Arkansas LLC Operating Agreement | A Comprehensive Guide

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
Last updated: 
WebinarCare offers informative content for educational purposes only, not as a substitute for professional legal or tax advice. We may earn commissions if you use the services we recommend on this site.
WebinarCare is led by Steve Bennett, a seasoned expert in the business world. He's gathered a team that's passionate about giving you reliable advice on everything from starting a business to picking the right tools. We base our tips and guides on real-life experience, ensuring you get straightforward and proven advice. Our goal is to make your business journey smoother and more successful. When you choose WebinarCare, you're choosing a trustworthy guide for all things business.
Arkansas Operating Agreement

When forming a Limited Liability Company (LLC) in Arkansas, one of the most critical steps is creating and executing an LLC Operating Agreement. This legally binding document outlines your LLC’s ownership, management, and operational procedures, ensuring that your business runs smoothly and is protected from potential disputes and legal issues. Although only sometimes required by state law, having a well-drafted operating agreement is essential for an LLC. This article will explore the content and importance of an Operating Agreement in Arkansas and discuss its key components.

Webinarcare Editorial Team will help you understand the process of having an operating agreement for your Arkansas business. You must be guided by all the factors gathered in this article.

What is an Operating Agreement?

An operating agreement is a legally binding document that outlines a limited liability company‘s ownership structure, management, and operational procedures (LLC). It governs the internal workings of the LLC and establishes the rights, responsibilities, and obligations of its members (owners) and managers.

This includes details such as rules, regulations, and provisions related to the operation of the LLC. The Operating Agreement serves as a guide for dealing with disagreements, bringing in new members, and managing various situations that may arise while doing business. It delivers clarity and ensures smooth functioning while providing legal protection to businesses.

Although not always required by state law, having a well-drafted operating agreement is essential for an LLC. It helps prevent potential disputes among members, ensures smoother business operations, and provides a clear framework for making decisions and resolving issues. It also helps to establish limited liability protection for the members by demonstrating that the LLC is a separate legal entity with its own rules and procedures.

Recommended: Creating an Operating Agreement in Arkansas is like having a personal legal guide at hand; it’s efficient, thorough, and ensures the smooth and compliant operation of your business. With LegalZoom’s operating agreement, it will protect your rights as an owner, keeping misunderstandings at bay and your business on the path to success. That’s why we recommend using –

LegalZoom – Starts at $99

Arkansas LLC Operating Agreement Content

An operating agreement is a legal document detailing the LLC’s organizational structure and operational procedures. It includes forming the LLC, members and ownership, distribution of profit and losses, management structure, meetings and voting procedure, limitation of liability and indemnification, dissolving Arkansas business, dispute resolution, and amendments and modification.

Article I: Formation of the LLC

The first step in creating an LLC Operating Agreement is to outline the basic information about your LLC, such as:

  • Name of the LLC: Your LLC’s name must include the words “Limited Liability Company” or the abbreviation “LLC” or “L.L.C.” and comply with the Arkansas LLC naming requirements.
  • Principal Office Address: This is where your LLC’s primary business activities will be conducted.
  • Purpose of the LLC: This section should describe the primary purpose of your LLC and the types of business activities it will engage in.
  • Registered Agent Information: Your Registered Agent is a person or entity designated to receive legal documents on behalf of your LLC. The Registered Agent must have a physical street address in Arkansas. It’s essential to choose a reliable and responsible Arkansas Registered Agent, as failure to receive and respond to legal documents can have serious consequences for you to start a business in Arkansas

You can serve as your Registered Agent, appoint a friend or family member, or hire the Best Arkansas Registered Agent Services. We reviewed some of the services for you to check out if you still don’t have one.

LLC Service

Rating & Pricing

Top Features

Learn More

#1 Recommendation

$299 Per Year

  • Free LLC Formation

  • RA service in all states

  • Legal consultation

$125 Per Year

  • Flat price for RA service

  • LLC formation package

  • Fast service

Article II: Members and Ownership

This section deals with identifying all the members of the LLC and their ownership percentages. It includes details like names, addresses, and contributions of each member. Details about how increases and decreases in membership are also covered in this section.

  • Initial Members: The names and addresses of each initial member should be listed, along with their respective ownership interests.
  • Ownership Interests: This section should detail each member’s ownership interest percentage.
  • Capital Contributions: Each member’s initial capital contribution to the LLC should be documented, along with any additional contributions that may be required.
  • Additional Members: The agreement should outline the process for admitting new members to the LLC and the rights and responsibilities of these new members.
  • Transfer of Membership Interests: The operating agreement should contain provisions governing the transfer of membership interests, including transfer restrictions and the right of first refusal for existing members.
  • Withdrawal of Members: The process and consequences for members who wish to withdraw from the LLC should be clearly defined. In Arkansas, there is a definite guideline on How to Remove a Member from your Arkansas LLC. 

Article III: Distribution of Profits and Losses

This article explains how the LLC profits and losses will be distributed among the members. It can be based on the ownership percentages or a different agreement stipulated by the members. It lays out the process for distribution and any restrictions on those distributions.

  • Allocation of Profits and Losses: The agreement should detail how profits and losses will be allocated among the members, typically based on their own interests.
  • Distributions to Members: The process for distributing profits to members should be outlined, including the timing and manner of distributions.

Article IV: Management Structure

Your LLC Operating Agreement should outline the management structure of your business. This includes

Member-Managed vs. Manager-Managed: You must decide whether your LLC will be managed by its members or appointed managers. This decision will impact the roles and responsibilities of each party.

A Member-Managed LLC is a type of limited liability company (LLC) where the management and day-to-day operations of the business are handled by its members (owners) directly. In a Member-Managed LLC, each member has the authority to make decisions and take actions on behalf of the company, such as entering into contracts, hiring employees, and managing the finances.

This management structure contrasts with a Manager-Managed LLC, where the members appoint one or more managers to oversee the business operations. In a Manager-Managed LLC, the appointed managers have the authority to make decisions and act on behalf of the company. In contrast, the members typically have a more passive role, focusing on high-level decision-making and strategic planning.

Roles and Responsibilities of Members/Managers: The agreement should define the roles and responsibilities of each member or manager, including their duties, decision-making authority, and any limitations on their powers.

Article V: Meetings and Voting Procedures

This article outlines the rules for conducting meetings and voting procedures. It specifies the quorum required for decision-making, how votes are counted, and how members are notified about meetings. It also includes information about special meetings and emergency decisions.

  • Voting Rights and Decision-Making Process: The agreement should outline each member or manager’s voting rights and decision-making for various business matters.
  • Meetings and Notice Requirements: The operating agreement should specify the frequency of meetings, the process for calling special meetings, and the notice requirements for each type of meeting.

Article VI: Limitation of Liability and Indemnification

To protect the personal assets of your LLC’s members and managers, your operating agreement in Arkansas should address the following:

  • Liability of Members/Managers: The agreement should limit the liability of members and managers for the debts and obligations of the LLC, following Arkansas law.
  • Indemnification Provisions: The operating agreement should include provisions for indemnifying members and managers for actions taken on behalf of the LLC, as long as those actions are within the scope of their duties and do not involve gross negligence or willful misconduct.
  • Insurance Requirements: The agreement should specify any insurance requirements for your LLC, such as liability or property insurance. Small business insurance helps safeguard your business from financial losses, legal claims, and other unforeseen events. This protection allows entrepreneurs to focus on growing and sustaining their businesses within the Arkansas economy.

You may check out the Best Small Business Insurance in Arkansas to learn more about business insurance.

Article VII: Record Keeping and Financial Reporting

This article provides details about the record-keeping and financial auditing procedures. It outlines the importance of keeping accurate and comprehensive records of an LLC’s financial transactions. It also specifies the frequency of financial reporting and distribution to the members.

  • Accounting and Recordkeeping: The operating agreement should outline your Arkansas LLC’s accounting methods and recordkeeping requirements. Effective financial management is important for the success of your Arkansas LLC. Establish a reliable accounting system to track income, expenses, and tax obligations. You can manage your finances using spreadsheets, accounting software, or becoming a CPA in Arkansas.
  • Fiscal Year: The agreement should specify the fiscal year for your LLC, which may be either a calendar year or any 12-month period.
  • Tax Treatment and Filing Requirements: The agreement should specify your LLC’s tax treatment and any required filings with the Arkansas tax authorities. You should include the filing of the Arkansas Certificate of Organization, annual fees, and other associated fees that need to be filed.

For the initial and final cost for forming your Arkansas LLC, look up the LLC Cost in Arkansas for additional information. 

Article VIII: Dissolution and Winding Up

This section outlines the circumstances under which the LLC may be dissolved, such as a unanimous decision by members, legal issues, bankruptcy, or achieving its purpose. It also includes information about how the LLC’s assets will be liquidated and debts paid upon dissolution.

Events Triggering Dissolution: The agreement should list the events that will trigger the dissolution of your LLC, such as the death or withdrawal of a member, a unanimous vote of the members, or a court order. 

Some common events include:

  • A unanimous vote of the members to dissolve the business.
  • The death, resignation, or withdrawal of a member unless the remaining members agree to continue the business.
  • The expiration of a specified period or the completion of a specific purpose, as outlined in the operating agreement.
  • A court order mandating the dissolution of the LLC.

Winding Up Process: The operating agreement should outline the process for winding up the affairs of the LLC, which typically involves:

  • Settling the company’s outstanding debts and obligations.
  • Liquidating the company’s assets.
  • Resolving any pending legal disputes.
  • Preparing and filing final tax returns.

Distribution of Assets: The operating agreement should specify how the LLC’s remaining assets will be distributed among the members upon dissolution, typically in proportion to their ownership interests.

Certificate of Cancellation: After the winding-up process is completed, the LLC may be required to file a certificate of cancellation or articles of dissolution with the Arkansas Secretary of State to dissolve the company and remove it from its records formally. 

Article IX: Dispute Resolution

This article provides the protocol for handling any disputes arising between LLC members. It can include stipulations for mediation or arbitration in case of any conflicts. The agreement should include a process for resolving member disputes, such as mediation or arbitration.

Article X: Amendments and Modifications

Your LLC Operating Agreement in Arkansas should include a process for making amendments and modifications, such as:

  • Process for Amending the Operating Agreement: The agreement should outline the process for proposing, considering, and approving amendments to the operating agreement.
  • Required Approval for Amendments: The agreement should specify the percentage of member approval required to amend the operating agreement.

Once your LLC Operating Agreement has been drafted, it should be executed by the initial members or managers and adopted by any additional members who join the LLC.

Role of Registered Agent in LLC Operating Agreement

A Registered Agent is a person or entity designated to receive legal documents and official correspondence on behalf of an LLC. While the primary role of a Registered Agent is to maintain a reliable point of contact for legal matters, some registered agent service providers also offer additional services, such as creating an operating agreement for your LLC. Below are some advantages of having a Registered Agent create an operating agreement for your business:

  • Expertise: A Registered Agent specializing in LLC Formation Services often has extensive knowledge and experience drafting operating agreements. They are familiar with the requirements and best practices for creating a comprehensive and legally compliant operating agreement, which can help protect your business interests and minimize potential disputes among members.
  • State-Specific Requirements: A Registered Agent offering operating agreement services is well-versed in state-specific laws and regulations governing LLCs. They can ensure that your operating agreement complies with the specific requirements of the state in which your LLC is formed, including mandatory provisions and filing requirements.
  • Time-Saving: Drafting an operating agreement in Arkansas can be complex and time-consuming, especially for business owners unfamiliar with legal terminology and procedures. By delegating this task to a Registered Agent, you can save time and focus on other crucial aspects of your business.
  • Customization: A Registered Agent with experience creating operating agreements can tailor the document to meet your business’s unique needs and circumstances. They can help you address specific management structures, financial arrangements, and other critical aspects of your LLC that may not be covered in a generic operating agreement template.
  • Ongoing Support: The Registered Agent services provide ongoing support and guidance in maintaining and updating your operating agreement as your business grows and evolves. This can help ensure that your operating agreement remains relevant and compliant with changing laws and regulations.

While there are advantages to having a Registered Agent create an operating agreement for your LLC, it is essential to carefully review and understand the terms of the agreement before signing. Additionally, it is a good idea to consult with legal and tax professionals to ensure that the operating agreement aligns with your business goals and complies with all applicable laws and regulations.

Recommended: Professional services will ensure your business gets legal notices and critical mail. With LegalZoom’s Registered Agent Services, they offer peace of mind and expert support for businesses, ensuring compliance and seamless communication with state authorities. That’s why we recommend using –

LegalZoom – $249/year

FAQs

What is an LLC operating agreement in Arkansas?
An LLC operating agreement in Arkansas is a legal document that outlines the ownership and operational structure of a limited liability company (LLC) established in Arkansas.
Are LLC operating agreements mandatory in Arkansas?
LLC operating agreements are not required by law in Arkansas, but they are highly advisable and recommended.
Can LLC operating agreements be modified in Arkansas?
Yes, LLC operating agreements can be modified in Arkansas as long as all members agree to the changes.
Who prepares LLC operating agreements in Arkansas?
LLC operating agreements can be prepared by the LLC members themselves or with the help of an attorney in Arkansas.
Can the state of Arkansas provide an LLC operating agreement template?
The state of Arkansas does not provide an LLC operating agreement template. It is important to create a customized agreement that meets the needs of the LLC.
Are LLC operating agreements filed with the state of Arkansas?
LLC operating agreements are not required to be filed with the state of Arkansas. They are internal documents used by the LLC members.
What is the benefit of having an LLC operating agreement in Arkansas?
An LLC operating agreement provides clear guidelines and rules for how the LLC operates, including member responsibilities and decision-making processes.
How do I ensure that my LLC operating agreement is valid in Arkansas?
In Arkansas, an LLC operating agreement is valid as long as it was created voluntarily by all members and it is in compliance with Arkansas business laws.
Can an LLC operating agreement supersede Arkansas state laws?
No, an LLC operating agreement cannot supersede Arkansas state laws. It must comply with all state regulations and laws.
Can a single-member LLC have an operating agreement in Arkansas?
Yes, even single-member LLCs in Arkansas can benefit from an operating agreement to clearly define their roles and responsibilities.
How detailed should an LLC operating agreement be in Arkansas?
An LLC operating agreement in Arkansas should be detailed enough to provide clear guidelines but not so detailed that it makes the document complex and difficult to follow.
Can an LLC operating agreement include provisions for the distribution of assets in case of dissolution in Arkansas?
Yes, an LLC operating agreement can include provisions for the distribution of assets in case of dissolution in Arkansas.
What are some common elements of LLC operating agreements in Arkansas?
Common elements of LLC operating agreements in Arkansas include member roles and responsibilities, decision-making processes, profit and loss distribution, dispute resolution, and dissolution.
Is it necessary for all members of an LLC to sign the operating agreement in Arkansas?
It is not technically necessary for all members of an LLC to sign an operating agreement in Arkansas, but it is highly recommended to avoid any confusion or conflict.
Can an LLC operating agreement require unanimous member approval for certain decisions in Arkansas?
Yes, an LLC operating agreement in Arkansas can require unanimous member approval for certain decisions.
Can an LLC require certain members to make capital contributions in Arkansas?
Yes, an LLC in Arkansas can require certain members to make capital contributions, but it must be specified in the operating agreement.
How long does it take to create an LLC operating agreement in Arkansas?
The time it takes to create an LLC operating agreement in Arkansas depends on factors such as the number of members and the complexity of the LLC’s management structure.
Can an LLC operating agreement be amended without consent from all members in Arkansas?
An LLC operating agreement in Arkansas can only be amended with the unanimous consent of all members unless otherwise specified in the agreement.
Who has access to the information contained in an LLC operating agreement in Arkansas?
Only members of the LLC have access to the information contained in an LLC operating agreement in Arkansas.
Can a non-member former employee of an LLC access an operating agreement in Arkansas?
No, a non-member former employee of an LLC cannot access an operating agreement in Arkansas.
Is an LLC operating agreement different from the LLC Articles of Organization in Arkansas?
Yes, an LLC operating agreement is a separate document from the Articles of Organization in Arkansas. The Articles of Organization define the LLC’s prominent characteristics, and the operating agreement governs its day-to-day operations.
Do LLC operating agreements include confidential information in Arkansas?
Yes, LLC operating agreements often include confidential information about the LLC and its members in Arkansas.
What happens if an LLC member violates an operating agreement in Arkansas?
If an LLC member violates an operating agreement in Arkansas, the LLC may face legal and financial consequences, and the violating member may face legal action.
Can an LLC operating agreement include provisions that limit liability in Arkansas?
Yes, an LLC operating agreement in Arkansas can include provisions to limit the liability of members and the LLC.
How frequently should an LLC operating agreement be reviewed in Arkansas?
An LLC operating agreement in Arkansas should be periodically reviewed by its members to ensure that it stays up-to-date with any changes in the business and legal landscape.
Can the court in Arkansas force an LLC to reconcile their operating agreement?
The court in Arkansas can force members of an LLC to reconcile their operating agreement in the event of disputes or disagreements.
Are LLC operating agreements required to be notarized in Arkansas?
LLC operating agreements in Arkansas are not required to be notarized, but doing so may make it easier to prove the authenticity of the agreement in legal proceedings.
Can an LLC operating agreement be created after the LLC has been formed in Arkansas?
Yes, an LLC operating agreement in Arkansas can be created after the LLC has been formed, although it is recommended to do so as soon as possible.
How can I obtain an LLC operating agreement template specific to Arkansas?
LLC operating agreements are not standardized in Arkansas; however, there are many online templates that can serve as a starting point for a customized agreement. Consulting with an attorney in Arkansas is ideal to ensure compliance to the best extent possible.
Do I need an LLC operating agreement in Arkansas?
While it is not legally required to have an LLC operating agreement in Arkansas, having one can provide clarity and protection in case of conflicts between members.
Can I create an LLC operating agreement in Arkansas myself?
Yes, you can create an LLC operating agreement in Arkansas by yourself, but it is recommended to seek legal advice and ensure it is in compliance with Arkansas regulations.
Are LLC operating agreements public information in Arkansas?
No, LLC operating agreements are not public information in Arkansas and are kept with the internal business records of the LLC.
What should be included in an LLC operating agreement in Arkansas?
An LLC operating agreement in Arkansas should include details related to ownership structure, management structure, voting rights, profit and loss distribution, and other important operational procedures.
How do I file my LLC operating agreement in Arkansas?
You do not need to file LLC operating agreements with the state of Arkansas, but it should be kept with internal business records.
Can I amend my LLC operating agreement in Arkansas?
Yes, an LLC operating agreement in Arkansas can be amended by following the procedures outlined in the original agreement.
What happens if there is no LLC operating agreement in Arkansas?
Without an LLC operating agreement in Arkansas, the state’s default LLC laws will apply, which may not adequately reflect the intentions of the members.
What is a single-member LLC operating agreement in Arkansas?
A single-member LLC operating agreement in Arkansas is a document outlining the operational procedures and ownership structure of a limited liability company with only one member in the state of Arkansas.
How many people can be included in an LLC operating agreement in Arkansas?
There is no limit to the number of people that can be included in an LLC operating agreement in Arkansas.
Is it necessary to have a lawyer review my LLC operating agreement in Arkansas?
While it is not required to have a lawyer review your LLC operating agreement in Arkansas, it is recommended for legal protection and to ensure compliance with Arkansas regulations.
Can an LLC operating agreement in Arkansas be enforced in court?
Yes, an LLC operating agreement in Arkansas can be enforced in court if it is legally binding and in compliance with Arkansas regulations.
Can an LLC operating agreement in Arkansas be changed during a lawsuit?
No, an LLC operating agreement in Arkansas cannot be changed during a lawsuit without the consent of all members involved.
Who should sign an LLC operating agreement in Arkansas?
All members involved in the LLC should sign the LLC operating agreement in Arkansas.
Are verbal LLC operating agreements valid in Arkansas?
While verbal agreements are legally binding in Arkansas, it is recommended to have a written LLC operating agreement for clarity and legal protection.
What is the difference between an LLC operating agreement and bylaws?
An LLC operating agreement outlines the details related to ownership structure and operation procedures whereas bylaws dictate the operational and legal structure of the LLC.
Can an LLC operating agreement in Arkansas be amended without the consent of all members?
No, an LLC operating agreement in Arkansas can only be amended with the consent of all members involved.
Are there any restrictions on LLC operating agreements in Arkansas?
LLC operating agreements must be in compliance with Arkansas state regulations, but outside of that, there are no major restrictions.
What is an annual Arkansas LLC operating agreement review?
An annual Arkansas LLC operating agreement review involves reviewing and updating the LLC operating agreement on a yearly basis to ensure it reflects current operations and ownership structure.
Are LLC operating agreements required to follow Arkansas state law?
Yes, LLC operating agreements in Arkansas must follow state law.
Can an LLC operating agreement in Arkansas require members to perform certain duties?
Yes, an LLC operating agreement in Arkansas can require members to perform certain duties as long as they are compliant with state law.
Can an LLC operating agreement in Arkansas be signed electronically?
Yes, an LLC operating agreement in Arkansas can be signed electronically as long as it is in compliance with state law.
What are some common mistakes people make when creating an LLC operating agreement in Arkansas?
Some common mistakes include inaccurately reflecting ownership structure, failing to outline key business procedures and operations, and failing to remain compliant with Arkansas state laws.
Can an LLC operating agreement in Arkansas be voided?
An LLC operating agreement in Arkansas can only be voided if it is deemed to be in violation of state law.
Is it necessary to notarize an LLC operating agreement in Arkansas?
While it is not required to notarize an LLC operating agreement in Arkansas, it is recommended to ensure legal protection.
Can an LLC operating agreement in Arkansas be transferred to another state?
Yes, an LLC operating agreement in Arkansas can be transferred to another state as long it is in compliance with the regulations of the new state and the regulatory provisions affecting the Arkansas LLC agreement.
What should I do if there is conflict related to my LLC operating agreement in Arkansas?
In case of conflict related to an LLC operating agreement in Arkansas, it is recommended to seek legal advice and follow the dispute resolution procedures outlined in the agreement.
Is an LLC operating agreement in Arkansas required for tax purposes?
While an LLC operating agreement in Arkansas is not required for tax purposes, it can provide the IRS and state taxing authorities with a clear understanding of the LLC’s operations.

Also Read

Conclusion

Having a well-drafted LLC Operating Agreement in place is crucial for the success and protection of your Arkansas LLC. It provides a clear framework for the ownership, management, and operation of your business, helping to prevent disputes and ensure compliance with state law. It is highly recommended to consult with legal and tax professionals when drafting and executing your operating agreement to ensure it meets your specific needs and complies with all applicable laws and regulations.

Leave a Comment