Canadian LLC Operating Agreement

1.Partnership: This option is only available if your LLC has two or more Members. A Partnership classification allows for pass-through taxation where your income is taxed only once, as income tax on the earnings paid to each of your Members. If your LLC has two or more Members it will be treated as a Partnership by default unless you designate otherwise. 2.Corporation: This option is available to any LLC. If you declare this option then the income of your LLC will be taxed first at the Company level and in addition, your Members would pay income tax on any distributions.

The tax matters partner of a partnership (or LLC that is classified as a partnership for US federal income tax purposes) represents the partnership (or LLC) before the IRS in all tax matters for a specific taxable year and is responsible for many of the partnership's (or LLC's) tax matters (such as preparing and filing tax returns, providing tax information to the partners (or members) and managing any audit process or investigation).

The fiscal year is the accounting period for which annual financial statements are prepared.

The federal income tax report is needed by each Member for their personal income tax filing.

Unless agreed by your remaining Members, the assignment of a Member's interest will only include that Member's financial interest in your Company. Full management rights and voting rights are only transferred with the approval of the remaining Members.

An unplanned change in ownership can alter the balance of power in your Company, possibly causing a change in direction that was not intended in the original vision of your Company. Your Members may wish to protect their interests against unanticipated new agendas.

In general, if you have no Managers, then each Member is deemed to be an agent of your Company and therefore authorized to commit your Company to business contracts that are within the normal business of the Company.If you have appointed Managers, then Members are not presumed to be an agent of your Company. In that case, your Managers would be presumed to have authority.In general, it is good practice to specify who has authority to bind your Company in contract and then to ensure that all customers and suppliers have knowledge of who has authority and who does not.

In general, business decisions will be resolved by a majority vote of your Members. However, where the impact on individual Member rights will be significant, your Members may wish to resolve these decisions through a unanimous vote in order to protect the interests of every Member.

Where normal operations or an extraordinary expansion of your LLC requires a significant financial investment involving additional expenses or a large debt load, the interests of all Members must be respected and the unanimous consent of all Members obtained before proceeding with that risk.Undertaking modest expenses may be resolved with a simple majority vote. However, incurring expenses over a certain amount should require a unanimous vote. You will be asked to enter an amount. Any expenditures over that amount will require the unanimous consent of all Members.

Where your Company has a claim against another person or business or where a debt is owed to the Company, it is in the best interest of the Company and your individual Members, if these obligations are paid in full.Whenever an obligation is to be released for less than full consideration it is important that the interests of each Member is represented and each of your Members is allowed to provide or reasonably withhold consent to the transaction.