Michigan Single-Member LLC Operating Agreement

Michigan law recognizes an operating agreement's authority to govern the LLC's internal affairs and the relations among members, managers, and the company, except where a statute specifically restricts that authority. Unlike some states, Michigan's own definition of "operating agreement" (MCL 450.4102) requires it to be written; an oral or implied understanding does not have this legal effect under Michigan law.

Michigan law (MCL 450.4404) requires a member or manager to act in good faith, with the care an ordinarily prudent person would exercise, and to account for any profit or benefit personally derived from a company transaction, unless the operating agreement provides otherwise. Separately, MCL 450.4407 lets the operating agreement eliminate a manager's monetary liability for breaching these duties, except for receipt of an improper financial benefit, liability for unlawful distributions, a knowing violation of law, or acts before the provision took effect.

Under MCL 450.4216, the Company may indemnify, hold harmless, and defend a member, manager, or other person against losses, expenses, claims, and demands arising from their role with the Company, and may purchase insurance for that purpose. Indemnification is not available for receipt of an improper financial benefit, liability for unlawful distributions, or a knowing violation of law (cross-referencing MCL 450.4407(a)-(c)).

Absent a contrary operating agreement, each member of a Michigan LLC has one vote, and a majority in interest of the members entitled to vote is required to approve most matters (MCL 450.4502). The operating agreement can allocate voting rights differently, including giving some members limited or no voting rights.

Absent a contrary operating agreement, an assignee of a membership interest in a Michigan LLC with more than one member may become a member only by unanimous vote of the members entitled to vote. In a single-member LLC, an assignee may become a member under the terms the member and assignee agree to (MCL 450.4506).

Under MCL 450.4509, a member of a Michigan LLC may withdraw only as the operating agreement provides -- Michigan gives members no independent statutory right to withdraw. The operating agreement should state whether and how a member may withdraw and what, if anything, a withdrawing member is entitled to receive.

The operating agreement must specify how profits, losses, and distributions will be allocated among members, which can modify Michigan's default equal allocation rule.

Under MCL 450.4503, a member may request the LLC's most recent annual financial statement and tax returns by written request, and may inspect and copy the LLC's required records during ordinary business hours at the member's own expense. The operating agreement can expand these rights but cannot eliminate them.

Michigan's default rule for amending the Articles of Organization requires a unanimous vote of the members entitled to vote, unless the operating agreement authorizes amendment by a lesser vote (MCL 450.4603). The operating agreement should set its own amendment procedure for itself rather than rely on this Articles-of-Organization default.

MCL 450.4507 makes a charging order the exclusive remedy by which a judgment creditor of a member may satisfy a judgment out of the member's LLC interest, and the statute itself bars the creditor from foreclosing on that lien or the underlying membership interest.

Michigan does not authorize the formation of series LLCs. The Michigan Limited Liability Company Act contains no provision creating a "series" or "protected series" structure. A business that wants to segregate assets and liabilities across different lines of business needs separate Michigan LLCs, not a single series structure.