Montana Single-Member LLC Operating Agreement

Introduction

Key Things to Know

1. 1

   Montana does not require an operating agreement to be in writing (Mont. Code Ann. Section 35-8-109), but written form is required to vary the default rules on recordkeeping, distribution rights, and member admission.

2. 2

   Without a written agreement, Montana splits profits, losses, and distributions equally among members, not in proportion to each member's capital contribution (Mont. Code Ann. Sections 35-8-503 and 35-8-601).

3. 3

   A charging order is by statute the exclusive remedy a judgment creditor has against a member's LLC interest (Mont. Code Ann. Section 35-8-705), and Montana law draws no separate carve-out for single-member LLCs.

4. 4

   Montana has no annual franchise tax or flat LLC fee. LLCs file an Annual Report with the Secretary of State each year by April 15, currently fee-waived through 2027 if timely filed, or $35 if filed late.

5. 5

   The duty of loyalty and the duty of care cannot be eliminated by the operating agreement, only narrowed within limits, and neither modification has to be in writing to be effective (Mont. Code Ann. Section 35-8-109(4)).

6. 6

   The Articles of Organization must state whether the LLC is member-managed or manager-managed; Montana has no silent default if the articles are left blank on this point (Mont. Code Ann. Section 35-8-202).

7. 7

   Montana's LLC Act explicitly allows series LLCs, with an additional $50 filing fee per named series member on top of the $35 base Articles of Organization fee.

Montana Requirements for LLC Operating Agreement

• Operating Agreement Authority (Montana Code Annotated § 35-8-109)

  This Operating Agreement governs the relations among members, managers, and the LLC. To the extent this Agreement does not provide for a matter, the Montana LLC Act governs. Members acknowledge that this Agreement supersedes default statutory provisions that would otherwise apply.

• Formation and Articles of Organization (Montana Code Annotated § 35-8-202)

  The LLC has been or will be formed by filing Articles of Organization with the Montana Secretary of State in accordance with state law. The Articles of Organization are incorporated by reference into this Operating Agreement.

• Member-Managed or Manager-Managed Structure (Montana Code Annotated § 35-8-307)

  The Articles of Organization must state whether the LLC is member-managed or manager-managed (Montana Code Annotated Section 35-8-202(1)(e)); Montana has no silent default if this is left unstated. In a member-managed LLC, each member has equal management rights and ordinary business matters are decided by a majority of members. In a manager-managed LLC, each manager has equal rights and ordinary matters are decided by the manager or a majority of managers, who are appointed and removed by majority vote of the members.

• Fiduciary Duties (Montana Code Annotated § 35-8-310)

  Members in a member-managed LLC, or managers in a manager-managed LLC, owe a duty of loyalty, a duty of care, and an obligation of good faith and fair dealing. The Operating Agreement may not eliminate the duty of loyalty, though it may identify specific activities that do not violate it. The duty of care may not be unreasonably reduced, and good faith and fair dealing may not be eliminated, though its performance standard may be defined if not manifestly unreasonable.

• Capital Contributions (Montana Code Annotated § 35-8-501)

  A member's interest may be issued in exchange for cash, property, promissory notes, services performed, or an agreement to contribute cash, property, or services in the future (Montana Code Annotated Section 35-8-501). The statute does not itself mandate a specific documentation format; the Operating Agreement should record the amount, form, and timing of each member's contribution to avoid later disputes.

• Allocation of Profits, Losses, and Distributions (Montana Code Annotated §§ 35-8-503, 35-8-601)

  Unless otherwise provided in writing in the articles of organization or Operating Agreement, each member is first repaid that member's capital contributions, and any remaining profits, losses, and surplus, as well as any cash or asset distributions, are then shared EQUALLY among members, not in proportion to each member's capital contribution. The Operating Agreement can set a different split.

• Voting Rights and Decision-Making (Montana Code Annotated § 35-8-307)

  Section 35-8-403 was repealed in 1999; voting rights are governed today by Section 35-8-307. Unless the Operating Agreement provides otherwise, each member of a member-managed LLC has EQUAL voting rights, not rights proportional to profit interest, and ordinary business matters are decided by a majority of members. A specific list of major matters, including amending the Operating Agreement or Articles, admitting a new member, and dissolving the company, requires the consent of all members.

• Transfer of Membership Interests (Montana Code Annotated §§ 35-8-703, 35-8-707)

  Section 35-8-704 was repealed in 1999. A member's distributional interest, a form of personal property rather than an ownership stake in LLC property, may be transferred in whole or in part under Section 35-8-703. Under Section 35-8-707, a transferee who is not admitted as a member receives only the economic right to distributions, not management or voting rights, unless the Operating Agreement or the other members provide otherwise.

• Withdrawal or Dissociation of Members (Montana Code Annotated § 35-8-803)

  A member is dissociated from the LLC upon events including express notice of withdrawal, an event the Operating Agreement designates as causing dissociation, transfer of all of the member's distributional interest, or expulsion under the Operating Agreement or by unanimous vote or judicial determination in specified circumstances (Montana Code Annotated Section 35-8-803).

• Dissolution and Winding Up (Montana Code Annotated § 35-8-901 through § 35-8-908)

  A Montana LLC dissolves and must wind up its affairs upon an event stated in writing in the articles or Operating Agreement, member consent in the percentage the Operating Agreement specifies, an event making the business illegal to continue (subject to a 90-day cure), expiration of a stated term, or judicial dissolution (Montana Code Annotated Section 35-8-901). Members may unanimously waive winding up and continue the business before it is completed.

• Records and Accounting (Montana Code Annotated § 35-8-405)

  Unless the Operating Agreement provides otherwise, the LLC must keep at its principal office a current and past list of members and managers, a copy of the articles of organization and amendments, copies of the LLC's tax returns and financial statements for the 3 most recent years, and copies of any written Operating Agreements, as required by Montana Code Annotated Section 35-8-405.

• Indemnification (Montana Code Annotated § 35-8-107)

  The Company may indemnify and hold harmless a member, agent, or employee from claims arising out of action or inaction taken on the Company's behalf, except where the action or failure to act constitutes willful misconduct or recklessness, and subject to any further standards or restrictions set out in the articles of organization or Operating Agreement (Montana Code Annotated Section 35-8-107(1)(l)).

• Amendment of Operating Agreement (Montana Code Annotated § 35-8-109)

  Unless the articles of organization or Operating Agreement provide otherwise, amending the Operating Agreement is one of a specific list of major matters that requires the consent of all members, not just a majority (Montana Code Annotated Section 35-8-307(3)(a), cross-referencing Section 35-8-109).