Kansas LLC Operating Agreement + Free Template
Creating a thorough operating agreement is one of the first steps you must take if you decide to form an LLC in Kansas.
We sought assistance from our team of licensed LLC lawyers with more than 16 years of expertise in the business sector to help you understand what you should include in your operating agreement.
We examined the elements that go into a comprehensive operating agreement and compiled this thorough list of everything your Kansas LLC operating agreement has to have.
- In Kansas, an LLC operating agreement is not mandatory but is considered critical for forming an LLC.
- A Kansas LLC operating agreement is a legal document that outlines ownership and operational procedures, offering benefits such as tax advantages, protection against default state laws, conflict resolution, and maintaining personal and professional separation.
- Failing to file the Annual Report with the Kansas Secretary of State, which comes with a $55 fee, is the leading cause of LLC dissolution in the state.
- In Iron Mound, LLC v. Nueterra Healthcare Mgmt., LLC, the operating agreement for ASC Midwest, LLC, became a legal contention point. My take: crucially complex.
Kansas Operating Agreement Free Template
Disclaimer: The provided template serves solely as a general guide and should not be used as a legal document without the advice of a qualified attorney. We disclaim any liability for its relevance or precision in your specific situation.
For a deeper understanding of the distinctions between manager-managed and member-managed LLCs, we invite you to read our detailed article.
What Is a Kansas LLC Operating Agreement?
A Kansas LLC operating agreement is a legal business document that outlines the ownership hierarchy and operational procedures of a single-member or multi-member limited liability company.
It defines the financial and operational choices made by the company, as well as the laws, regulations, and provisions. The document's goal is to regulate the company's internal operations in a way that meets the owners' unique requirements.
Even though the Kansas Secretary of State does not require it, an operating agreement is considered a critical document that must be included when forming a limited liability company.
In addition to ensuring your operating agreement is up-to-date and accurately reflects your LLC's structure and governance, it's critical to fulfill ongoing obligations to the state. Maintaining your LLC's operating agreement and meeting state obligations, such as filing the annual report with a $55 fee to the Kansas Secretary of State, is crucial. Non-compliance is a leading cause of LLC dissolution in Kansas.
The limited liability company's members are legally obligated to abide by the conditions of the operating agreement after they have signed it.
"In the absence of an operating agreement, your business is required to adhere to the default regulations set forth by the state."
- Jon Morgan, Co-Editor & Co-Founder of Venture Smarter
Writing Operating Agreement Do's and Don'ts
- Understand Kansas Requirements: Familiarize yourself with the Kansas Revised Limited Liability Company Act to ensure your operating agreement complies with state requirements. For example, failing to file Annual Report ($55 fee) is the primary reason LLCs are dissolved in the state.
- Protect Members: Limit the liability of members for the debts and actions of the LLC to the extent allowed by law.
- Keep It Accessible: Ensure all members have access to the operating agreement and understand its contents.
- Review and Update Regularly: As your business grows and changes, so should your operating agreement. Review it annually and update it as necessary.
- Don't Use Generic Templates Blindly: While templates can be a good starting point, don't rely on them entirely. Customize your agreement to fit your LLC's specific needs.
- Don't Ignore Member Agreements: Ensure that all members agree to the terms and sign the document.
- Don't Overlook Dispute Resolution: Include a method for resolving disputes among members to avoid costly litigation.
- Don't Be Vague: Be as specific as possible to avoid ambiguity and misunderstandings.
- Don't Neglect to Define the Dissolution Process: Clearly outline the steps required to dissolve the LLC, including the distribution of assets.
What Should Be Covered in My Operating Agreement?
Your Kansas LLC operating agreement should comprehensively outline your company's structure and operational rules, including details such as the LLC's official name, ownership distribution, management responsibilities, and procedures for meetings and record-keeping.
In Kansas, according to the Small Business Profile, small businesses make up 99.1% of all enterprises, totaling 256,287 entities .
Here are more details of what should be covered in your Kansas LLC operating agreement:
1. LLC Name
You need to include the company's name and address in this section.
Include the LLC's full legal name as registered, the physical address of the main business site, a compliance statement with state LLC naming laws, a clause allowing business under other names with proper registration, and a defined process for changing the business address.
2. Ownership Details
The operating agreement should clearly outline the ownership framework, documenting the capital investments of each member of the Kansas LLC and their corresponding ownership percentages, along with their shares in the profits and losses.
In our LLC, the operating agreement meticulously records each person's investment, transforming potential disputes into clear-cut, documented facts. This approach has rendered conversations about ownership peaceful.
It's essential that the agreement include the names, addresses, roles, responsibilities, and equity percentages of all members.
The new federal law, effective January 1, 2024, requires certain corporations and LLCs to report beneficial ownership information to FinCEN .
3. Voting Rights and Decision-Making Powers
You must decide how votes are distributed if members want to cast ballots. You might allocate the same votes to each member or divide them according to ownership.
The number of votes required for a certain action should also be included in the operating agreement.
If all the voting processes occur during member meetings, you must decide how frequently the meetings will be held.
4. Profit Distributions
You will describe how earnings and losses are allocated in this section of the written LLC operating agreement.
The distribution of money, real estate, and other corporate assets must be specified.
This section of the operating agreement also describes when profits are allocated.
You should indicate whether members must wait a certain amount of time before withdrawing from their gains or if they can do so immediately.
You should describe how the Kansas LLC is managed (by a member or a manager).
If you run a member-managed LLC, all members may participate in management, and they can oversee the daily transactions of the entity. If this is the case, clarifying each person's responsibilities and degree of power is crucial.
If it's a manager-managed LLC, you may designate an individual to take charge of all management-related duties.
For this type of management structure, you should also talk about the election process, the duration of the manager's term, and their pay.
The operating agreement must articulate the standards for maintaining the LLC's records, which include financial documents, member details, and records of meetings.
It needs to identify the specific records to be preserved, their designated storage solutions, and the time frame for their safekeeping.
The agreement should guarantee members access to these records and set forth explicit procedures for their review.
7. Member Change Process
Numerous factors can affect membership changes in a limited liability company.
The following membership changes should be addressed in this part of your LLC's operating agreement:
- Adding or removing members
- A direct membership transfer from a current member to a new member
- Death of an LLC member
- Bankruptcy of a group member
- Verifiable reasons for expelling a member
This section of the limited liability company agreement should also state whether current members can purchase shares from other members before they sell them.
8. Meeting Requirements
The operating agreement ought to outline how often member meetings will occur, be it annually or more frequently.
It needs to detail the procedures for organizing both regular and special meetings of members, including requirements for notice, establishing a quorum, and the methods of voting.
9. Operational Rules and Regulations
In the Kansas LLC operating agreement, this portion should delineate the company's adherence to legal requirements, specify operational hours and premises, allocate responsibilities to members and managers, articulate financial procedures, outline methods for resolving disputes, and set forth clear processes for making amendments, all aimed at fostering transparent and effective governance.
Do I really need an LLC operating agreement in Kansas?
No, it's not required; however, there are several advantages to consider.
You need an LLC operating agreement to avoid state rules, show business legitimacy, and have a better conflict resolution system.
Here are the benefits of Kansas LLC operating agreements:
- Tax Advantages And Financial Management: A thorough operating agreement allows you to resolve taxation and financial management issues. You may set up rules for adding or deleting members, manage profit allocation among LLC members, and specify how capital contributions will be made.
- Protection Against Default State Laws: Per Kansas law, your multi-member LLC is subject to the state's default rules governing how LLCs are run if it doesn’t have a customized operating agreement. With an operating agreement, you can make crucial decisions about the rules and laws governing how your company operates.
- Resolution Of Conflict And Avoidance Of Expensive Litigation: An operating agreement can help settle disputes quickly and prevent expensive lawsuits. By providing methods for resolving disputes, such as mediation or arbitration provisions, you offer a planned procedure for resolving disputes promptly and impartially.
- Keeping Personal And Professional Identity Separate: An operating agreement helps to separate the firm from the owner. An LLC with an operating agreement has the capacity to limit personal liability in both ways; it hides the company's assets from its members' obligations while simultaneously insulating its members from business liabilities.
- Strengthening Organizational Structure : An operating agreement covers processes for admitting new LLC members, buyout options, or rules for transferring ownership interests. You can ensure a seamless transition in the case of ownership changes or member departures because the agreement takes care of these issues upfront.
- To Open Bank Accounts And Source Funding: When opening financial accounts to do business as a single-member LLC, you frequently need to provide an original copy of the operating agreement and your employer identification number, according to the U.S. Small Business Administration guide . Without this documentation, it would be difficult for the corporation to get an LLC business bank account. Authentic investors also require proof of a company's legitimacy before moving forward with the entity.
- Evidence Of Legitimacy: The firm's authenticity is a factor that real investors consider when evaluating potential investments. An excellent technique to ensure that the Kansas LLC portrays itself properly is through operating agreements. It shows that the LLC's members care about the business and want it to follow the law. This attracts investors, which propels growth and expansion.
Can a Kansas LLC Operating Agreement Be Amended?
Yes, a Kansas LLC operating agreement can be amended based on the business terms. The procedures for making amendments are outlined in the operating agreement, whether through unanimous voting or during a specific period of the calendar year.
Does a single-member LLC need an operating agreement?