Mississippi Single-Member LLC Operating Agreement

Except as provided in Section 79-29-123(2) and (3), the certificate of formation or operating agreement governs the LLC's internal affairs, the rights and duties of members, managers, and officers, and the means of amending the operating agreement; the Act fills any gap the agreement leaves (Miss. Code Ann. Section 79-29-123(1)-(2)). This supremacy is not unlimited: among other real, enumerated limits, the agreement may not eliminate a member's capacity to sue and be sued, eliminate the implied covenant of good faith and fair dealing, unreasonably restrict information rights under Section 79-29-315, or vary the winding-up asset-distribution priority under Section 79-29-813(1) (Section 79-29-123(3)).

Members, managers, and officers are not personally liable for the LLC's debts, obligations, or liabilities solely by reason of holding that role (Miss. Code Ann. Section 79-29-311(1)). A member, manager, or officer may still voluntarily agree in writing to be personally obligated for LLC debts (Section 79-29-311(3)), and Mississippi courts apply an ordinary LLC veil-piercing standard on proof of frustration of contractual expectations, flagrant disregard of LLC formalities, and fraud or misfeasance (Restaurant of Hattiesburg, LLC v. Hotel & Restaurant Supply, Inc., Miss. Ct. App. 2012).

A member's contribution may be cash, property, services rendered, or a promissory note or other obligation to contribute cash, property, or services (Miss. Code Ann. Section 79-29-501). A member's promise to contribute is not enforceable at all unless it is set out in a writing signed by that member (Section 79-29-503(1)), and the agreement may set penalties, such as reduced interest or forced sale, for a member who fails to make a required contribution (Section 79-29-503(4)).

Absent a contrary certificate of formation or operating agreement provision, profits and losses are allocated among members on the basis of the value of each member's contributions to the LLC, to the extent those contributions have been received and not returned, not split evenly among members (Miss. Code Ann. Section 79-29-505). The prior citation to Section 79-29-503 was incorrect; that section addresses a member's liability for contributions, not the sharing of profits and losses.

Distributions are allocated among members on the same contribution-value basis as profits and losses, in the manner the certificate of formation or operating agreement provides (Section 79-29-507). No distribution may be made if, after giving effect to it, the LLC could not pay its debts as they come due, or the LLC's total assets would be less than its total liabilities plus any senior dissolution preferences owed to other members (Section 79-29-609(1)).

Unless the operating agreement provides for management by one or more managers, an LLC is managed by its members, but not one-vote-per-member: management is vested in each member in proportion to that member's then-current percentage interest in the LLC's profits, and the decision of members owning more than fifty percent (50%) of that percentage controls (Miss. Code Ann. Section 79-29-305). A managing member may delegate management authority to agents, officers, or other persons without ceasing to be a member.

Each member's vote on any matter is weighted by that member's then-current percentage interest in the LLC's profits, and the decision of members owning more than fifty percent (50%) of that percentage controls, unless a greater percentage is expressly required elsewhere in the Act (Miss. Code Ann. Section 79-29-309(1)-(2)). The prior citation to Section 79-29-307 was incorrect; that section addresses the agency power of members, managers, and officers to bind the LLC to third parties, not voting.

Mississippi's LLC Act does not itself require the LLC to hold meetings or satisfy any quorum; the certificate of formation or operating agreement may address notice, waiver, record dates, quorum, and proxy voting, but these are optional choices, not statutory mandates (Miss. Code Ann. Section 79-29-309(3)-(6)). One default does apply regardless of the agreement's silence: if no member meeting has been held in the preceding fifteen months, members owning twenty percent (20%) or more of the voting power may call one on thirty days' written notice, at the LLC's expense (Section 79-29-309(6)(d)).

Absent modification, a member of a member-managed LLC (or a manager) must act in good faith, with fair dealing, with the care an ordinarily prudent person in a like position would exercise, and in a manner reasonably believed to be in the LLC's best interests (Section 79-29-123(6)(a)-(c)). The certificate of formation or a written operating agreement may expand, restrict, or eliminate these duties, but may never eliminate liability for an improper financial benefit, intentional infliction of harm, an intentional violation of criminal law, a wrongful distribution, or a bad-faith violation of the covenant of good faith and fair dealing (Section 79-29-123(4)(a)-(f)); this power is only enforceable if set out in the certificate of formation or a written operating agreement (Section 79-29-123(7)(a)-(b)).

A member's financial interest is freely assignable, but an assignee receives only the assignor's right to share in profits, losses, and distributions; the assignee does not become a member or gain any right to participate in management unless all of the LLC's other members consent, or the certificate of formation or operating agreement otherwise provides (Miss. Code Ann. Sections 79-29-703(1)-(2), 79-29-707(1)).

The prior citation to Section 79-29-601 was incorrect; that section addresses distributions, not withdrawal. Under the actual withdrawal section, a member may withdraw only at the time or upon the events a written operating agreement specifies. Absent a contrary certificate of formation or written operating agreement, a member may not withdraw before the LLC's dissolution and winding up without the written consent of all other members, and the LLC has no power to expel a member unless the certificate of formation or written operating agreement provides otherwise (Miss. Code Ann. Section 79-29-303).

An LLC dissolves and must wind up upon the earliest of: the time or event stated in the certificate of formation or operating agreement, the consent of all members (or a lesser number the agreement specifies), a qualifying court order, or the LLC having no members (Miss. Code Ann. Section 79-29-801(1)). For a single-member LLC specifically, the LLC is not automatically dissolved when its last member departs: dissolution is avoided if, within 180 days, the departed member's personal representative agrees in writing to continue the LLC and admit a successor member, or a new member is otherwise admitted under the operating agreement (Section 79-29-801(1)(d)).

Section 79-29-315 is an access-rights provision, not a general recordkeeping mandate: on reasonable demand for a good-faith purpose related to their interest, each member is entitled to true and current information on the LLC's business and financial condition, copies of its tax returns, a current list of members and managers, a copy of the operating agreement and certificate of formation with amendments, and information on each member's contributions (Miss. Code Ann. Section 79-29-315(1)(a)-(f)). The LLC may keep trade-secret or other sensitive information confidential for a reasonable time (Section 79-29-315(3)).

If the certificate of formation or operating agreement does not itself state how the operating agreement may be amended, all members must agree to any amendment, except that an amendment resulting from a merger with a domestic or foreign LLC needs only approval by a majority of members (Miss. Code Ann. Section 79-29-123(2)(b)). The initial operating agreement itself must be agreed to by all members (Section 79-29-123(1)).

The prior citation to Section 79-29-123(3)(h) was incorrect; that provision addresses unreasonable restriction of information rights under Section 79-29-315, not indemnification. Under the correct subsection, the LLC may indemnify a member, manager, or officer against claims and demands generally, but may not indemnify a person found to have engaged in fraudulent conduct, or in conduct excluded from liability limitation under Section 79-29-123(4), and adjudged liable for claims based on that conduct. The LLC must indemnify a member, manager, or officer who is wholly successful, on the merits or otherwise, in defending a proceeding brought because of that role (Miss. Code Ann. Section 79-29-123(5)(a)-(b)).

The prior citation to Section 79-29-123 was incorrect; that section does not address dispute resolution, forum selection, or arbitration anywhere in its text. The Act's actual provision on this topic lets a manager, member, or officer consent, in a written operating agreement or other writing, to the jurisdiction of specified courts or arbitration and to a prescribed manner of service of process. Except by agreeing to arbitrate in a specified jurisdiction, a member who is not a manager cannot waive the right to sue in Mississippi courts over the LLC's internal affairs (Miss. Code Ann. Section 79-29-1211). Such an agreement is enforceable only if set out in a written operating agreement (Section 79-29-123(7)(i)).