Operating Agreement Template Real Estate

SINGLE-ASSET REAL ESTATE LIMITED LIABILITY COMPANY OPERATING AGREEMENT

DOCUMENT CONTROL

• Effective Date: [Date]
• Version: 1.0 (Production-Ready)
• Jurisdiction: State of [State of Formation]
• Designated Property: [Property Street Address, City, State, ZIP]

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SECTION 1: OFFICIAL NOTICE / DISCLAIMER

LEGAL NOTICE: This document is a sophisticated legal instrument drafted for single-asset real estate (SARE) operations. Real estate ventures involve complex tax, liability, and regulatory considerations. The execution of this Agreement alters legal rights and obligations. The Members acknowledge that they have been advised to retain independent legal counsel and certified public accountants specializing in real estate taxation prior to executing this Agreement. No warranties, express or implied, are provided by the drafter regarding the tax consequences or local statutory compliance of this template outside the jurisdiction of [State of Formation].

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SECTION 2: PARTIES & DEFINITIONS

2.1 The Parties

This Operating Agreement (the "Agreement") is entered into and made effective as of [Date], by and among:

1. The Company: [Company Legal Name, LLC], a [State of Formation] limited liability company (the "Company").
2. The Managing Member: [Name of Managing Entity or Individual], having a principal place of business/residence at [Address] ("Managing Member").
3. The Investor Member(s): The parties executing this Agreement as Investor Members listed on Schedule A attached hereto (each an "Investor Member" and collectively, the "Investor Members"). (The Managing Member and Investor Members are collectively referred to herein as the "Members".)

2.2 Definitions

For purposes of this Agreement, the following terms shall have the meanings specified below:

• "Act" means the [State of Formation] Limited Liability Company Act, as amended from time to time.
• "Capital Contribution" means the total amount of cash and the agreed fair market value of any property contributed to the Company by a Member pursuant to Section 4.
• "Distributable Cash" means all cash revenues of the Company derived from operations, refinancing, or capital transactions, after payment of all operating expenses, debt service, capital expenditures, and reasonable reserves established by the Managing Member.
• "Internal Rate of Return (IRR)" means the discount rate that makes the net present value of all cash flows (both positive and negative) from the Company to a Member equal to zero.
• "Major Decision" has the meaning ascribed in Section 6.3.
• "Percentage Interest" means the ownership interest of a Member in the Company, as set forth on Schedule A, subject to adjustment in accordance with this Agreement.

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SECTION 3: ORGANIZATION, NAME, AND OPERATIONS

3.1 Formation and Name

The Company was formed as a limited liability company by filing Articles of Organization with the Secretary of State of [State of Formation] on [Date of Filing]. The business of the Company shall be conducted under the name [Company Legal Name, LLC] or such other name as the Managing Member may select.

3.2 Principal Place of Business

The principal office and place of business of the Company shall be located at [Street Address, City, State, ZIP], or such other location as the Managing Member may determine.

3.3 Registered Agent

The name and address of the registered agent for service of process in the State of [State of Formation] is [Registered Agent Name], located at [Registered Agent Address].

3.4 Business Purpose

The sole and exclusive purpose of the Company is to acquire, own, finance, develop, lease, operate, manage, and ultimately sell or otherwise dispose of the real property located at [Property Street Address] (the "Property"), and to engage in any and all activities necessary, incidental, or convenient thereto. The Company shall not engage in any other business or commercial activity.

3.5 Term

The term of the Company shall be perpetual unless dissolved in accordance with the provisions of this Agreement or the Act.

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SECTION 4: CAPITAL CONTRIBUTIONS AND FINANCING

4.1 Initial Capital Contributions

The Members have contributed, or concurrently with the execution of this Agreement shall contribute, cash to the Company in the amounts set forth opposite their respective names on Schedule A ("Initial Capital Contributions"), totaling [$Total Capitalization Amount].

4.2 Additional Capital Contributions

If the Managing Member determines that additional capital is required by the Company for property operations, debt service, capital improvements, or unforeseen contingencies relating to the Property ("Additional Capital"), the Managing Member shall issue a written capital call notice ("Capital Call Notice") to all Members.

• Pro Rata Funding: Each Member shall have the right, but not the obligation, to contribute its pro rata share of the Additional Capital based on its respective Percentage Interest within [15] days of receipt of the Capital Call Notice.
• Dilution / Default Mechanism: If any Member fails to fund its pro rata share of Additional Capital ("Non-Funding Member"), any funding Member may elect to advance the shortfall. The funding Member may elect to treat such advance as:
  1. A demand loan bearing interest at the rate of [12]% per annum, compounded monthly, or
  2. A capital contribution resulting in a dilution and recalculation of the Members' Percentage Interests pursuant to the following formula: [Insert Dilution Formula, e.g., 150% of the non-funding member's diluted capital value].

4.3 Capital Accounts

A separate capital account shall be maintained for each Member in accordance with Internal Revenue Code ("IRC") Section 704(b) and Treasury Regulations thereunder.

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SECTION 5: ALLOCATIONS AND DISTRIBUTIONS

5.1 Allocation of Profits and Losses

Except as otherwise required by IRC Section 704(c) and the mandatory "regulatory allocation" provisions (such as minimum gain chargebacks and qualified income offsets), all items of income, gain, loss, deduction, and credit of the Company shall be allocated among the Members in proportion to their respective Percentage Interests.

5.2 Distribution of Distributable Cash

Distributable Cash shall be determined by the Managing Member and distributed no less frequently than [quarterly] in the following order of priority:

1. First: To the Investor Members, until they have received a cumulative non-compounded preferred return of [8]% per annum on their unreturned Initial Capital Contributions.
2. Second: To the Members, pro rata in proportion to their unreturned Capital Contributions, until all Capital Contributions have been fully returned.
3. Third: Thereafter, [70]% to the Members pro rata based on Percentage Interests, and [30]% to the Managing Member as a promoted interest ("Carried Interest"), subject to any vesting schedules.

5.3 Tax Distributions

Notwithstanding Section 5.2, the Company shall, subject to available cash flow and debt covenants, distribute to each Member an amount of cash sufficient to pay federal, state, and local income taxes arising from their allocation of Company taxable income, calculated using the highest marginal individual tax rate applicable in the State of [State of Formation].

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SECTION 6: MANAGEMENT AND GOVERNANCE

6.1 Management by Managing Member

Except as otherwise expressly provided in this Agreement, the business, property, and affairs of the Company shall be managed exclusively by the Managing Member ([Name of Managing Member]). The Managing Member shall have full, exclusive, and complete authority, power, and discretion to manage and control the business of the Company, to make all decisions regarding the Property, and to bind the Company.

6.2 Authority of the Managing Member

Without limiting the generality of Section 6.1, the Managing Member is authorized to:

• Execute leases, brokerage agreements, property management agreements, and construction contracts.
• Secure and maintain property, casualty, liability, and umbrella insurance.
• Retain accountants, attorneys, and third-party vendors.
• Execute mortgages, deeds of trust, and loan modifications relating to the Property.

6.3 Major Decisions

The Managing Member shall not take any of the following actions ("Major Decisions") without the prior written consent or affirmative vote of Members holding at least [66.6]% of the Percentage Interests:

1. The sale, exchange, or other disposition of the Property or any substantial portion thereof.
2. The refinancing, encumbering (other than the initial acquisition loan), or cross-collateralization of the Property.
3. The approval of the annual operating and capital budgets of the Company.
4. The confession of a judgment against the Company or filing for bankruptcy.
5. Entering into contracts with affiliates of the Managing Member on terms not arm's-length.
6. The amendment of the Articles of Organization or this Agreement.

6.4 Property Management

The Managing Member is authorized to retain an affiliate of the Managing Member or a third-party institutional firm as property manager at a market-rate management fee not to exceed [3-5]% of gross collected revenues of the Property.

6.5 Limitation of Liability and Indemnification

• Liability: No Member, Manager, or officer of the Company shall be personally liable for any debt, obligation, or liability of the Company solely by reason of being a member, manager, or officer.
• Indemnification: The Company shall indemnify, defend, and hold harmless the Managing Member and its affiliates, officers, directors, employees, and agents against any losses, claims, damages, or liabilities incurred in connection with the business of the Company, provided that such acts do not constitute fraud, gross negligence, willful misconduct, or a material breach of this Agreement.

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SECTION 7: BOOKS, RECORDS, AND TAX MATTERS

7.1 Books and Records

The Managing Member shall maintain accurate books and records of the Company at its principal place of business. Each Member (or its designated representative) shall have the right to inspect and copy such books and records upon reasonable written notice during normal business hours.

7.2 Tax Matters Partner / Partnership Representative

The Managing Member is hereby designated as the "Partnership Representative" pursuant to IRC Section 6223 (as amended by the Bipartisan Budget Act of 2015) and corresponding state tax provisions, with full power to act on behalf of the Company in all tax audits and proceedings.

7.3 Fiscal Year

The fiscal year of the Company shall begin on the 1st day of January and end on the 31st day of December.

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SECTION 8: TRANSFERS AND WITHDRAWALS

8.1 Restrictions on Transfer

• General Prohibition: No Member may sell, assign, transfer, pledge, hypothecate, or otherwise encumber ("Transfer") all or any part of its Percentage Interest without the prior written consent of the Managing Member, which consent may be withheld in the Managing Member’s sole and absolute discretion.
• Permitted Transfers: An Investor Member may transfer its interest to an immediate family member, a revocable living trust for estate planning purposes, or an affiliated entity under common control, provided that the transferee executes a joinder agreement agreeing to be bound by the terms hereof.

8.2 Right of First Refusal (ROFR)

If a Member receives a bona fide third-party offer to purchase all or part of its Percentage Interest, such Member must first offer the interest to the Company, and secondarily to the non-transferingly remaining Members, on the same terms and conditions, prior to consummating the third-party sale.

8.3 Drag-Along / Tag-Along Rights

• Drag-Along: If the Managing Member and holders of at least [75]% of the Percentage Interests approve a third-party sale of 100% of the Property or Company interests, all other Members shall be required to vote for, consent to, and participate in such sale on the same economic terms.
• Tag-Along: If the Managing Member proposes to sell a controlling interest to a third party, the Investor Members shall have the right to participate in such sale on a pro rata basis.

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SECTION 9: DISSOLUTION AND WINDING UP

9.1 Dissolution Events

The Company shall dissolve upon the first to occur of the following:

1. The sale, condemnation, or other final disposition of all or substantially all assets of the Company and the distribution of all proceeds.
2. The unanimous written agreement of all Members to dissolve.
3. The entry of a judicial decree of dissolution under the Act. Note: The bankruptcy, death, or withdrawal of an Investor Member shall not dissolve the Company.

9.2 Winding Up and Liquidation

Upon dissolution, the Managing Member (or a designated liquidating trustee) shall liquidate the assets of the Company. The proceeds shall be applied in the following order of priority:

1. To the payment of debts and liabilities of the Company to third-party creditors (including expenses of liquidation).
2. To the setting up of any reasonable reserves for contingencies deemed necessary by the liquidator.
3. To the Members in accordance with their positive capital account balances and distribution priorities set forth in Section 5.2.

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SECTION 10: MISCELLANEOUS PROVISIONS

10.1 Governing Law and Venue

This Agreement, and all claims or causes of action arising out of or relating to this Agreement, shall be governed by, and construed in accordance with, the laws of the State of [State of Formation], without regard to its conflict of laws principles. Each Member consents to the exclusive jurisdiction of the state and federal courts located in [County, State].

10.2 Amendments

This Agreement may be amended, modified, or changed only through a written instrument executed by the Managing Member and Investor Members holding at least [66.6]% of the Percentage Interests; provided, however, that no amendment shall disproportionately and adversely affect the economic capital interest of any non-consenting Member without such Member's express written consent.

10.3 Severability

If any provision of this Agreement is held to be invalid, illegal, or unenforceable, the remaining provisions shall remain in full force and effect.

10.4 Entire Agreement

This Agreement, along with the attached Schedule A, constitutes the entire agreement among the Members regarding the subject matter hereof and supersedes all prior oral or written agreements, understandings, or term sheets.

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SECTION 11: EXECUTION & SIGNATURES BLOCK

IN WITNESS WHEREOF, the parties hereto have executed this Single-Asset Real Estate Limited Liability Company Operating Agreement as of the Effective Date first written above.

MANAGING MEMBER:

[Name of Managing Entity / Individual]

Signature: ___________________________________________________
Printed Name: [Signatory Name]
Title: [Managing Member / Authorized Signatory]
Date: [Date]

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INVESTOR MEMBER(S):

[Name of Investor Entity / Individual]

Signature: ___________________________________________________
Printed Name: [Signatory Name]
Title: [Title, if entity]
Percentage Interest: [00.00]%
Initial Capital Contribution: [$0.00]
Date: [Date]

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(Attach additional signature pages for multiple investors as required)

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SCHEDULE A: MEMBER SCHEDULE & CAPITALIZATION TABLE

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SECTION 12: STEP-BY-STEP EXECUTION GUIDE

1. Review and Fill Blanks: Complete all bracketed fields [...] across the document, ensuring exact alignment with the capitalization table on Schedule A and the underlying pro forma/term sheet.
2. State Filing Check: Verify that the LLC name used in Section 3.1 matches the exact active status name on file with the Secretary of State of [State of Formation].
3. Signatures Collection: Execute signature pages via an authenticated electronic signature platform (e.g., DocuSign, Adobe Sign) or via wet-ink signatures witnessed by a Notary Public if mandated by local custom.
4. Capital Contribution Transfer: Ensure all Investor Members wire their Initial Capital Contributions into the Company's dedicated, segregated escrow or operating bank account prior to or concurrently with the execution date.
5. Post-Execution Recordkeeping:
   • File the fully executed PDF of this Operating Agreement, along with Schedule A, in the Company's permanent corporate minute book/records vault.
   • Provide a copy of the executed document to the Company's CPA for preparation of initial IRS Form 1065/state partnership tax filings and potential Section 754 elections.