New Mexico Single-Member LLC Operating Agreement

New Mexico's Limited Liability Company Act defines an "operating agreement" as a written agreement providing for the conduct of the LLC's business and affairs, including any amendment, which must also be in writing (NMSA § 53-19-2(O)). An oral or handshake understanding does not meet this definition, so it cannot serve as an operating agreement capable of overriding the Act's default rules.

A New Mexico LLC is member-managed by default. A manager-managed structure takes effect only if the ARTICLES OF ORGANIZATION themselves contain a statement vesting management in one or more managers; stating a manager-managed structure in the operating agreement alone is not enough (NMSA § 53-19-8(D)). Absent that statement in the articles, management is vested in the members (NMSA § 53-19-15(A)).

Unless the articles of organization or operating agreement provide otherwise, members vote in proportion to the value of their capital contributions, not one member, one vote (NMSA § 53-19-17(A)). Most member decisions, including approving a sale of substantially all assets or a merger, require the affirmative vote of members holding a majority of that voting power; removing a member requires the affirmative vote of all of the other members (NMSA § 53-19-17(B)).

Unless the articles of organization or an operating agreement provide otherwise, New Mexico allocates profits and losses among members in proportion to the value of each member's capital contributions, adjusted to reflect withdrawals of capital, not split evenly per member (NMSA § 53-19-22).

Unless the articles of organization or an operating agreement provide otherwise, interim distributions made before dissolution are allocated among members in the same proportion as profits and losses, based on the value of each member's capital contributions (NMSA § 53-19-23).

Unless the articles of organization or an operating agreement provide otherwise, a membership interest is freely assignable, but an assignee becomes a member, gaining voting and management rights rather than just a right to distributions, only with the unanimous consent of all of the other members (NMSA §§ 53-19-32, 53-19-33). If a member dies or is adjudged incompetent, that member's legal representative has all the rights of an assignee for purposes of settling the member's estate (NMSA § 53-19-34).

Unless the articles of organization or an operating agreement provide otherwise, a member of a perpetual-existence LLC may voluntarily withdraw at any time on 30 days' prior written notice and is entitled to receive the fair market value of their membership interest within a reasonable time after withdrawal (NMSA § 53-19-37). A member of an LLC formed for a definite term has no right to withdraw early unless the agreement allows it.

Unless the articles of organization or an operating agreement provide otherwise, a New Mexico LLC dissolves upon an event stated in the operating agreement, the written consent of members holding a majority of the voting power, or a court's judicial dissolution decree when continuing the business is no longer reasonably practicable (NMSA §§ 53-19-39, 53-19-40). Articles of dissolution must then be filed with the Secretary of State (NMSA § 53-19-41).

New Mexico's Act does not use a "duty of loyalty and duty of care" framework. Instead, unless the articles of organization or an operating agreement provide otherwise, a member with management responsibility, or a manager, is not liable to the LLC or the other members for an act or omission unless it constitutes gross negligence or willful misconduct, and must account for and hold as trustee any profit derived from an LLC transaction or use of LLC property, unless the transaction was disclosed and approved or was fair to the LLC (NMSA § 53-19-16).

A New Mexico LLC must keep at its principal place of business, and tell every member where to find, a current list of every member's and manager's name and address, a copy of the articles of organization and its amendments, copies of the LLC's tax returns and financial statements for the three most recent years, and a copy of every current and prior operating agreement and amendment (NMSA § 53-19-19(A)).

The articles of organization or an operating agreement may provide for indemnification of a member or manager for judgments, settlements, penalties, fines, or expenses incurred in a proceeding arising from that person's status as a member or manager, and for advancing that person's defense expenses before final disposition (NMSA § 53-19-18). New Mexico's statute sets no exceptions to this power in its own text; the scope and any limits of indemnification are set entirely by the operating agreement.

Unless the articles of organization or an operating agreement provide otherwise, amending the articles of organization or the operating agreement requires the affirmative vote of members holding a majority of the voting power of all members (NMSA § 53-19-17(B)(1)). If a provision already requires a greater-than-majority vote to approve a matter, that same greater vote is required to amend that provision (NMSA § 53-19-17(C)).

It is the stated policy of New Mexico's Limited Liability Company Act to give maximum effect to freedom of contract and to the enforceability of operating agreements (NMSA § 53-19-65(A)). That enforceability depends on the operating agreement being in writing: the Act defines an "operating agreement" itself as a written agreement, so an unwritten understanding does not displace the Act's default rules (NMSA § 53-19-2(O)).

On application by a member's judgment creditor, a court may charge that member's LLC interest with payment of the judgment; the creditor then has no more rights than an assignee of the interest would have, meaning economic rights only, not management or voting rights or automatic membership (NMSA § 53-19-35). New Mexico courts have separately pierced through a single-member LLC under the state's ordinary veil-piercing standard when the owner dominated the entity for an improper purpose that caused the plaintiff harm, so the charging order is not an absolute shield if the LLC's separate existence is disregarded (Morrissey v. Krystopowicz, 2015-NMCA-092).