Arizona Single-Member LLC Operating Agreement
Create an Arizona single-member LLC operating agreement with state-specific guidance on distribution defaults, fiduciary duties, and asset protection.
Introduction
A single-member LLC operating agreement is the internal document where you, as the sole owner of an Arizona LLC, set the rules for how your business runs, how distributions are handled, and what happens if you bring on a partner or close the business later. Arizona does not require the agreement to be written, oral and implied agreements are legally valid, but a written agreement is the only reliable way to override statutory defaults you may not want, including the rule that splits distributions in equal shares regardless of who contributed more. It is also the clearest evidence, if a court or the IRS ever asks, that you are running a real business, not a personal wallet.
0/5000
Key Things to Know
- 1
Arizona does not require an operating agreement to be written. Oral and implied agreements are legally valid, but only a written agreement lets you override statutory default rules with certainty (A.R.S. Section 29-3102(A)(17)).
- 2
Without an operating agreement addressing distributions, Arizona law splits them in equal shares among members, regardless of who contributed more capital, not proportional to ownership (A.R.S. Section 29-3404(A)).
- 3
A charging order is the exclusive statutory remedy against a member's LLC interest, and Arizona's version does not let a creditor force a foreclosure sale of that interest, a stronger protection than the base uniform act (A.R.S. Section 29-3503(E)).
- 4
Arizona LLCs owe no annual report and no annual franchise tax or flat state fee, unlike many other states.
- 5
Arizona allows an operating agreement to expand, limit, or even eliminate the duty of loyalty and duty of care, but it can never eliminate the good faith and fair dealing obligation or liability for willful misconduct (A.R.S. Section 29-3105).
- 6
The operating agreement itself is not filed with the state. You form the LLC by filing Articles of Organization with the Arizona Corporation Commission, a $50 standard filing fee.
- 7
Most Arizona LLCs must publish notice of formation in a newspaper for three consecutive publications within 60 days of filing, unless the statutory agent's address is in Maricopa or Pima County, which are exempt (A.R.S. Section 29-3201(G)).
Key decisions before you file
Before you file a LLC Operating Agreement in Arizona, a few decisions shape the document: which option to choose and what each one means. The LLC Operating Agreement guide walks through them.
Open the LLC Operating Agreement guideCustomize your LLC Operating Agreement Template with DocDraft
Arizona Requirements for LLC Operating Agreement
Operating Agreement Authority (A.R.S. § 29-3105)
This Operating Agreement governs the relations among Members, the rights and duties of a Manager, and the Company's activities and affairs, and may contain any provision not contrary to law. Where this Agreement and the Arizona Limited Liability Company Act conflict, this Agreement governs, except for a limited set of matters the Act does not allow an operating agreement to vary.
Limited Liability Protection (A.R.S. § 29-3304)
Members and managers are not personally liable, directly or indirectly, for a debt, obligation, or other liability of the Company solely by reason of being or acting as a member or manager. Failing to observe formalities relating to the exercise of the Company's powers is not by itself a ground for imposing personal liability.
Statutory Agent (A.R.S. § 29-3115)
The Company shall designate and continuously maintain a statutory agent with a place of business or residence in Arizona, authorized to receive service of process, notices, and demands on the Company's behalf, as required by the Arizona Limited Liability Company Act.
Articles of Organization Compliance (A.R.S. § 29-3201, § 29-3202)
This Operating Agreement shall not conflict with the Articles of Organization filed with the Arizona Corporation Commission. The Company must amend its Articles within 30 days after certain events specified by statute, including a change in the identity of a member of a member-managed Company.
Member Voting Rights (A.R.S. § 29-3407)
In a member-managed Company, absent a contrary Agreement, any Member may act alone to manage ordinary-course activities. A matter outside the ordinary course, such as admitting a new member, requires the consent of a majority in interest of the Members, a term weighted by each Member's share of Company profits, not a simple per-member majority.
Management Structure (A.R.S. § 29-3407)
Management of the Company is reserved to its Members unless the Articles of Organization state that the Company is managed by one or more Managers. A manager-managed election must be reflected in both the Articles of Organization and this Agreement.
Fiduciary Duties (A.R.S. § 29-3105, § 29-3409)
Members (in a member-managed Company) or Managers (in a manager-managed Company) owe duties of loyalty and care under Arizona law. This Agreement may expand, limit, or eliminate those duties, except that it may never eliminate the contractual obligation of good faith and fair dealing or liability for willful or intentional misconduct.
Capital Contributions (A.R.S. § 29-3402)
A Member's contribution to the Company may consist of property transferred to, services performed for, or another benefit provided to the Company, or an agreement to provide any of those in the future. This Agreement should state each Member's contribution and any agreed value for non-cash contributions.
Distribution of Profits (A.R.S. § 29-3404)
Absent a contrary Agreement, any distribution made by the Company before its dissolution and winding up must be split in EQUAL SHARES among Members, regardless of the size of each Member's capital contribution. This Agreement should state a different split if the Members do not intend an equal division.
Limitations on Distributions (A.R.S. § 29-3405)
The Company may not make a distribution if, after the distribution, it would be unable to pay its debts as they become due in the ordinary course, or its total assets would be less than its total liabilities. This restriction protects Company creditors and cannot be eliminated by this Agreement.
Transfer of Membership Interests (A.R.S. § 29-3502)
A Member may transfer a transferable interest, in whole or in part, without causing dissociation or dissolution. A transfer alone does not entitle the transferee to participate in management or to receive Company information beyond what relates to the transferred distribution right, unless the transferee is admitted as a Member.
Withdrawal and Dissociation of Members (A.R.S. § 29-3601, § 29-3602)
A Member may dissociate at any time by express will, but dissociation in breach of this Agreement is wrongful and makes the withdrawing Member liable to the Company and the other Members for resulting damages. This Agreement should address whether the Company must buy out a dissociated Member's interest.
Dissolution and Winding Up (A.R.S. § 29-3701)
Absent a different threshold in this Agreement, the Company dissolves on the consent of a majority in interest of the Members, after 180 consecutive days with no members, or by court order for illegality, deadlock, or oppression. This Agreement should set its own dissolution triggers and winding-up procedure.
Records and Accounting (A.R.S. § 29-3410)
The Company must keep a current list of members and managers, its Articles of Organization and amendments, copies of any written operating agreements, capital contribution records, and tax returns and financial statements for the three most recent years. Members and managers may inspect and copy these records for a purpose reasonably related to their rights and duties.
Amendment Procedures (A.R.S. § 29-3105, § 29-3407)
This Agreement governs the means and conditions for its own amendment. Absent a different threshold stated here, amending this Agreement requires the consent of all Members, not merely a majority.