OPERATING AGREEMENT
OF BUILD THEN MARKET LLC
THIS OPERATING AGREEMENT (the "Agreement") is entered into effective as of [DATE], by and among the Members listed in Schedule A.
ARTICLE 1: FORMATION AND PURPOSE
1.1 Formation. The Company was formed as a Limited Liability Company ("LLC") under the laws of the State of [STATE] by filing Articles of Organization.
1.2 Purpose. The purpose of the Company is to operate an agile technology development firm and digital marketing studio, and to engage in any lawful act or activity for which limited liability companies may be formed under the Act.
1.3 Principal Office. The principal office of the Company shall be located at [ADDRESS], or such other place as the Managing Member may determine.
ARTICLE 2: CLASSES OF MEMBERSHIP AND CAPITAL
2.1 Capital Structure. The Company’s equity is divided into distinct classes of Units. The allocation of interest is as follows:
| Class | Entity / Role | Allocation | Rights Type |
|---|---|---|---|
| Class A | Founder & Managing Member | 52% | Capital Interest (CI). Full Voting Rights. |
| Class B | Passive Partner Owners | 28% | Profit Interest (PI). Economic Rights Only (Non-Voting except as specified). Capped at 2% per Member (14 Members max). |
| Reserved | ESOP / Future Investors | 20% | Authorized Reserve. Unissued Units held for future employees or investors. |
2.2 Class A Members (The Founder). Class A Units represent the controlling interest. The Founder (Abhi Ray) serves as the Managing Member with exclusive authority over day-to-day operations, banking, and strategic direction, subject only to the specific limitations in this Agreement.
2.3 Class B Members (Profit Interest Holders). Class B Units are "Profit Interests" intended to qualify as a safe harbor partnership interest under IRS Revenue Procedure 93-27.
- No Initial Capital Account: Class B Members have a Capital Account balance of $0.00 at the time of grant.
- Economic Rights: Class B Members participate only in the future appreciation and profits of the Company generated after the date of their grant. They do not share in the value of the Company existing prior to their admission.
2.4 Admission of New Members. New Members may be admitted only upon the approval of the Managing Member. The admission process shall follow the Consultative Governance procedures outlined in Article 5.
ARTICLE 3: DISTRIBUTIONS AND ALLOCATIONS
3.1 Profits and Losses. Profits and Losses shall be allocated to Members in accordance with their respective Percentage Interests, subject to the regulatory allocations required by IRS Code Section 704(b).
3.2 Distributions. Distributions of Available Cash shall be made at the discretion of the Managing Member (quarterly or annually).
- Vesting Constraint: No distributions shall be made regarding unvested Class B Units. Any amounts attributable to unvested units shall be retained by the Company until such units vest.
3.3 The "Hurdle Amount" (Tax Protection). To ensure Class B Units remain tax-free upon grant, distributions upon a Liquidation Event (sale of company) shall be made in the following priority:
- First: To Class A Members until they have received an amount equal to the Fair Market Value of the Company as of the date the Class B Units were issued (the "Hurdle Amount").
- Second: To all Members (Class A and Vested Class B) pro-rata according to their Percentage Interests.
ARTICLE 4: SERVICE RELATIONSHIPS AND VESTING
4.1 Independent Contractor Status (The "Safe Harbor"). Unless and until a Class B Member executes a separate written Employment Agreement, the Class B Member is an Independent Contractor and not an employee of the Company.
- No Benefits: Class B Members are not entitled to wages, overtime, health insurance, retirement, or PTO.
- Autonomy: Class B Members control the manner, means, and timing of their advisory services and supply their own equipment.
- Tax Liability: Class B Members are solely responsible for all self-employment taxes.
4.2 Vesting Milestones. Class B Units are subject to a risk of forfeiture. Vesting occurs only upon the objective achievement of the following milestones (no Board discretion allowed):
- Revenue Milestone: The Company recognizes $[AMOUNT] in cumulative GAAP revenue.
- Product Milestone: Delivery and acceptance of product features listed on Schedule 3.1(b).
- Continuous Service: The Member maintains a continuous Service Relationship through the vesting date.
4.3 Revenue-Threshold Conversion Trigger. Promptly—and no later than forty-five (45) days—after the Company first exceeds $1,000,000 in cumulative GAAP revenue (the "Revenue Threshold"), the Managing Member shall:
- Offer each Active Class B Member a written Employment Agreement containing market salary and customary benefits.
- Failure to Accept: If a Member fails to accept the employment offer within thirty (30) days, they shall be deemed a "Bad Leaver," and their unvested Units shall be forfeited.
4.4 Section 83(b) Election. Each Class B Member must file a Section 83(b) Election with the IRS within thirty (30) days of the grant date. Failure to provide proof of this filing to the Company results in the automatic forfeiture of all Units.
ARTICLE 5: MANAGEMENT AND GOVERNANCE
5.1 Management by Class A. Except as expressly provided otherwise, the Managing Member (Class A) has full, exclusive, and complete authority to manage and control the business.
5.2 Consultative Governance (The "Team Culture" Norm). While legal authority resides with Class A, the Company adopts the following governance norms to foster culture and consensus. These norms are internal policies and do not supersede the Managing Member’s legal authority to act in a crisis or deadlock.
5.2.1 The Hiring Panel. Prospective new Members shall be interviewed by a panel consisting of the Managing Member and three (3) Class B Members (selected on a rotating basis).
5.2.2 The Consultative Vote. For Major Decisions (including the admission of a new Member), the Managing Member shall seek a "Cultural Supermajority."
- Quorum: A meeting regarding a Consultative Vote requires the presence of the Founder plus at least 50% of the Class B Members (e.g., 7 of 14).
- Late Policy: Meetings shall commence precisely at the scheduled time. If Quorum is not met after a 5-minute grace period, the meeting may proceed for informational purposes, but the Consultative Vote is tabled.
- Support Threshold: The goal for approval is the affirmative vote of the Founder plus a simple majority of the Class B Members (e.g., 8 out of 14 total votes).
5.3 Legal Supermajority (Protective Provisions). Notwithstanding the above, the following actions require the legal consent of Members holding at least 75% of the total Percentage Interests (which must include the Founder):
- Amending this Operating Agreement;
- Dissolving the Company;
- Selling substantially all Company assets.
ARTICLE 6: TRANSFERS AND EXIT
6.1 Restrictions on Transfer. Class B Units are non-transferable. Class B Members may not sell, assign, pledge, or encumber their Units without the prior written consent of the Managing Member.
6.2 Service Cessation (Bad Leaver / Good Leaver).
- Good Leaver (Death/Disability): Unvested Units forfeit; Vested Units are retained.
- Bad Leaver (Resignation/Cause): All Units (Vested and Unvested) are subject to repurchase by the Company at Par Value ($0.0001 per unit). "Cause" includes material breach of confidentiality, fraud, or failure to perform services.
6.3 Drag-Along Rights. In the event of a sale of the Company approved by the Managing Member, all Class B Members are required to sell their Units on the same terms and conditions ("Drag-Along").
ARTICLE 7: MISCELLANEOUS
7.1 Indemnification. The Company shall indemnify Members for acts performed in good faith within the scope of Company business, excluding acts of fraud, gross negligence, or willful misconduct.
7.2 Entire Agreement. This Agreement constitutes the entire understanding between the parties and supersedes all prior agreements.
7.3 Governing Law. This Agreement is governed by the laws of the State of [STATE].
IN WITNESS WHEREOF, the Members have executed this Agreement as of the date first written above.
(Signatures follow)