Subsidiary Operating Agreement Template

Members of the parent company LLC must decide what leeway the subsidiary manager will have to acquire assets for the business. The decision-making process for acquiring assets should be clearly explained to explain whether the manager needs permission to purchase equipment and vehicles or whether such purchase applications must be submitted for approval by members of parent company LLC. If you own a limited liability company, you may own a subsidiary that is also an LLC. The parent company is listed in the LLC securities as the owner of the subsidiary. In addition, the subsidiary`s LLC documents must contain a corporate agreement clearly stating who manages the LLC, to whom that person will report, and what the manager`s responsibilities will be. Your settlement agreement requires careful fidelity. Members of your parent company, LLC, may grant the manager of a subsidiary the right not to have staff, if necessary, without prior authorization. On the other hand, if you wish to monitor management more closely, the agreement may require the approval of LLC members in the parent company prior to the creation and occupation of new positions. In addition, the agreement may set limits on the amount of wage costs the manager can set with respect to the amount of revenue generated by the subsidiary. Whether your subsidiary is managed by an individual or a management company, partners must decide whether the manager is able to enter into debt contracts for the subsidiary. The agreement must specify certain obligations and indicate the remedy for the performance of these tasks. For example, the executive`s enterprise agreement may indicate that members of the parent company LLC have the right to terminate the contract if the monetary management procedures do not meet their expectations. The subsidiary`s operating contract should not only list the annual salary that your parent LLC pays to management, but also give details of how bonuses are earned and when they are paid.

For example, an executive who maintains a profit margin of 25 per cent for three months may receive a bonus of 10 per cent of the annual salary paid on the first day of the following month, after reaching the quota. The agreement should also explain how administrative fees are paid. In other words, it should show whether the parent company expects management to use its budget for administrative assistants or whether these salaries are paid separately from the administrative salary. Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. He has written on economics, marketing, finance, sales and investments for publications such as „The New York Daily News,“ „Business Age“ and „Nation`s Business.“ He is a teaching designer with credits for companies like ADP, Standard and Poor`s and Bank of America. This site is protected by reCAPTCHA and Google`s privacy rules and terms of use apply. Learn more about FindLaw`s newsletter, including our terms of use and privacy policies. The email address cannot be subscribed. Please try again.