Operating Agreement LLC Arkansas

An Operating Agreement for a Limited Liability Company (LLC) in Arkansas is a contract among members that defines how the business is governed. It explains ownership structure, management duties, voting rights, and how internal conflicts are resolved. Under Arkansas Code §4-38-105, an Operating Agreement may be written, oral, implied, or a mix of these forms. Once a person becomes a member, they are bound by its terms, and the LLC is also bound, even if it has not expressly agreed to the document.

Legal Standing in Arkansas

Arkansas law does not require an LLC to have an Operating Agreement to operate. The statute §4-38-105 makes it optional but enforceable. When forming an LLC, organizers must file a Certificate of Organization with the Arkansas Secretary of State, but the Operating Agreement remains an internal record and is not filed with the government. Under §4-38-106, individuals may agree to terms before the LLC’s creation. These terms become binding once the entity exists, and a single organizer may create an agreement that takes effect upon formation.

Importance of Having a Written Agreement

While not required, a written Operating Agreement is strongly recommended because it offers several important benefits:

• Reinforces limited liability: Demonstrates that the LLC operates as a distinct entity, separate from personal assets.
• Overrides default state rules: Allows members to define their own terms rather than rely on Arkansas’s default provisions in Title 4, Chapter 38.
• Establishes credibility: Lenders and banks often require it to verify ownership and signing authority.
• Prevents misunderstandings: Clarifies ownership, management roles, and profit distribution, helping reduce disputes.

Main Elements of the Agreement

Arkansas does not provide a standard template, but most Operating Agreements include:

• Basic company information: LLC name, start date, principal address, purpose, duration, and Registered Agent details.
• Ownership and contributions: Member list with ownership percentages, defined in §4-38-102(8), and initial capital investments.
• Tax classification: Specifies how the LLC will be taxed—sole proprietorship, partnership, or corporation. Arkansas is not a community property state, so the “qualified joint venture” election does not apply.
• Profit distributions: Explains how profits are shared and when distributions occur, usually based on ownership share.
• Management structure: Indicates whether the LLC is member-managed or manager-managed, as described in §4-38-407.
• Transfer and dissolution: Describes procedures for transferring interests and dissolving the company, following §§4-38-701–4-38-702.

Record-Keeping and Compliance

The Operating Agreement is not filed with the Secretary of State, but it should be signed and stored with company records. Notarization is optional but can add verification. During audits or disputes, courts or state agencies may request a copy to confirm governance. LLCs must also obtain an Employer Identification Number (EIN) from the IRS for tax and banking purposes.