Distributions of Profits and Losses. During the Term of this Agreement, profits and losses of GCTLO will be distributed among the Parties as follows:
Distributions of Profits and Losses. In addition to defining each owner's distributive share, your operating agreement should answer these questions: How much -- if any -- of the LLC's allocated profits (the members' distributive shares) must be distributed to LLC members each year? Can members expect the LLC to pay them at least enough to cover the income taxes they'll owe on each year's allocation of LLC profits? (An LLC owner, like a partner in a partnership, has to pay income taxes on the full amount of profits that are "allocated" to him or her, not just on profits that are actually paid out. When profits are plowed back into the business instead of being paid out, they are still treated as income to the owners, in the proportions allocated.) Will distributions of profits be made regularly or are the owners entitled to draw at will from the profits of the business? Because you and your co-owners may have different financial needs and marginal tax rates (tax brackets), the allocation of profits and losses is an area to which you should pay particular attention. You may want to run the allocation part of your operating agreement by a tax professional, to make sure it achieves the overall results you had in mind. Voting Rights While most LLC management decisions are made informally, sometimes a decision is so important or controversial that a formal vote is necessary. There are two ways to split voting power among LLC members: Either each member's voting power corresponds to his or her percentage interest in the business, or each member gets one vote -- called "per capita" voting. Most LLCs mete out votes in proportion to the members' ownership interests. Whichever method you choose, make sure your operating agreement specifies how much voting power each member has, as well as whether a majority of the votes or a unanimous decision will be required to resolve an issue. Ownership Transitions Many new business owners neglect to think about what will happen if one owner retires, dies, or decides to sell the owner's interest in the company. These concerns may not be on your mind now, but such situations crop up frequently for small business owners, and it pays to be prepared. Operating agreements should include a buyout scheme -- rules for what will happen when a member leaves the LLC for any reason. How to Create an Operating Agreement Obviously, you'll need help beyond this article to make your own operating agreement. There are many sources for blank or sample LLC operating agreements, but y...
Distributions of Profits and Losses. Profits and losses shall be allocated to the Members in proportion to their respective Membership Interests.
Distributions of Profits and Losses
