. This protection typically doesn't cover intentional wrongdoing or severe negligence.
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 Oregon LLC can be taxed in one of four ways—sole proprietorship, partnership, S corporation, or C corporation—depending on the number of members and the tax status your business selects with the IRS. An operating agreement must include sections relating to tax status, outlining your chosen status, how you can change it, and how to handle tax returns and allocations. This clear roadmap aids your business in managing financial aspects, such as profits, losses, dividends, and 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.
This clause outlines when your LLC will distribute its earnings. Although not as important for single-member LLCs, multi-member LLCs need to ensure they detail the requirements, timing, and procedures for profit and loss distributions.
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.
The LLC amendment clause guides you on how to change any term within your LLC. This process is simpler for single-member LLCs; however, multi-member LLCs require thoughtful consideration of aspects like voting percentages and the requirements to amend the 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 are not required to follow corporate formalities, which usually apply to corporations. But, not adhering to these formalities can compromise your corporate veil. Therefore, it's wise to include a waiver of all formalities in the operating agreement.
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.
Having a dissolution plan helps you determine what to do when things don't go as planned. It assists in dissolving your LLC and designating who will be in control should you experience an untimely death or become unable to manage your business.
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.
The effective date of your operating agreement is when it comes into action. It's the day that the agreement "takes effect" on your business.
Good news! There's no need to file your operating agreement. It's an internal document, unlike your Articles of Organization or Certificate of Formation. Just keep a copy of the signed agreement in your company records for future reference.
When your business expands and you're ready to add a new member to your LLC, you'll need to create a new operating agreement in line with your updated partnership terms. A multi-member operating agreement differs significantly from a single-member one, so it's best to draft a new document based on the changes in your business.
