Section 10.12 Operating Agreement

• Library: Estate Planning 2013 Forms

Operating Agreement of Smith Investments, LLC

Operating Agreement (“Agreement”) made and entered into this _____ day of ______________, 20___, by John Smith, Sr., Jane Smith, John Smith, Jr., and Mary Smith (hereinafter referred to individually as a “Member” and collectively as “Members”).

Witnesseth

Whereas, the Members desire to form Smith Investments, LLC (the “Company”) under the Missouri Limited Liability Company Act (the “Act”) for the following purposes:

1. To consolidate the assets to be held by the Company and to coordinate the investment of the assets;

2. To establish business and investment policy regarding the assets of the Company, including any real property and investment assets (whether owned directly or indirectly through other entities including, without limitation, interests in other limited liability companies or limited partnerships) and any other property in which the Company will own whole or fractional interests, and to promote greater sale value of the assets;

3. To enable both the Company and the Members to benefit from the knowledge and experience of the Manager or Managers in the management of assets;

4. To achieve economies of scale for investment purposes such that the Members may participate in investment opportunities they might not otherwise have available because of minimum investment requirements;

5. To achieve operational cost advantages;

6. To preserve family control of the assets of the Company;

7. To facilitate communication among family members in connection with business matters;

8. To facilitate annual gifting by the Members without fractionalizing the assets of the Company;

9. To provide continuity of family ownership of the assets of the Company through transfer restrictions and buy-sell provisions and to help minimize the impact of any future marital or creditor problems of any current or future Members;

10. To provide a method of dispute resolution among family members to avoid the expense and problems of litigation;

11. To educate family members with respect to investment strategy;

12. To provide greater flexibility in investments and other decisions because of the operation of the Business Judgment Rule;

13. To provide the Members with limited liability protection with respect to the Company and Company property; and

14. To facilitate the administration of estates of family members and reduce the costs associated with the disability of any of the Members; and

Whereas, with respect to the foregoing, the Members wish to enter into this Agreement and to set forth the terms and conditions on which the management, business, and financial affairs of the Company shall be conducted,

Now, therefore, in consideration of the premises, the parties agree:

Article I

Formation

The Members hereby form a limited liability company under the Act, as amended from time to time, to be managed by a manager or managers (“Manager” or “Managers”) as designated, appointed, or elected in this Agreement. Unless the Act expressly provides that the Act supersedes any provision contained in this Agreement, the terms and conditions of this Agreement shall apply. The Members hereby ratify the Articles of Organization (the “Articles”) filed with the Office of the Secretary of State of the State of Missouri on the _____ day of _________________, 20___, with respect to the Company, a copy of which is attached as Exhibit “A” and made a part of this Agreement by this reference. A Member’s interest in the Company shall be personal property for all purposes. All real and personal property owned by the Company shall be owned by the Company as an entity, and no Member individually shall have any ownership interest in the property. All references to “I.R.C. §” refer to the Internal Revenue Code of 1986, as amended.

Article II

Name

The name of the Company is Smith Investments, LLC. The business and affairs of the Company shall be conducted solely under this name or under fictitious names as may be filed by the Manager or Managers.

Article III

Business of the Company

3.1 Business of the Company

To accomplish the purposes of the Company as set forth in the recitals of this Agreement, the business of the Company shall include, but is not limited to, the following:

a. To:

1. engage in the real estate business;

2. acquire, own, hold, develop, and operate real estate properties, either as operator, managing agent, principal agent, partner, stock holder, limited liability company or syndicate member, associate, joint venturer, participant, or otherwise;

3. invest in and raise funds for real estate development and operation;

4. purchase, contract, acquire, own, develop, operate, lease, mortgage, pledge, sell, or otherwise dispose of buildings, fixtures, and improvements; and

5. do anything necessary or incident to the real estate business;

b. To purchase, sell, invest, and deal in the following: stock, bonds, mutual funds, notes, options, commodities, evidences of indebtedness, foreign or domestic, bonds and any other obligations of any governmental entity, domestic or foreign, bills of exchange in commercial paper, and any other securities (regulated or unregulated);

c. To invest Company property or carry on a trade or business, form all types of business entities or trusts, or acquire general or limited partnership interests in a partnership, membership interests in a limited liability company or a joint venture, shares in the corporation, or interests in any syndication;

d. To buy, sell, lease, and deal in services, personal property, and real property and to engage in any other trade or business or investment activity;

e. To operate one or more offices, lease or acquire office space, engage personnel, and do all things necessary to operate the office;

f. To carry such insurance as the Manager or Managers may deem necessary and appropriate; and

g. To make, enter into, deliver, and perform all contracts, agreements, or undertakings; pay all costs and expenses; and perform all acts deemed appropriate by the Manager or Managers to carry out the Company purposes.

3.2 Powers

To accomplish the aforementioned purposes, the Company shall have all powers and rights of a limited liability company organized under the Act.

Article IV

Principal Office

The principal office of the Company shall be ______________, or such other place or places as may hereafter be approved by the Manager or Managers. The initial registered office of the Company, and the initial registered agent at this office, shall be set forth in the Articles.

Article V

Term of the Company

The term of the Company shall be a period of years beginning on the date of this Agreement and ending on December 31, 20___, unless the term is extended by amendment to this Agreement or unless the Company shall be sooner dissolved in accordance with the Act or this Agreement.

Article VI

Accounting Method, Records, and Fiscal Year

6.1 Accounting Method

The Company shall keep its accounting records and shall report its income for income tax purposes on the cash receipts and disbursements method of accounting or in accordance with generally accepted accounting principles, at the discretion of the Manager or Managers.

6.2 Books and Records

All books and records of the Company (including those records required by the Act) shall be maintained at the principal office of the Company. Subject to the restrictions set forth in this Agreement, each Member shall have the right, during regular business hours, to inspect and copy these books and records. Each Member shall bear all expenses incurred in any examination made for the Member’s account. The Company shall also provide to the Members copies of monthly financial statements, as prepared by the Company, and copies of the annual compiled financial statements, as prepared by the certified public accountants retained by the Company. Notwithstanding the preceding sentences, the Manager or Managers may determine, because of contractual obligations, business concerns, or other considerations, that trade secrets and other confidential information regarding the business, affairs, property, and financial condition of the Company shall be kept confidential and not provided to some or all of the Members and that it is not just and reasonable for those Members (or their representatives) to examine or copy that information.

6.3 Fiscal Year

The fiscal year of the Company shall be the calendar year.

6.4 Taxation as Partnership

It is the intent of the Members that the Company be treated as a partnership for federal and state income tax purposes. Any provision in this Agreement that, in the opinion of counsel for the Company, may cause the Company to be classified as an association rather than a partnership shall be void and shall be severed from this Agreement, but the severance shall not affect the remaining provisions of this Agreement.

6.5 Bank Accounts

All funds of the Company shall be deposited in a separate bank, money market, or similar account or accounts approved by the Manager or Managers and in the name of the Company. Withdrawals therefrom shall be made only by the person authorized to do so by the Manager or Managers. Funds of the Company shall not be comingled with the funds of any other person.

Article VII

Capital Contributions

7.1 Membership Units and Membership Interests

a. Membership Units

The Company shall have the authority to issue _____ units of participation (“Membership Units” or “Units”), with a par value of One Hundred Dollars ($100.00) per Unit, each of which shall have and be subject to the rights, privileges, preferences, and restrictions set forth in this Agreement. The Company may issue certificates evidencing the ownership of Units by a Member. Each outstanding Unit represents an equal undivided interest in the capital, profits, and losses, and distributions thereof, of the Company. During the term of the Company, the book value of a Unit held by a Member shall be determined by dividing the...