A Michigan contractor operates as an LLC with 2 members. One member wants to withdraw. What document governs this process?
Correct Answer
D) Operating Agreement
The Operating Agreement governs member withdrawal procedures in a Michigan LLC. This document outlines the rights and obligations of LLC members.
Why This Is the Correct Answer
The correct answer is D (Operating Agreement). The Operating Agreement is the foundational internal governance document for a Michigan LLC. It outlines the rights and obligations of members, including procedures for withdrawal, buyout terms, and dissolution triggers. Member withdrawal is a contractual matter governed by this agreement, not by the state.
Why the Other Options Are Wrong
Option A: Partnership Agreement
Partnership Agreement is incorrect. A Partnership Agreement governs general or limited partnerships, not LLCs. An LLC is a distinct business entity with its own governing documents. Using a partnership agreement for an LLC is both legally incorrect and inapplicable.
Option B: Articles of Incorporation
Articles of Incorporation is incorrect. Articles of Incorporation are used to form corporations, not LLCs. LLCs are formed using Articles of Organization. Neither document governs the internal process of member withdrawal.
Option C: Bylaws
Bylaws is incorrect. Bylaws are the internal governance documents for corporations, not LLCs. The LLC equivalent of bylaws is the Operating Agreement. Selecting Bylaws confuses corporate governance with LLC governance.
Memory Technique
LLC = Operating Agreement. Corporation = Bylaws. Partnership = Partnership Agreement. Match the entity to its document. For any question about what governs an LLC internally, the answer is almost always the Operating Agreement.
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