Arkansas Single-Member LLC Operating Agreement

Arkansas Code Annotated Section 4-38-105 recognizes the operating agreement as the agreement of all members, whether oral, implied, in a record, or any combination, governing the relations among the members and the LLC. It may not vary the LLC's capacity to sue and be sued, registered-agent and Secretary of State filing requirements, or Arkansas law as the governing law, and it may not eliminate the duty of loyalty or duty of care except as permitted under Section 4-38-105(f).

A debt, obligation, or other liability of the LLC is solely the LLC's; a member or manager is not personally liable for it solely by reason of being or acting as a member or manager (Arkansas Code Annotated Section 4-38-304(a)). The LLC's failure to observe formalities relating to its powers or management is not, by itself, a ground for imposing personal liability on a member or manager (Section 4-38-304(b)).

An Arkansas LLC is member-managed by default unless the operating agreement provides that it is manager-managed. In a member-managed LLC, each member has equal management rights and a majority of the members decides ordinary-course matters. In a manager-managed LLC, ordinary matters are decided exclusively by the manager, or by a majority of managers if more than one (Arkansas Code Annotated Section 4-38-407).

Members (in a member-managed LLC) or managers (in a manager-managed LLC) owe the duty of loyalty and duty of care defined in Arkansas Code Annotated Section 4-38-409. If not manifestly unreasonable, the operating agreement may alter aspects of the duty of loyalty and may alter the duty of care, but no provision may authorize bad faith, willful or intentional misconduct, or a knowing violation of law (Section 4-38-105(e)-(g)).

In a member-managed LLC, a matter in the ordinary course of the company's activities may be decided by a majority of the members; a matter outside the ordinary course, and any amendment to the operating agreement, requires the affirmative vote or consent of all members (Arkansas Code Annotated Section 4-38-407). In a manager-managed LLC, members vote by majority to elect or remove managers.

Unless the operating agreement provides otherwise, distributions made by the LLC before dissolution are shared in EQUAL shares among the members, regardless of the size of each member's capital contribution, not proportional to contribution (Arkansas Code Annotated Section 4-38-404(a)). The operating agreement can set a different split.

A member is dissociated from an Arkansas LLC on any of roughly sixteen triggering events set out in Arkansas Code Annotated Section 4-38-602, including the member's express withdrawal on notice, expulsion under the operating agreement or by unanimous vote, death or incapacity of an individual member, bankruptcy, and foreclosure of the member's interest. The operating agreement should state any buyout terms; Arkansas's default rules do not guarantee an automatic payout.

A member's transferable interest, the right to receive distributions, may be transferred in whole or in part and does not by itself cause the member's dissociation or the LLC's dissolution (Arkansas Code Annotated Section 4-38-502). Unless the operating agreement or the other members provide otherwise, a transferee does not become a member, gains no right to participate in management, and receives only the distributions the transferor would have received.

An Arkansas LLC dissolves and must wind up its activities upon the first to occur of an event stated in the operating agreement, the consent of all members, an event making it unlawful for substantially all of the company's activities to continue, or administrative or judicial dissolution (Arkansas Code Annotated Section 4-38-701). The operating agreement should name who is responsible for winding up.

In a member-managed LLC, a member may inspect and copy company records on reasonable notice, and the LLC must furnish material information without demand. In a manager-managed LLC, a member must make a written demand describing the information sought, and the LLC must respond within ten days (Arkansas Code Annotated Section 4-38-410).

Arkansas LLCs owe a flat $150 Annual LLC Franchise Tax Report and payment to the Arkansas Secretary of State every year, due May 1, regardless of income or business activity (Arkansas Code Annotated Section 26-54-104). Unlike most states, Arkansas's LLC franchise tax is administered by the Secretary of State, not the Department of Finance and Administration. Late filing adds a $25 penalty plus 10% interest.

The operating agreement may be amended only with the affirmative vote or consent of all members, in both a member-managed and a manager-managed LLC (Arkansas Code Annotated Section 4-38-407). Arkansas's LLC Act does not set a lower default amendment-voting threshold; unanimous consent applies unless the agreement itself changes that rule for future amendments.

The LLC must reimburse a member of a member-managed company, or the manager of a manager-managed company, for payments made on the company's behalf, and must indemnify and hold the person harmless from a related claim or demand, subject to advancement of expenses and the company's ability to purchase liability insurance (Arkansas Code Annotated Section 4-38-408). Indemnification may not cover conduct that could not lawfully be authorized under Section 4-38-105(e).