Drafting LLC and Partnership Agreements
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SUMMARY TABLE OF CONTENTS
CHAPTER 1: Entity Choices and Common Issues
CHAPTER 2: Agricultural Businesses
CHAPTER 3: Construction Companies
CHAPTER 4: Manufacturing Companies
CHAPTER 5: Wholesale LLCs
CHAPTER 6: Retail LLCs
CHAPTER 7: Insurance Companies
CHAPTER 8: Real Estate Development Companies
CHAPTER 9: Service Companies
CHAPTER 10: Technology Companies
CHAPTER 11: Medical Device Companies
CHAPTER 12: Computer Software
CHAPTER 13: Technology Hardware Companies
EXPANDED TABLE OF CONTENTS
CHAPTER 1: ENTITY CHOICES AND COMMON ISSUES
I. The Initial Choices
A. Selecting the State
§1:01 Organize the Company Where It Does Business
§1:02 Multi-State Companies
B. Selecting the Entity Form
1. Regulating Laws
§1:10 Uniform Acts
§1:11 LLC Acts
2. Criteria for Choosing the Entity Form
§1:20 Three Primary Criteria
§1:21 Liability
§1:22 Taxability
§1:23 Flexibility
3. Entity Choice Scenarios
§1:30 Initial Purchases of Buildings
§1:31 Sale of the Buildings
§1:32 Purchase From B by A
§1:33 Owners Split Buildings
§1:34 Lessons From the Scenarios
II. Limited Liability Companies
A. Initial Considerations
§1:40 Name
§1:41 Purpose
§1:42 Contributions
§1:43 Compensation
§1:44 Allocation of Distributions
B. Securities Laws
§1:50 Determine What Law Applies
§1:51 Provide Adequate Information to Members
C. Management
§1:60 Managed by a Manager
§1:61 Managed by a Manager With a Board of Directors
§1:62 Managed by a Manager With Member Consent
§1:63 Member Managed
D. Transfer of Interests
§1:70 Provision Requiring Member Consent
§1:71 Comprehensive Provision for Various Transfers
§1:72 Release of Former Member From Indebtedness
E. Reports and Termination
§1:80 Reporting to the State
§1:81 Termination
F. Drafting an LLC Operating Agreement
§1:90 An LLC Checklist
§1:91 LLC Agreements Are Industry Specific
G. Forms
Form 1-1 LLC Checklist
III. Partnership Agreements
A. General Partnerships
§1:90 History and Governing Acts
§1:91 Characteristics
B. Limited Liability Partnerships
1. General Points
§1:100 History &and Development of LLPs
§1:101 Characteristics &and Formation of LLPs
2. Drafting an LLP Agreement
§1:110 Sample Agreement; General Points
§1:111 Recitals
§1:112 Article I
§1:113 Article II – - EEquity Structure
§1:114 Article III - – Management
§1:115 Article IV - – Partners
§1:116 Articles V - – XI
C. Limited Partnerships
1. General Points
§1:120 History &and Development of Limited Partnerships
§1:121 Characteristics &and Formation of Limited Partnerships
2. Drafting a Limited Partnership Agreement
§1:130 Sample Agreement; General Points
§1:131 Article I - – General
§1:132 Article II - – Capital Contribution and Unit Allocation
§1:133 Article VI - – Rights, Duties and Powers of Partners
IV. Forms
Form 1-2 Sample LLP Agreement
Form 1-3 Sample Limited Partnership Agreement
CHAPTER 2: AGRICULTURAL BUSINESSES
I. The Family Farm
A. Sample Facts and Recommendation
§2:01 Assumptions and Goals
§2:02 Recommended Structure
B. The Real Estate LLC
§2:10 Membership and Authorized Units
§2:11 Management
§2:12 Transfers
C. The Farm Operation LLC
§2:20 Capital Contributions and Equity Structure
§2:21 Management
§2:22 Cash Distributions
§2:23 Transfer of Units
D. The Farm Lease Agreement
§2:30 Rent
E. Forms
Form 2-1 Real Estate LLC
Form 2-2 Farm Operation LLC
Form 2-3 Farm Lease Agreement
II. Sophisticated Farm Operation
A. Characteristics of Large Farm Operations
§2:40 General Points
§2:41 Member Contributions
§2:42 Allocations
§2:43 Management
§2:44 Transfers of Interest
B. Sample #1 Operating Agreement
§2:50 General Points
§2:51 Structure of the LLC
§2:52 Organizational Matters – Purpose
§2:53 Financial Matters
§2:54 Management and Control
§2:55 Transfers of Interests
§2:56 Noncompetition Agreement
C. Sample #2 Operating Agreement
§2:60 General Points
§2:61 Financial Matters
§2:62 Management and Control
§2:63 Transfers of Interest, Change in Control, and Withdrawal
D. Forms
Form 2-4 Operating Agreement (Sample 1)
Form 2-5 Operating Agreement (Sample 2)
CHAPTER 3: CONSTRUCTION COMPANIES
I. Introduction
§3:01 Large and Small Construction Companies
§3:02 Joint Ventures
II. Small LLCs
A. Characteristics
§3:10 Assumptions and Goals
§3:11 Role of Organizer
§3:12 Membership and Capital Contributions
§3:13 Member Loans
§3:14 Major Actions
§3:15 Distributions
B. Forms
Form 3-1 Simple LLC Operating Agreement
III. Joint Venture LLCs
A. Characteristics
§3:20 Assumptions and Goals
§3:21 Scope and Term of the Joint Venture
§3:22 Management
§3:23 Administrative Functions
§3:24 Costs/Expenses
§3:25 Initial Capital
§3:26 Additional Capital
§3:27 Distribution of Profit and Loss
§3:28 Accounting Procedures
§3:29 Member Insolvency
§3:30 Assignment or Transfer of Membership
§3:31 Arbitration of Disputes
B. Forms
Form 3-2 Joint Venture LLC Agreement: Sample #1
Form 3-3 Joint Venture LLC Agreement: Sample #2
CHAPTER 4: MANUFACTURING COMPANIES
I. Initial Issues
§4:01 Key Drafting Questions
§4:02 Formation Questions
§4:03 Management Questions
§4:04 Termination Questions
II. Specific Drafting Points
§4:10 Purpose and Powers
§4:11 Limitations on Withdrawals and Distributions
§4:12 Management — Major Actions
§4:13 Members — Voting
§4:14 Cash Distributions
§4:15 Transfer of Units — Method of Purchase
III. Forms
Form 4-1 Sample Operating Agreement
Form 4-2 Alternate Sample Operating Agreement
CHAPTER 5: WHOLESALE LLCs
I. Initial Issues
§5:01 Initial Capital
§5:02 Management
§5:03 Family Businesses
§5:04 Termination
II. Specific Drafting Points
§5:10 Organization and Name
§5:11 Organization — Purpose
§5:12 Capital Contributions — Member Contributions
§5:13 Capital Contributions — Additional Capital Contributions
§5:14 Management
§5:15 Allocations of Profit and Loss
§5:16 Books and Records
§5:17 Transfer of Units
§5:18 Dissolution and Liquidation
III. Forms
Form 5-1 Sample Operating Agreement
CHAPTER 6: RETAIL LLCs
I. Initial Issues
§6:01 Structure Depends on Amount of Capital Needed
§6:02 Structure Depends on Amount of Capital Needed
II. Specific Drafting Points
§6:10 Organization - Purpose
§6:11 Capital Contributions - Member Contributions
§6:12 Capital Contributions - Revaluation
§6:13 Management
§6:14 Distributions
§6:15 Books and Records
§6:16 Transfer of Units
§6:17 Dissolution and Liquidation
III. Forms
Form 6-1 Sample Operating Agreement
CHAPTER 7: INSURANCE COMPANIES
I. Initial Issues
§7:01 Initial Capital Requirements Are Limited
§7:02 Management System Varies With the Size
§7:03 Common Buy-Out Procedure
II. Specific Drafting Points
§7:10 Organization - Purpose
§7:11 Capital Contributions
§7:12 Management
§7:13 Distributions
§7:14 Books and Records
§7:15 Transfer of Units
§7:16 Dissolution and Liquidation
III. Forms
Form 7-1 Sample Operating Agreement
CHAPTER 8: REAL ESTATE DEVELOPMENT COMPANIES
I. Initial Issues
§8:01 The Developer and the Investor
§8:02 Distribution of Capital Investments
§8:03 Different Operating Agreements
§8:04 LLCs or Partnerships
II. Developer Company
§8:10 Organizational/Formation Issues
§8:11 Capital Accounts
§8:12 Management
§8:13 Distributions
§8:14 Books and Records
§8:15 Transfer of Units
§8:16 Dissolution and Liquidation
§8:17 Defaults and Remedies
§8:18 Indemnification
III. Investor Company
§8:20 Organizational/Formation Issues
§8:21 Equity Structure
§8:22 Management
§8:23 Members
§8:24 Distributions
§8:25 Books and Records
§8:26 Transfer of Units
§8:27 Liquidation
§8:28 Defaults and Remedies
§8:29 Indemnification
§8:30 General Provisions
IV. Forms
Form 8-1 Developer Operating Agreement
Form 8-2 Investor Operating Agreement
Form 8-3 Investor Company Schematic
CHAPTER 9: SERVICE COMPANIES
I. Initial Issues
§9:01 State Regulations
§9:02 New or Pre-Existing Practices
§9:03 Employment Agreement Severance Payments
II. Specific Drafting Points
§9:10 Organization - Purpose
§9:11 Capital Contributions
§9:12 Management
§9:13 Members
§9:14 Allocations and Distributions
§9:15 Books and Records
§9:16 Transfer of Units
§9:17 Dissolution and Liquidation
III. Forms
Form 9-1 Sample Operating Agreement
CHAPTER 10: TECHNOLOGY COMPANIES
I. Initial Issues
§10:01 Stage One - Initial Formation
§10:02 Stage Two - Money From Outsiders
§10:03 Stage Three - More Complex Ownership
§10:04 Stage Four - Additional Capital
II. Specific Drafting Points
§10:10 Purpose
§10:11 Capital Contributions
§10:12 Pre-emptive Rights
§10:13 Management
§10:14 Board of Advisors
§10:15 Members
§10:16 Allocations of Profits and Loss
§10:17 Books and Records
§10:18 Transfer of Interests
§10:19 Dissolution and Liquidation
§10:20 Definitions
§10:21 General Provisions - Securities Laws
III. Forms
Form 10-1 Sample Operating Agreement
CHAPTER 11: MEDICAL DEVICE COMPANIES
I. Initial Issues
§11:01 Stages of the Entity
§11:02 Intellectual Property Issues
§11:03 Increase in Capital
II. Specific Drafting Points
§11:10 Purpose
§11:11 Capital Contributions
§11:12 Additional Fundraising
§11:13 Management
§11:14 Members
§11:15 Allocations of Profits and Loss
§11:16 Books and Records
§11:17 Transfer of Interests
§11:18 Dissolution and Liquidation
§11:19 General Provisions
§11:20 Tax Allocation Provisions
III. Forms
Form 11-1 Sample Operating Agreement
CHAPTER 12: COMPUTER SOFTWARE
I. Initial Issues
§12:01 Low Capital Needs
§12:02 Intellectual Property Protection
II. Specific Drafting Points
§12:10 Purpose
§12:11 Capital Contributions and Equity Structure
§12:12 Management
§12:13 Allocations of Profit and Loss
§12:14 Transfer of Units
§12:15 Dissolution and Liquidation
§12:16 Books and Records
III. Forms
Form 12-1 Sample Operating Agreement
CHAPTER 13: TECHNOLOGY HARDWARE COMPANIES
I. Initial Issues
§13:01 Early Stage Is Similar to Other Companies
§13:02 Capital Fundraising Stage
II. Specific Drafting Points
§13:10 Purpose
§13:11 Capital Contributions and Equity Structure
§13:12 Management
§13:13 Members
§13:14 Allocations of Profit and Loss
§13:15 Books; Elections; Budgets; Fiscal Year
§13:16 Transfer of Interests
§13:17 Dissolution and Liquidation
§13:18 Definitions
III. Forms
§13-1 Sample Operating Agreement
