South Carolina Single-Member LLC Operating Agreement

To the extent this Operating Agreement addresses a matter, it governs the relations among the Members, Managers, and the LLC; where it is silent, the South Carolina Uniform Limited Liability Company Act supplies the default rule. The Operating Agreement may not, however, unreasonably restrict a Member's right to information, eliminate the duty of loyalty, unreasonably reduce the duty of care, eliminate the obligation of good faith and fair dealing, vary the right to expel a member in specified circumstances, or restrict the rights of third parties under the Act (S.C. Code Ann. Section 33-44-103(b)).

The debts, obligations, and liabilities of the LLC, whether arising in contract, tort, or otherwise, are solely those of the LLC. A member or manager is not personally liable for an LLC debt, obligation, or liability solely by reason of being or acting as a member or manager, and the LLC's failure to observe usual formalities is not itself a ground for personal liability (S.C. Code Ann. Section 33-44-303(a)-(b)). A member may voluntarily accept personal liability for specified LLC debts only if stated in the articles of organization and consented to in writing.

A South Carolina LLC is member-managed by default; it becomes manager-managed only if the articles of organization so designate (S.C. Code Ann. Section 33-44-101(11)-(12)). In a member-managed LLC, each member has equal management rights, and ordinary-course matters are decided by a majority of the members. In a manager-managed LLC, managers are elected by a majority of the members and hold office until a successor is elected (S.C. Code Ann. Section 33-44-404(a)-(b)).

Members in a member-managed LLC owe a duty of loyalty and a duty of care to the LLC and other members (S.C. Code Ann. Section 33-44-409). The duty of care is limited to refraining from grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law. The Operating Agreement may modify these duties, but may never eliminate the duty of loyalty, unreasonably reduce the duty of care, or eliminate the obligation of good faith and fair dealing (S.C. Code Ann. Section 33-44-103(b)).

Unless the Operating Agreement provides otherwise, distributions made before the LLC's dissolution and winding up are shared among members in equal shares, without regard to each member's capital contribution (S.C. Code Ann. Section 33-44-405(a)). This is a default rule the Operating Agreement can, and typically should, override with the members' intended split.

Absent a contrary Operating Agreement provision, distributions are shared among members in equal shares (S.C. Code Ann. Section 33-44-405(a)). No distribution may be made if, after giving it effect, the LLC could not pay its debts as they become due, or its total assets would be less than its total liabilities (S.C. Code Ann. Section 33-44-406).

After formation, admitting a new member requires the consent of all members, unless the Operating Agreement provides a different process (S.C. Code Ann. Section 33-44-404(c)(7)). This is one of a specific list of matters the LLC Act reserves for unanimous member consent absent a contrary Operating Agreement provision.

Unless the Operating Agreement provides otherwise, a member has the power to withdraw from a South Carolina LLC at any time, rightfully or wrongfully, by express will (S.C. Code Ann. Section 33-44-602(a)) -- an unconditional default right, not one requiring the other members' consent. A member who withdraws in breach of the Operating Agreement, or early from a term company, may be liable to the LLC for resulting damages (S.C. Code Ann. Section 33-44-602(b)-(c)).

A member's interest in the LLC is personal property (S.C. Code Ann. Section 33-44-501(b)). Transferring that interest entitles the transferee only to the distributions the transferor would have received; it does not, by itself, make the transferee a member or give the transferee any right to participate in management, unless the transferor's grant or all other members' consent admits the transferee as a member (S.C. Code Ann. Sections 33-44-502, 33-44-503).

A South Carolina LLC dissolves upon an event specified in the Operating Agreement, the members' consent as the Operating Agreement specifies, an event making the business unlawful, or judicial dissolution on specific statutory grounds (S.C. Code Ann. Section 33-44-801). The Secretary of State may also administratively dissolve an LLC that fails to pay a fee, tax, or penalty within sixty days after it is due (S.C. Code Ann. Section 33-44-809).

South Carolina's LLC Act does not itself list required company records the way some states' statutes do. Instead, the LLC must give members and their agents access to its records, if any, at reasonable times and locations, and must furnish information a member needs to exercise rights or perform duties without demand, plus other information on reasonable demand (S.C. Code Ann. Section 33-44-408). A member may also obtain a copy of any written operating agreement at the LLC's expense.

The LLC must reimburse a member or manager for payments made, and indemnify a member or manager for liabilities incurred, in the ordinary course of the LLC's business or to preserve its business or property (S.C. Code Ann. Section 33-44-403). This reimbursement right is not conditioned on a good faith finding or a formal proceeding; it does not, however, extend to liabilities incurred outside the ordinary course of business or the LLC's preservation.

Amending the Operating Agreement requires the consent of all members, unless the Operating Agreement itself sets a different threshold (S.C. Code Ann. Section 33-44-404(c)(1)). South Carolina's LLC Act does not separately require that consent be in writing; the Operating Agreement may specify its own amendment procedure, including a written-consent requirement, if the members want one.

The exclusive remedy of a judgment creditor of a member is to obtain a charging order against the member's distributional interest. The charging order constitutes a lien on the member's distributional interest and requires the LLC to pay to the judgment creditor any distributions that would otherwise be paid to the member.