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. It changes how you should draft the document. A.R.S. § 29-3105(A)(2) says the operating agreement may contain any provision that is not contrary to law. Then § 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 around. They list what the agreement may not do and treat the statute as the baseline. Arizona puts the agreement first. It 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. It now governs every Arizona LLC. The company you formed with the Arizona Corporation Commission exists because of the Articles of Organization. The agreement sets how it behaves. Under § 29-3105(B) the chapter only reaches matters the agreement leaves alone. Our Arizona operating agreement page covers the transactional detail for the document itself.
What ALLCA does when the agreement is silent
Arizona splits money and votes in opposite directions. The split catches founders out. Section 29-3404(A) requires any distribution made before dissolution and winding up to be in equal shares. That covers members and persons dissociated as members. Per head. Meanwhile § 29-3407(B)(3) hands three decisions to a majority in interest of the members. Matters outside the ordinary course. Matters where a known difference exists. And whether to make an interim distribution at all.
Section 29-3102(12) defines majority in interest by profits. Profits interests are measured by the right to share in distributions. Those are the distributions exceeding the repayment of contributions on liquidation.
So an Arizona LLC that never wrote anything down weights the vote by money. Then it splits the money by head. The member with the larger economic stake decides whether a distribution happens. That member then takes the same check as everyone else. Section 29-3407(B)(4) requires the affirmative vote of all members for four things. Amending the operating agreement. Issuing a transferable interest to anyone. Acting outside the company's stated purpose. Or converting the company to manager managed.
Dissolution under § 29-3701(A)(2) needs a majority in interest. It also needs 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 one with a single member. And § 29-3102(17) confirms that an operating agreement can be the agreement of a sole member. No Arizona rule treats a one member company as a lesser entity. And no rule strips it of protection either, as the creditor section below shows.
The sole member document supplies 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. That matters 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 | $97 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. Under § 29-3102(12) voting power tracks the profits interest. So 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. Reversing it is a two step job.
4. Voting weights and thresholds
The default mixes three thresholds. Inside the ordinary course, § 29-3407(B)(2) gives a free hand. Outside it, a majority in interest decides. And unanimity governs the list in § 29-3407(B)(4). Write your own thresholds. Be specific about what counts as ordinary course. 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. Then 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 and a consent gate. Add 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
Under § 29-3602 a person may dissociate at any time. That 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. They include 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. Say who may revoke. And say how allocations behave after the election changes. Arizona conforms broadly to the federal characterization, 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. But § 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.
Create your Arizona operating agreement
We draft an operating agreement built around Arizona law and your ownership split, ready to sign. Or keep reading and draft your own.
Charging Orders and the Paragraph Arizona Left Out
Section 29-3503 is short. The interesting part is what is missing. Subsection A lets a court enter a charging order. That order requires 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 makes this section 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 contains two more paragraphs. One lets a court foreclose the charging order lien and order a sale of the transferable interest. The other gives a purchaser the entire interest of a sole member. Neither appears in § 29-3503. Arizona did not adopt them. The section holds no foreclosure remedy. It draws no distinction between a company with one member and a company with several.
That matters, because a widely repeated claim says otherwise. It says Arizona single member LLCs lose charging order protection and get treated as alter egos. The statute does not say that.
Here is what is true. 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 answers that argument. Hoping the statute will do the work alone is not an answer.
How Far Arizona Lets You Rewrite Duties
Very far. Start with section 29-3105(D)(1). A member, manager or other person may have duties, including the duty of care, the duty of loyalty and any other fiduciary duty. The operating agreement may expand, limit or eliminate those duties. Section 29-3105(D)(2) goes further. The agreement may 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. It also bars eliminating the duty to refrain from willful 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. So in principle an Arizona duty waiver could be oral. In practice, a signed document is the only version anybody believes. A member who wants to prove the others agreed to let him compete with the company will find that out. 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 under § 29-3407(B)(3) his profits interest gave him the majority in interest. 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. Later they wanted to add a taproom partner who would contribute $150,000 for a stake. Under § 29-3407(B)(4)(d), issuing a transferable interest to any person requires the affirmative vote of all the members. 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 got its own agreement, its own account and its own statutory agent. Some advisers suggested forming a Delaware series and registering it in Arizona. That 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. They concede ground to the code. Arizona inverts that with § 29-3105(A)(3) instead. So a cautious template gives away authority the state was willing to hand you. The more common failure is worse. It is 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 no public filing names who can sign for the company. For a sole member that is the whole point of the document. The other point is the record showing 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. Take an investor admitted on a handshake, whose paperwork is signed by only the managing member. That 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
Arizona has no 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. Say your agreement names a manager while the filed articles say member managed. The company now has 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. The figures below are arithmetic on the facts stated, not 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. 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. Trade on a personal account while governance is sorted and you have 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. That 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 four things. The filed Articles of Organization. The EIN letter. Identification for beneficial owners. And the operating agreement. Arizona reserved the statement of authority section, so the agreement is the only authority document in existence. 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 four things. Separate accounts. Genuine capital. Decisions actually taken by the body the agreement names. And distributions that were authorized rather than assumed. Trade outside Arizona and 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. We draft the distribution clause that displaces § 29-3404(A), and set thresholds against the unanimity list in § 29-3407(B)(4) as well. We write transfer and buyout terms. And we decide 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 mismatch. The document is written for a state whose statute overrides the agreement. It is then filed in a state whose statute defers to it. The second failure is a percentage table with no clause saying it displaces equal shares. A drafted agreement names the sections it overrides. It 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. That 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. That includes a sole member. It can be oral, implied, in a record or in any combination. Writing it down is an evidentiary decision in Arizona, not 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. That covers 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. It 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) lets the operating agreement expand, limit or eliminate the duty of care, the duty of loyalty and any other fiduciary duty. Section 29-3105(C)(5) preserves two things. The contractual obligation of good faith and fair dealing. And the duty to refrain from willful 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. 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 $97 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.
