DocDraft Logo

Vermont Single-Member LLC Operating Agreement

Create a Vermont single-member LLC operating agreement with state-specific guidance on default allocation, minimum tax, and charging order treatment.

Introduction

A single-member LLC operating agreement is the internal document where you, as the sole owner of a Vermont LLC, set the rules for how your business runs and how profits are handled. Vermont does not require every operating agreement to be in writing, but it is still the clearest evidence, if a court, a bank, or the IRS ever asks, that you are running a real business, not just a personal wallet. It matters more in Vermont than in many states for one reason: if a creditor gets a court judgment against you and forecloses on your LLC interest, Vermont law lets that creditor take over your entire company, not just your distributions, because you are the sole member.

0/5000

Key Things to Know

  1. 1

    Written form is not required for a Vermont operating agreement in general, since the law defines it to include oral or implied agreements (11 V.S.A. Section 4001(20)).

  2. 2

    Without an operating agreement, Vermont law allocates profits and losses in proportion to the agreed value of each member's capital contribution, not split evenly (11 V.S.A. Section 4055(a)).

  3. 3

    Vermont's default management rule gives each member an equal vote regardless of contribution size, with ordinary matters decided by a majority of members (11 V.S.A. Section 4054(b)).

  4. 4

    Vermont's charging order statute singles out single-member LLCs: if a court forecloses a charging order against a sole member's interest, the purchaser gets the member's entire interest and becomes the new member (11 V.S.A. Section 4074(g)).

  5. 5

    Vermont LLCs generally owe a $250 annual minimum entity tax to the Department of Taxes if taxed as a partnership, separate from a $45 Annual Report fee owed to the Secretary of State (32 V.S.A. Section 5921; 11 V.S.A. Sections 4012, 4033).

  6. 6

    Fiduciary duties can be altered, and particular aspects eliminated, unless doing so is unreasonable, but the implied covenant of good faith and fair dealing can only have its standards defined, never eliminated (11 V.S.A. Section 4003(b)-(c)).

  7. 7

    The operating agreement itself is not filed with the state. You form the LLC by filing Articles of Organization ($155 fee) with the Vermont Secretary of State (11 V.S.A. Sections 4012, 4023).

Key decisions before you file

Before you file a LLC Operating Agreement in Vermont, a few decisions shape the document: which option to choose and what each one means. The LLC Operating Agreement guide walks through them.

Open the LLC Operating Agreement guide

Customize your LLC Operating Agreement Template with DocDraft

Vermont-Specific Provisions

Use this together with the complete LLC operating agreement template, which covers the standard provisions your agreement also needs: capital contributions, management structure, meetings, transfers, withdrawal, and dissolution. The sections below cover only what is specific to Vermont law.

1. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of Vermont, including the Vermont Limited Liability Company Act, 11 V.S.A. Chapter 25.

2. Allocation of Profits and Losses

Unless otherwise stated elsewhere in this Agreement, profits and losses shall be allocated among the Members in proportion to the agreed value of each Member's contributions to the Company, as stated in the Company's required records, as provided by 11 V.S.A. Section 4055 in the absence of a contrary agreement.

3. Fiduciary Duties

The duty of loyalty and the duty of care owed by a Member or Manager to the Company and the other Members may be altered, and particular aspects eliminated, unless doing so is unreasonable, as provided by 11 V.S.A. Sections 4003 and 4059. This Agreement may not eliminate the implied obligation of good faith and fair dealing, though it may prescribe the standards by which that obligation is measured.

4. Indemnification

The Company may indemnify a Member or Manager as set forth in the complete template, except that indemnification and any limit on a Member's or Manager's money-damages liability may not be altered or eliminated for: (a) breach of the duty of loyalty, (b) receipt of an improper financial benefit, (c) breach of the obligation of good faith and fair dealing, (d) intentional infliction of harm on the Company or a Member, or (e) an intentional violation of criminal law, as provided by 11 V.S.A. Section 4003(f).

5. Charging Order

Under 11 V.S.A. Section 4074, a charging order is the exclusive remedy by which a judgment creditor of a Member may satisfy a judgment from that Member's interest. If the Company has only one Member, foreclosure of a charging order against that Member's interest transfers the Member's entire interest, not only a distributional interest, and the purchaser thereby becomes a Member.

6. Execution

This Agreement is effective as of the date signed below. Vermont law does not require an LLC operating agreement to be notarized or witnessed to be valid.

[MEMBER] Signature: _____________________ Date: _____________

Printed Name: _____________________

Vermont Requirements for LLC Operating Agreement

Operating Agreement Authority (11 V.S.A. § 4003)

The Operating Agreement governs the relations among the Members and between the Members and the LLC; where the Agreement is silent, the Vermont LLC Act's default rules apply. The Agreement may not, however: vary the LLC's capacity to sue or be sued in its own name; vary the choice of Vermont law; vary a court's power to decree dissolution or order winding up; unreasonably restrict a Member's right to bring an action on the LLC's behalf; or, except as specifically permitted, eliminate the duties of loyalty and care, the good faith and fair dealing covenant, or a Member's information rights (11 V.S.A. Section 4003(b)).

Articles of Organization Compliance (11 V.S.A. § 4023)

The Operating Agreement may not vary the nonwaivable provisions of Section 4003(b). Beyond that, if the Operating Agreement conflicts with the Articles of Organization filed with the Vermont Secretary of State, the OPERATING AGREEMENT controls as between the Members, Managers, and their transferees; the Articles control only as to outside persons who relied on the Articles to their detriment (11 V.S.A. Section 4023(c)).

Member Voting Rights (11 V.S.A. § 4054)

Unless the Operating Agreement provides otherwise, each Member of a member-managed Vermont LLC has an EQUAL right to participate in management, and an ordinary-course matter is decided by a MAJORITY OF THE MEMBERS, not a vote weighted by capital contribution. Nine enumerated major matters, including amending the Operating Agreement or admitting a new Member, instead require the unanimous consent of all Members (11 V.S.A. Section 4054(b)-(d)).

Fiduciary Duties (11 V.S.A. § 4059)

Members and managers owe fiduciary duties of loyalty and care to the LLC and other members. The Operating Agreement may define, alter, or eliminate aspects of these duties to the extent permitted by Vermont law, but may not eliminate the implied contractual covenant of good faith and fair dealing.

Indemnification Provisions (11 V.S.A. § 4060, § 4003(f))

The Operating Agreement may provide for indemnification, reimbursement, and insurance for Members and Managers (11 V.S.A. Section 4060), and may alter or eliminate that indemnification or limit money-damages liability, EXCEPT for: a breach of the duty of loyalty; receipt of an improper financial benefit; a breach of the good faith and fair dealing obligation; intentional infliction of harm on the LLC or a Member; or an intentional violation of criminal law (11 V.S.A. Section 4003(f)).

Records and Information Rights (11 V.S.A. § 4058(b))

The LLC must maintain certain records and provide members with access to information concerning the company's activities, financial condition, and other circumstances as required by Vermont law. The Operating Agreement may establish reasonable restrictions on information access.

Allocation of Profits and Losses (11 V.S.A. § 4055)

Unless the Operating Agreement provides otherwise, profits and losses are allocated among Members in proportion to the agreed value of each Member's capital contribution, not split evenly, taking into account variations in contributions during the allocation period (11 V.S.A. Section 4055(a)).

Distributions (11 V.S.A. § 4056, § 4055(c))

A Vermont LLC may not make a distribution if the LLC could not then pay its debts as they come due in the ordinary course of business, or if the LLC's total assets would fall below its total liabilities plus amounts needed to satisfy Members with superior preferential rights (11 V.S.A. Section 4056(a)). A Member has no right to an interim distribution absent a company decision to make one, and dissociation alone does not entitle a Member to a distribution (11 V.S.A. Section 4055(c)).

Member Withdrawal and Dissociation (11 V.S.A. § 4081)

The Operating Agreement should specify the circumstances causing a Member's dissociation, in addition to the 14 statutory dissociation events already listed in the Vermont LLC Act (11 V.S.A. Section 4081). By default, a Member's dissociation alone does not entitle that Member to any distribution from the LLC (11 V.S.A. Section 4055(c)(2)); the Operating Agreement can set different buyout terms.

Transfer of Membership Interests (11 V.S.A. § 4071, § 4073)

A Member's distributional interest is personal property and may be transferred (11 V.S.A. Section 4071). A transferee does not automatically become a Member and, unless admitted with the consent of all other Members, has no right to participate in management, access LLC records, or inspect the LLC's books; the transferee is entitled only to the distributions the transferor would have received (11 V.S.A. Section 4073).

Dissolution Procedures (11 V.S.A. § 4101)

The Operating Agreement should specify events triggering dissolution in addition to the LLC Act's own statutory dissolution events (11 V.S.A. Section 4101). Winding-up and termination mechanics are addressed separately (11 V.S.A. Section 4102).

Amendment Procedures (11 V.S.A. § 4054(d)(1))

Except as the Operating Agreement provides otherwise, amending the Operating Agreement requires the affirmative vote or consent of ALL Members, not merely a majority (11 V.S.A. Section 4054(d)(1)). This is a default rule, not merely a permitted option; the Operating Agreement can lower this threshold if the Members agree to do so.

Frequently Asked Questions

It's the internal document where a Vermont LLC's sole owner sets the rules for running the business and handling profits. Vermont doesn't require it to be written, but it's the clearest proof the LLC is a real business, not just a personal wallet, and it becomes especially important given how Vermont treats single-member LLCs in a creditor judgment.

Not by blanket legal requirement. Vermont's definition of an operating agreement covers oral or implied agreements, not just written ones. But without a written one, state default rules apply automatically, including a contribution-based profit split and equal, per-member voting rights, rather than terms you choose yourself.

Vermont's default LLC rules fill the gap. Profits and losses get allocated based on the agreed value of each member's contributions, and, in management decisions, each member gets an equal vote regardless of contribution size, unless your agreement sets different terms (11 V.S.A. Section 4055; Section 4054).

It supports that protection, but Vermont law is unusually direct about a limit for single-member LLCs specifically. A charging order is the creditor's exclusive remedy against your LLC interest, but if a court forecloses that order against a sole member, the creditor's purchaser gets your entire interest and becomes the new member, not just your distributions.

Vermont LLCs generally owe two separate charges: a $250 minimum entity tax to the Department of Taxes if taxed as a partnership, and a $45 Annual Report fee to the Secretary of State, due within three months after your fiscal year ends. These are billed by different agencies on different schedules.

No. You file Articles of Organization ($155 fee) with the Vermont Secretary of State to form the LLC, but the operating agreement itself is an internal document you keep with your own business records. It is never submitted to the state, and it is not the same document as your Annual Report.

Largely, yes. Vermont allows an operating agreement to alter fiduciary duties and eliminate particular aspects of them, unless doing so would be unreasonable. The one thing it cannot do is eliminate the implied covenant of good faith and fair dealing, though the agreement can define the standard used to measure it.