Arizona Wrote a Statute That Steps Aside for Your Agreement
Arizona does not require an LLC to adopt an operating agreement. What it does instead is unusual enough that it changes how the document should be drafted. A.R.S. § 29-3105(A)(2) says the operating agreement may contain any provision that is not contrary to law, and § 29-3105(A)(3) adds this: in the event of a conflict between a provision of the operating agreement and this chapter, the provision of the operating agreement governs. Most state acts phrase the relationship the other way round, listing what the agreement may not do and treating the statute as the baseline. Arizona puts the agreement first and then lists a short set of exceptions in subsection C.
The Arizona Limited Liability Company Act, sometimes called ALLCA, replaced the older Title 29 chapter and now governs every Arizona LLC. The company you formed with the Arizona Corporation Commission exists because of the Articles of Organization. How it behaves is set by the agreement, and by § 29-3105(B) the chapter only reaches matters the agreement leaves alone. If you want the transactional detail for the document itself, our Arizona operating agreement page covers it.
What ALLCA does when the agreement is silent
Arizona splits money and votes in opposite directions, and the split catches founders out. Section 29-3404(A) requires that any distribution made before dissolution and winding up be in equal shares among members and persons dissociated as members. Per head. Meanwhile § 29-3407(B)(3) gives the decision on matters outside the ordinary course, on matters where a known difference exists, and on whether to make an interim distribution at all, to a majority in interest of the members. Section 29-3102(12) defines majority in interest by profits, and profits interests are measured by the right to share in distributions exceeding the repayment of contributions on liquidation.
So an Arizona LLC that never wrote anything down weights the vote by money and then splits the money by head. The member with the larger economic stake decides whether a distribution happens, and then takes the same cheque as everyone else. Section 29-3407(B)(4) then requires the affirmative vote of all members to amend the operating agreement, to issue a transferable interest to anyone, to act outside the company's stated purpose, or to convert the company to manager managed. Dissolution under § 29-3701(A)(2) needs a majority in interest and members who would take more than half the liquidation value.
Why an Arizona sole member writes one
Section 29-3102(11)(b) confirms that a limited liability company includes a limited liability company with a single member, and § 29-3102(17) confirms that an operating agreement can be the agreement of a sole member. There is no Arizona rule that treats a one member company as a lesser entity, and, as the creditor section below shows, no rule that strips it of protection either.
What the sole member document actually does is supply authority and evidence. Arizona has no statement of authority filing, so nothing on the public record tells a counterparty who may sign. The agreement is the only place that lives. It is also the record that separates the company from the owner when someone argues the two are the same thing. Our single-member LLC guide covers the habits that back it up.
What Belongs in an Arizona Operating Agreement
The Arizona position in one table
| Question | Arizona answer |
|---|---|
| Required by statute? | No |
| Must it be written? | No. Oral, implied or in a record all qualify |
| Filed with the state? | No. No form, no filing, no fee |
| Governing act | Arizona Limited Liability Company Act, Title 29 Chapter 7 |
| Statement of authority filing? | None. Arizona reserved the section |
| Series LLCs | Not available for Arizona domestic companies |
| File.Business custom agreement | $99 flat |
Ten clauses do most of the work in Arizona. Each replaces a default ALLCA has already selected.
1. Members, percentages and profits interests
Name each member and fix the profits interest, not just a generic percentage. Because § 29-3102(12) defines voting power by profits interest, the number you write there decides who controls a majority in interest vote.
2. Contributions and the consequences of not funding
Record contributions and their agreed values, then decide what happens when a member does not answer a capital call. Section 29-3407(F) already requires the company to reimburse a member for an advance beyond agreed capital, so say whether such advances are loans, and on what terms.
3. Member managed or manager managed
Arizona puts this choice in the public filing. Section 29-3407(A) reserves management to the members unless the Articles of Organization provide for managers, and § 29-3407(B)(4)(c) requires every member to approve an articles amendment that changes it. Decide before you file, because reversing it is a two step job.
4. Voting weights and thresholds
The default mixes a free hand inside the ordinary course under § 29-3407(B)(2) with a majority in interest outside it and unanimity for the list in § 29-3407(B)(4). Write your own thresholds, and be specific about what counts as ordinary course, because that phrase is doing a lot of unsupervised work.
5. Allocation and distribution
This clause overrides the equal shares rule in § 29-3404(A). Separate the allocation of taxable income from the distribution of cash, and say whether tax distributions are mandatory when income is allocated but cash is retained.
6. Transfers and admission of a buyer
A transferee gets economic rights only unless admitted. Add a right of first refusal, a consent gate and a tag along or drag along if an exit is plausible. Note that issuing any transferable interest already requires unanimous member approval under § 29-3407(B)(4)(d).
7. Exit terms and the buyout formula
A person may dissociate at any time under § 29-3602, which does not entitle them to be bought out. Without a formula, a departing Arizona member becomes a permanent economic passenger. Write the price, the payment period and the funding source.
8. Dissolution triggers and the waterfall
Section 29-3701(A) sets the statutory triggers, including the one hundred and eighty day rule when a company has no members. Write your own triggers, your own deadlock resolution and your own payout order. The mechanics are in our Arizona dissolution guide.
9. Federal tax election
Say who signs Form 2553 or Form 8832, who may revoke, and how allocations behave after the election changes. Arizona conforms broadly to the federal characterisation, so the federal choice drives the state result.
10. Disputes and amendment
Section 29-3805 allows the company to have a special litigation committee unless the agreement says otherwise, and § 29-3105(C)(10) limits how far you may vary it. Pick your forum, decide on mediation, and set an amendment threshold in place of the statutory unanimity. Amending the public record is separate and covered in amending Arizona articles.
Form your LLC
If you would rather not do this yourself, we prepare the articles, check name availability with the state, and file it for you. Or keep reading and file it on your own. This guide covers everything you need either way.
Charging Orders and the Paragraph Arizona Left Out
Section 29-3503 is short, and the interesting part is what is missing. Subsection A lets a court enter a charging order requiring the company to pay the creditor any distribution otherwise due to the debtor. Subsection B lets the debtor extinguish it by satisfying the judgment. Subsection C lets the company or the other members buy out the creditor's position. Subsection E provides that this section is the exclusive remedy by which a judgment creditor may satisfy a judgment from the debtor's transferable interest.
The uniform text that Arizona started from also contains a paragraph letting a court foreclose the charging order lien and order a sale of the transferable interest, and a further paragraph giving a purchaser the entire interest of a sole member. Neither appears in § 29-3503. Arizona did not adopt them. There is no foreclosure remedy in the section and no distinction drawn between a company with one member and a company with several.
That matters because a widely repeated claim says Arizona single member LLCs lose charging order protection and are treated as alter egos. The statute does not say that. What is true is that a court will disregard any LLC, single member or not, where the owner has ignored the entity: no separate account, no records, no real capital, personal spending run through the company. The agreement plus a clean set of books is the answer to that argument, not a hope that the statute will do the work alone.
How Far Arizona Lets You Rewrite Duties
Very far. Section 29-3105(D)(1) provides that to the extent a member, manager or other person has duties, including the duty of care, the duty of loyalty and any other fiduciary duty, those duties may be expanded, limited or eliminated by the operating agreement. Section 29-3105(D)(2) allows the agreement to limit or eliminate any or all liabilities for breach of those duties as modified.
Two limits survive. Section 29-3105(C)(5) bars eliminating the contractual obligation of good faith and fair dealing, and it bars eliminating the duty to refrain from wilful or intentional misconduct under § 29-3409. Section 29-3105(C)(6) bars limiting liability for violating either. Everything else is negotiable.
Arizona also does not require a writing for this. Alabama and Delaware both condition duty elimination on a written agreement; A.R.S. § 29-3102(17) accepts an agreement that is oral, implied, in a record or any combination. In principle an Arizona duty waiver could be oral. In practice, a member who wants to prove that the others agreed to let him compete with the company will find that a signed document is the only version anybody believes. Write it down for evidentiary reasons, not statutory ones.
Three Arizona Companies in Practice
Example one: Papago Park Dental Partners, Phoenix
Three dentists formed an LLC. One bought the practice and the equipment for $610,000; the other two contributed $25,000 each and clinical time. Nothing was written. The practice distributed $420,000 in its second full year, and § 29-3404(A) split it in equal shares: $140,000 apiece. The founding dentist controlled the decision to distribute, because his profits interest gave him the majority in interest under § 29-3407(B)(3), but he could not change what happened to the money once it moved. A distribution clause would have redirected roughly $210,000 of that single year.
Example two: Verde Valley Hard Cider, Cottonwood
Two members built a cidery and later wanted to add a taproom partner who would contribute $150,000 for a stake. Issuing a transferable interest to any person requires the affirmative vote of all the members under § 29-3407(B)(4)(d), and one of the two refused unless his own economics were protected first. There was no admission mechanic and no anti dilution language, so the negotiation started from nothing. The agreement they signed afterwards set a board style approval threshold and a standing formula for new capital.
Example three: Sonoran Ridge Property Group, Tucson
A family wanted four rental buildings, roughly $3.4 million in total, insulated from one another. Arizona does not offer domestic series LLCs, so the answer was four Arizona LLCs under a holding company, each with its own agreement, its own account and its own statutory agent. The alternative some advisers suggested, forming a Delaware series and registering it in Arizona, would have added a foreign registration and a second body of law to every dispute. Four agreements cost less than that.
Five Mistakes That Cost Arizona Members Money
Mistake 1: Using a template that assumes the statute wins
Templates drafted for uniform act states are written defensively, conceding ground to the code. Arizona inverts that with § 29-3105(A)(3), so a cautious template gives away authority the state was willing to hand you. The more common failure is worse: a percentage interest recital that never says it is displacing the equal shares rule in § 29-3404(A).
Mistake 2: Skipping it because there is one member
Arizona reserved § 29-3302, the statement of authority section, so there is no public filing that names who can sign for the company. For a sole member that is the whole point of the document, alongside the record that shows the business is separate from the owner.
Mistake 3: Admitting a member without the unanimous approval
Section 29-3407(B)(4)(d) requires all members to approve issuing a transferable interest, and § 29-3407(B)(4)(b) requires all members to approve an amendment. An investor admitted on a handshake, whose paperwork is signed by only the managing member, has a defect on the face of the statute. Paper the admission and the amendment together.
Mistake 4: Trying to file it with the Corporation Commission
There is no Arizona filing for an operating agreement, no form and no fee. The Commission does not accept it and does not want it. Your public record is the Articles of Organization and your Arizona statutory agent. Arizona uses the term statutory agent rather than registered agent, and unlike most states it does not require a general annual report from LLCs.
Mistake 5: Putting the management election only in the agreement
This one is specific to Arizona. Section 29-3407(A) reserves management to the members unless the Articles of Organization provide for managers. An agreement that names a manager while the filed articles say member managed leaves the company with two inconsistent answers to a question a lender will ask. Fix the articles and the agreement in the same pass.
What Happens Financially When ALLCA Decides Instead
Arizona charges no penalty for the missing document, because it never asked for one. The cost lands elsewhere, and the figures below are arithmetic on the facts stated rather than a survey of professional fees.
The distribution default is the biggest number. On the Phoenix facts, one year of equal shares moved about $210,000 away from the member who funded the practice. Held for four years on similar distributions, that is roughly $840,000. The second exposure is the unanimity list in § 29-3407(B)(4): a single member can block new capital indefinitely, and a cidery that cannot admit a $150,000 investor is a cidery that does not open the taproom.
The third is banking. Arizona banks ask for the operating agreement when a company with more than one owner opens an account, and a business that trades on a personal account while governance is sorted has handed a future plaintiff the commingling argument. The fourth is judicial dissolution under § 29-3701(A)(4), where a member asks a court to end the company for deadlock or oppression. Those petitions are contested and slow, and § 29-3701(B) lets the court order a remedy other than dissolution, which means a judge rather than the members ends up designing the deal.
What Arizona Banks and Counterparties Ask For
At account opening expect a request for the filed Articles of Organization, the EIN letter, identification for beneficial owners, and the operating agreement. Because Arizona reserved the statement of authority section, the agreement is the only authority document in existence, and lenders read the signature clause first. Title companies handling Arizona real property ask for the same pages plus the transfer restrictions.
The file is also the separateness record. Courts asked to disregard an Arizona LLC look for separate accounts, genuine capital, decisions actually taken by the body the agreement names, and distributions that were authorised rather than assumed. If the company trades outside Arizona you will produce the same documents for foreign qualification, often with an Arizona certificate of good standing attached. If the entity has lapsed, handle reinstatement before the meeting.
How File.Business Drafts Arizona Operating Agreements
We start with the Articles of Organization, because Arizona puts the management election there. Then we work through profits interests, which drive every majority in interest vote, the distribution clause that displaces § 29-3404(A), thresholds against the unanimity list in § 29-3407(B)(4), transfer and buyout terms, and how much of the duty modification permitted by § 29-3105(D) you actually want. Where separable assets are involved we set out the multiple entity structure Arizona requires in place of a series.
Free templates against a drafted Arizona agreement
The characteristic template failure in Arizona is a document written for a state whose statute overrides the agreement, filed in a state whose statute defers to it. The second is a percentage table with no clause saying it displaces equal shares. A drafted agreement names the sections it overrides and uses the latitude § 29-3105 grants. Trading under another name needs a separate Arizona trade name filing, changing agents is covered in changing an Arizona statutory agent, and the general framework is in operating agreement essentials.
Arizona Operating Agreement FAQ
Does Arizona require an LLC to have an operating agreement?
No. Nothing in the Arizona Limited Liability Company Act requires one. A.R.S. § 29-3105(B) says the chapter governs only to the extent the operating agreement does not provide for a matter, which makes the document optional and decisive at the same time.
Can an Arizona operating agreement be oral?
Yes. A.R.S. § 29-3102(17) defines an operating agreement as the agreement of all the members, including a sole member, whether oral, implied, in a record or in any combination. Writing it down is an evidentiary decision in Arizona rather than a statutory requirement.
Do I file my operating agreement with the Arizona Corporation Commission?
No. There is no filing, no form and no fee. The operating agreement is a private internal record. The Articles of Organization and the statutory agent appointment are the public filings.
How are distributions split in an Arizona LLC with no agreement?
In equal shares. A.R.S. § 29-3404(A) requires any distribution made before dissolution and winding up to be in equal shares among members and persons dissociated as members, regardless of who contributed what. Only the operating agreement changes that.
Do single-member Arizona LLCs lose charging order protection?
Not under the statute. A.R.S. § 29-3503(E) makes the charging order the exclusive remedy and draws no distinction based on the number of members. Arizona also declined to adopt the foreclosure and sole member sale paragraphs that appear in the uniform text, so the section contains no foreclosure remedy at all.
Can an Arizona agreement eliminate fiduciary duties?
Largely, yes. A.R.S. § 29-3105(D)(1) allows the duty of care, the duty of loyalty and any other fiduciary duty to be expanded, limited or eliminated by the operating agreement. Section 29-3105(C)(5) preserves the contractual obligation of good faith and fair dealing and the duty to refrain from wilful or intentional misconduct.
Can I form a series LLC in Arizona?
No. The Arizona Limited Liability Company Act contains no provision for a domestic series, and A.R.S. § 29-3302, the statement of authority section in the uniform text, is reserved as well. Arizona businesses that want separated asset pools generally use multiple Arizona LLCs under a holding company.
Need a custom Arizona Operating Agreement?
File.Business drafts Arizona-specific Operating Agreements at $99 flat: customized for single-member or multi-member structure, ownership percentages, capital contributions, tax election preferences, and management structure. Includes member-signature template and document-vault storage.
Doing this in Arizona specifically: our Arizona operating agreement page covers the drafting itself, including the distribution clause that displaces equal shares and the thresholds that work with the unanimity list in ALLCA.
Every statutory reference on this page was read in the Arizona Revised Statutes on the Legislature's own site. Sections are amended; confirm the current text before you rely on it.
Disclosure. File.Business is a private filing service, not a government agency and not a law firm. We prepare and submit filings at your direction, and nothing on this page is legal or tax advice. Filing fees, deadlines, and statutory references are current as of the last-updated date shown above and can change. Confirm current requirements with the relevant state agency before you file.
