Operating Agreement LLC Arkansas

An Arkansas Limited Liability Company (LLC) Operating Agreement is an internal legal document that explains how the company will function. It outlines ownership interests, management authority, and the procedures members will follow when making operational decisions. Some refer to it as an Arkansas Operating Agreement or Arkansas LLC Company Agreement. Regardless of the name used, it serves as the primary internal record governing the LLC.

Many Arkansas LLCs adopt this agreement at formation, while others implement one later as their structure develops. The document is not filed with the state and is kept as part of the company’s internal records.

Is an Arkansas Operating Agreement Required?

Arkansas does not legally require LLCs to maintain an Operating Agreement. Under the Arkansas Uniform 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 Arkansas statutory provisions, which may not reflect the members intended operations.

Why an Arkansas Operating Agreement Matters

Maintains limited liability protection

A written Operating Agreement helps show that the LLC exists as a separate legal entity. Courts may review internal company practices when evaluating whether to uphold limited liability protections. A written document is especially important for single-member LLCs.

Provides clear internal rules

Arkansas’s default rules apply only when an Operating Agreement does not address a particular issue. A written agreement allows members to specify decision-making procedures, management authority, and financial practices.

Required by financial institutions and third parties

Banks, lenders, and professional advisors often request an Operating Agreement to verify ownership and confirm who has authority to act for the business.

Addresses Arkansas franchise tax obligations

Arkansas LLCs must file an Annual Franchise Tax Report and pay the corresponding tax each year. The Operating Agreement can assign responsibility for meeting these state requirements, which helps maintain the LLC’s good standing.

Key Provisions to Include in an Arkansas Operating Agreement

Basic Company Details

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

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

Registered Agent and Office

• Name and address of the Arkansas registered agent
• Procedures for changing the registered agent
• Required filings with the Arkansas Secretary of State

Member Information

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

Capital Contributions

• Type and value of contributions provided by each member
• Rules for additional contributions
• Statement that contributions do not generate interest unless stated

Management Structure

• Whether the LLC is member managed or manager managed
• Description of duties, authority, and voting rights of managers or members
• Procedures for appointing or removing managers

Profit and Loss Allocation

• Method for allocating profits and losses
• Rules for making distributions
• Statement that distributions may occur only when the LLC can meet its obligations

Tax Election

• The LLC’s chosen federal tax classification
• Acknowledgment that certain elections require IRS filings

Voting Procedures

• Voting rights
• Quorum requirements
• Approval thresholds for various decisions

Most Arkansas LLCs base voting power on ownership percentages unless modified by agreement.

Transfers of Interest

• Procedures for transferring membership interests
• Requirements for admitting new members
• Treatment of interests upon withdrawal, death, or expulsion

Records and Bookkeeping

• How financial statements, tax records, and company documents will be maintained
• Arkansas Annual Franchise Tax Report filing requirements
• Note that failure to file may result in penalties or loss of good standing

Compensation

• Rules for compensating members, managers, or officers
• Reimbursement of business expenses

Dissolution

• Events that may initiate dissolution
• Steps for winding up the business
• Filing a Statement of Dissolution with the Arkansas Secretary of State

Amendments

• Procedures for amending the Operating Agreement
• Requirement for written member approval unless otherwise stated

Management Options for Arkansas LLCs

Member Managed

Members oversee daily operations and may make decisions on behalf of the company. This structure is common for smaller LLCs. Voting authority typically reflects ownership percentages unless modified.

Manager Managed

Members appoint one or more managers to handle daily operations. Managers may be members or nonmembers. Members retain authority over major decisions but delegate operational responsibilities.

Creating and Maintaining the Arkansas Operating Agreement

Drafting and Signing

The Operating Agreement becomes effective once adopted by the members. Arkansas permits written, oral, and implied agreements, but a written document provides clarity and reduces the risk of disputes.

Recordkeeping

The agreement should be stored with the LLC’s permanent records. Arkansas requires LLCs to file an Annual Franchise Tax Report, making organized documentation essential.

Amending the Agreement

Members may update the agreement by following the amendment procedures stated in the document. If amendments affect information filed with the Arkansas Secretary of State, the LLC must submit the appropriate updates.