California Single-Member LLC Operating Agreement

Create a California single-member LLC operating agreement with state-specific guidance on RULLCA defaults, taxes, and liability protection.

Introduction

A single-member LLC operating agreement is the internal document where you, as the sole owner of a California LLC, set the rules for how your business runs, how profits are handled, and what happens if you bring on a partner or close the business later. California does not require every operating agreement to be in writing, but written form is required to make several specific provisions enforceable, including any change to the fiduciary duties you owe the LLC, and it is the clearest evidence, if a court or the IRS ever asks, that you are running a real business and not just using the LLC as a personal wallet.

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Key Things to Know

  1. 1

    Written form is not required for a California operating agreement in general, but it is required to make several specific provisions enforceable, and for any change to fiduciary duties (Corp. Code Section 17701.10).

  2. 2

    Without an operating agreement, California law allocates profits and losses based on the value of each member's capital contribution, not split evenly (Corp. Code Section 17704.04).

  3. 3

    A charging order is the formal remedy against a member's LLC interest, but California courts allow creditors to pierce the LLC when it has been treated as an alter ego, so keeping LLC and personal finances genuinely separate matters (Blizzard Energy, Inc. v. Schaefers, 71 Cal.App.5th 832 (2021)).

  4. 4

    California LLCs owe an $800 annual minimum franchise tax to the Franchise Tax Board regardless of income or activity level.

  5. 5

    The duty of loyalty can be modified, but not eliminated, under a 'not manifestly unreasonable' standard, and the duty of care can be reasonably reduced, only if done in writing with the members' informed consent (Corp. Code Section 17704.09).

  6. 6

    The operating agreement itself is not filed with the state. You form the LLC by filing Articles of Organization (Form LLC-1, $70 fee) with the California Secretary of State.

  7. 7

    A Statement of Information must be filed with the Secretary of State within 90 days of formation, and every two years after that.

Key decisions before you file

Before you file a LLC Operating Agreement in California, a few decisions shape the document: which option to choose and what each one means. The LLC Operating Agreement guide walks through them.

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California-Specific Provisions

Use this together with the complete LLC operating agreement template, which covers the standard provisions your agreement also needs: capital contributions, management structure, meetings, transfers, withdrawal, and dissolution. The sections below cover only what is specific to California law.

1. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of California, including the California Revised Uniform Limited Liability Company Act, California Corporations Code Sections 17701.01 through 17713.13.

2. Allocation of Profits and Losses

Unless otherwise stated elsewhere in this Agreement, profits, losses, and distributions shall be allocated among the Members in proportion to the value of each Member's capital contribution to the Company, as provided by California Corporations Code Section 17704.04 in the absence of a contrary agreement.

3. Fiduciary Duties

The duty of loyalty owed by a Member or Manager to the Company and to the other Members may be modified by this Agreement, but not eliminated, provided the modification is not manifestly unreasonable. The duty of care may be reasonably reduced. A modification under this Section is effective only because it is set forth in this written Agreement with the informed consent of the Members, as required by California Corporations Code Sections 17701.10(e) and 17704.09.

4. Indemnification

The Company may indemnify a Member or Manager as set forth in the complete template, except that indemnification may not be altered or eliminated for: (a) a breach of the duty of loyalty, (b) receipt of an improper financial benefit to which the Member or Manager is not entitled, (c) a Member's liability for excess distributions under California Corporations Code Section 17704.06, (d) intentional infliction of harm on the Company or a Member, or (e) an intentional violation of criminal law, as provided by California Corporations Code Section 17701.10(g).

5. Execution

This Agreement is effective as of the date signed below. California law does not require an LLC operating agreement to be notarized or witnessed to be valid. The provisions above are effective only because they are set forth in this written, signed Agreement.

[MEMBER] Signature: _____________________ Date: _____________

Printed Name: _____________________

California Requirements for LLC Operating Agreement

Formation and Governing Law (California Corporations Code § 17701.01-17713.13)

The LLC is formed under the California Revised Uniform Limited Liability Company Act (RULLCA) and shall be governed by California law. The Operating Agreement must acknowledge compliance with RULLCA provisions.

Operating Agreement Authority (California Corporations Code § 17701.10)

Establishes that the Operating Agreement governs the relations among members and between members and the LLC, and the rights and duties of managers. The agreement may contain provisions not contrary to law.

Limited Liability Protection (California Corporations Code § 17703.04)

Affirms that members and managers are not personally liable for the debts, obligations, or liabilities of the LLC solely by reason of being a member or manager. This protection does not extend to common law alter ego liability, a member's own tortious conduct, or a debt a member voluntarily agrees in writing to assume.

Management Structure (California Corporations Code § 17704.07)

A California LLC is member-managed by default unless the Articles of Organization state it is manager-managed. In a member-managed LLC, each member has equal management and voting rights. A manager-managed election must be stated in both the Articles of Organization and the Operating Agreement.

Capital Contributions (California Corporations Code § 17704.02)

Details the initial and any additional capital contributions required from members, including the form of contributions (cash, property, services) and valuation methods.

Allocation of Profits and Losses (California Corporations Code § 17704.04)

Absent a contrary agreement, California law allocates profits, losses, and distributions in proportion to the value of each member's capital contribution, not split evenly among members. The Operating Agreement can set a different split.

Voting Rights and Decision-Making (California Corporations Code § 17704.07(c))

In a member-managed LLC, ordinary-course business decisions are decided by a majority of the members. An act outside the ordinary course, such as amending the Operating Agreement, requires the consent of all members.

Fiduciary Duties (California Corporations Code § 17704.09)

Defines the fiduciary duties owed to the LLC and its members: by members in a member-managed LLC, or by managers in a manager-managed LLC. The duty of loyalty can be modified, but not eliminated, under a "not manifestly unreasonable" standard. The duty of care can be reasonably reduced. Any modification requires a written operating agreement with the informed consent of the members.

Transfer Restrictions (California Corporations Code § 17705.01-17705.04)

Establishes restrictions on transferring membership interests, including any right of first refusal, approval requirements, or prohibitions on transfers.

Withdrawal and Dissociation (California Corporations Code § 17706.01-17706.03)

Specifies the circumstances under which a member may withdraw from the LLC and the consequences of dissociation, including any buyout provisions.

Dissolution and Winding Up (California Corporations Code § 17707.01-17707.09)

Outlines the events triggering dissolution of the LLC and procedures for winding up its affairs, including asset distribution priorities.

Books and Records (California Corporations Code § 17701.13)

California LLCs must maintain certain records, including a written copy of the Operating Agreement, if one exists in writing, and any amendments to it. This recordkeeping default can only be varied by a written Operating Agreement.

Tax Classification (Internal Revenue Code § 7701; Treasury Regulations § 301.7701-3)

Addresses the LLC's federal tax classification (partnership, disregarded entity, or corporation) and any tax-related provisions, including tax allocations and distributions.

Securities Law Compliance (Securities Act of 1933; California Corporations Code § 25000-25707)

Ensures compliance with federal and state securities laws if membership interests are considered securities, including applicable exemptions from registration.

Indemnification (California Corporations Code § 17701.10(g))

The Operating Agreement may alter or eliminate indemnification for a member or manager, except for: a breach of the duty of loyalty, receipt of an improper financial benefit to which the member or manager is not entitled, a member's liability for excess distributions, intentional infliction of harm on the LLC or a member, or an intentional violation of criminal law.

Amendment Procedures (California Corporations Code § 17701.10)

Establishes procedures for amending the Operating Agreement, including required vote thresholds and notice requirements.

Dispute Resolution (California Code of Civil Procedure § 1280-1294.2)

Specifies methods for resolving disputes among members or between members and the LLC, such as mediation, arbitration, or litigation procedures.

California Franchise Tax Compliance (California Revenue and Taxation Code § 17941-17942)

Acknowledges the LLC's obligation to pay the annual California franchise tax and LLC fee based on total annual income.

Statement of Information Filing (California Corporations Code § 17702.09)

Recognizes the requirement to file a Statement of Information with the California Secretary of State within 90 days of formation and biennially thereafter.

Anti-Discrimination Compliance (Title VII of Civil Rights Act; California Fair Employment and Housing Act)

Ensures the LLC's operations comply with federal and California anti-discrimination laws in employment, business practices, and member relations.

Frequently Asked Questions

It's the internal document where a California LLC's sole owner sets the rules for running the business and handling profits. California doesn't require it to be written for every purpose, but written form is required for several specific provisions and any fiduciary-duty changes, and it's the clearest proof the LLC is a real business, not just a personal wallet.

Not by blanket legal requirement. California allows oral or implied operating agreements (Corp. Code Section 17701.10). But without a written one, state default rules apply automatically, including a contribution-based profit split rather than one you choose, and several provisions and any fiduciary-duty modification only take effect if they're in writing.

California's default LLC rules fill the gap. Profits, losses, and distributions get allocated based on the value of each member's capital contribution rather than however you'd choose to split them, which matters most once you bring on a second member and haven't defined your own split (Corp. Code Section 17704.04).

It supports that protection, but doesn't guarantee it on its own. California law makes a charging order the formal creditor remedy against your LLC interest, but courts allow creditors to pierce the LLC when it's treated as an alter ego. Following your agreement and keeping finances separate is what keeps the shield intact.

California LLCs owe an $800 annual minimum franchise tax to the Franchise Tax Board, due regardless of income and regardless of whether the LLC is actively doing business, plus a Statement of Information filing with the Secretary of State every two years.

No. You file Articles of Organization (Form LLC-1, $70 fee) with the California Secretary of State to form the LLC, but the operating agreement itself is an internal document. You keep it with your own business records; it's never submitted to the state.

Partially. The duty of loyalty can be modified but not eliminated, under a standard that the modification not be manifestly unreasonable. The duty of care can be reasonably reduced. Either change is only effective if it's in a written operating agreement with the informed consent of the members (Corp. Code Section 17704.09).