sns-network-solutions/businesses/sns-hospitality-group/indian-food-truck/docs/operating-agreement.md

# Operating Agreement for Foodtruck1 LLC

> **Draft / template — not legal advice.** This is a working draft for a
> **two-member** Indiana LLC that is a subsidiary of SnS Network Solutions Holdings
> LLC. Unlike the other subsidiaries, this one is **not** wholly owned by Holdings —
> it has a second Member holding a performance-vesting interest. Have an
> Indiana-licensed attorney and a CPA review and finalize this before either party
> signs. Items in `[brackets]` need your specific information; items marked
> `[TODO — attorney/CPA review]` should be confirmed with counsel.

**Entity:** `[Foodtruck1 LLC — confirm final legal name once filed]` (the "Company")
**Parent:** SnS Network Solutions Holdings LLC (the "Parent Company"), 85% Member
**Second Member:** `Kiowa Scott` ("Kiowa"), 15% Member (vesting)
**State of formation:** Indiana
**Effective date:** `[Effective Date — the date this Agreement is adopted]`

---

## 1. Formation and Purpose

This Operating Agreement (the "Agreement") is entered into by the Members, **SnS
Network Solutions Holdings LLC** (the "Parent Company") and **`Kiowa Scott`**
("Kiowa"), to govern the operations of **Foodtruck1 LLC**, a limited
liability company organized under the Indiana Business Flexibility Act (Indiana Code
§ 23-18).

The Company is an **operating subsidiary** formed to operate a mobile food truck
business. Unlike the Parent Company, the Company **does** conduct client-facing
work and carries the operating liability associated with that work (food service,
a commercial vehicle, and — depending on the staffing model chosen — employees),
which is why it is held in a separate LLC, walling that liability off from the
Parent Company and from every sibling subsidiary.

## 2. Registered Office and Registered Agent

- **Principal office:** `[Principal business address]`
- **Registered agent:** `[Registered agent name]`
- **Registered office address:** `[Indiana street address of the registered agent]`


## 3. Members and Ownership

| Member | Membership Interest | Capital Contributed |
|---|---|---|
| SnS Network Solutions Holdings LLC | 85% | `[$ amount — Sam's invested capital in this venture]` |
| Kiowa | 15% (subject to vesting — see §5) | $0 |

Kiowa is admitted as a full Member — with voting and economic rights — as of the
Effective Date, granted in exchange for her services (business formation/paperwork
work and originating this venture), not for a cash contribution. Her 15% interest is
subject to the vesting and forfeiture terms in §5, which control over any
inconsistent provision elsewhere in this Agreement.

Allocations of profit and loss for tax purposes are made in proportion to each
Member's Membership Interest, subject to §5 and §8.
`[TODO — CPA review: confirm capital account mechanics for a $0-contribution,
services-for-equity Member, and how allocations should work while her interest is
partly unvested — see §5 and §8.]`

## 4. Management

The Company shall be **Member-managed**. Because the Parent Company holds a Membership
Interest majority (85%), the Parent Company — acting through its authorized
representative, **Samuel S. James** — retains sole authority to approve or reject
major Company decisions, including:

- Entering into contracts, leases, and vendor/supplier agreements;
- Opening and controlling the Company's bank and financial accounts;
- Procuring insurance and equipment;
- Hiring and directing employees, or engaging an independent operator, per the
  staffing model chosen (see §10);
- Admitting any new member (which requires amending this Agreement — see §12).

**Day-to-day management** (routes, customers, daily operations) is delegated to
`[TODO: designate — Kiowa, a hired operator under a lease/license arrangement, or a
hired manager under a direct-hire staffing model; pending the staffing-model decision
referenced in `../requirements.md`]`, who reports to Samuel S. James as the Parent
Company's authorized representative.

## 5. Vesting and Forfeiture of Kiowa's Membership Interest

This section is the controlling reference for Kiowa's equity — consistent with, and
incorporating, the terms of
[`../../00-sns-holding/docs/kiowa-equity-framework.md`](../../00-sns-holding/docs/kiowa-equity-framework.md).

**5.1 Vesting schedule.** Measured from the Company's **Opening Date** (the date the
Company begins revenue-generating operations — `[TODO: record actual date once
known]` — not the date this Agreement is signed or the date Articles of Organization
are filed):

| Milestone (from Opening Date) | Vests | Condition |
|---|---|---|
| 3 months | 3.75% (cumulative 3.75%) | Time-based, unconditional |
| 6 months | 3.75% (cumulative 7.50%) | Time-based, unconditional |
| 9 months | 3.75% (cumulative 11.25%) | Time-based, unconditional |
| 12 months | final 3.75% (cumulative 15.00%) | Conditional — only vests if cumulative net profit has reached **2x** the Parent Company's invested capital (per §3) by month 12 |

**5.2 Acceleration.** If the Company's cumulative net profit reaches 2x the Parent
Company's invested capital at any point before the 12-month mark, Kiowa's interest
immediately and fully vests to 15%, regardless of which quarterly milestone has or
has not yet passed.

**5.3 Forfeiture and repurchase.** If cumulative net profit has **not** reached 2x
the Parent Company's invested capital by the 12-month mark, the final 3.75% tranche
does not vest. The Parent Company has the option (exercisable within
`[TODO — e.g., 90 days]` of the 12-month mark) to repurchase that unvested tranche
from Kiowa for **`[$1.00 — nominal consideration, given no cash was paid in]`**. Upon
exercise, Kiowa's Membership Interest permanently reduces to whatever had vested
through month 9 (up to 11.25%), and the repurchased tranche is transferred to the
Parent Company. There is no cure period and no later opportunity to re-earn the
forfeited tranche for this venture.

**5.4 Distributions during the vesting period.** Until any tranche is forfeited under
§5.3, Kiowa receives distributions on her full 15% Membership Interest as if fully
vested (consistent with profits-interest tax treatment — see §8). Forfeiture under
§5.3 applies only prospectively: distributions already paid to Kiowa before the
forfeiture date are not clawed back.
`[TODO — CPA review: confirm this "full distributions during vesting, forfeiture only
prospective" approach is consistent with, or needs a formal forfeiture-allocation
provision for, profits-interest safe-harbor tax treatment.]`

**5.5 Independence from other ventures.** This vesting arrangement applies only to
Kiowa's interest in this Company. It has no effect on, and is not affected by, any
equity Kiowa may be granted in any other subsidiary she originates.


## 6. Bank Accounts, Books, and Records

- The Company shall maintain **its own bank account(s)**, separate from the Parent
  Company's and from every sibling subsidiary's accounts.
- The Company shall keep accurate books and records of its finances, contracts, and
  material decisions — including records sufficient to verify the vesting milestones
  in §5 (cumulative net profit, by quarter, from the Opening Date) — retained at the
  principal office as required by Indiana law.

## 7. Capital Contributions and Additional Distributions

- **Capital contributions:** The Parent Company may contribute additional capital to
  the Company as needed; contributions are recorded in the Company's books against
  its capital account. Kiowa is not required or expected to make cash contributions.
- **Distributions:** Subject to §5.4, distributions of available profits are made pro
  rata to the Members' respective Membership Interests, at the times and amounts the
  Parent Company determines under §4, subject to the Company's financial obligations
  and applicable law (the Company may not make a distribution that would render it
  unable to pay its debts as they come due).

## 8. Tax Treatment

With two Members, the Company is, by default, treated as a **partnership** for U.S.
federal income tax purposes; each Member reports their share of income and expense
via a Schedule K-1. Because the Parent Company is itself a multi-member LLC taxed as
a partnership, this creates a **tiered partnership structure** requiring coordination
between the Company's and the Parent Company's returns.
`[TODO — CPA/attorney review: (1) confirm Kiowa's interest is structured and
documented as a profits interest under Rev. Proc. 93-27/2001-43, not a capital
interest, to avoid immediate taxable income to her on grant; (2) confirm whether
Kiowa should file a protective Section 83(b) election within 30 days of the Effective
Date given the forfeiture condition in §5.3 — this is a hard IRS deadline; (3) confirm
tiered-partnership filing mechanics between this Company and the Parent Company; (4) a
Form 1065 will be required for this Company.]`

- **EIN:** `[Company EIN — obtain from the IRS once Articles of Organization are filed]`
- **Fiscal year:** `[Fiscal year — typically the calendar year]`

## 9. Liability and Indemnification

To the fullest extent permitted by Indiana law:

- No Member shall be **personally liable** for the debts, obligations, or
  liabilities of the Company solely by reason of being a member; and
- The Company shall **indemnify and hold harmless** each Member (and any authorized
  manager or agent) against claims, losses, and expenses arising from the good-faith
  management of the Company within the scope of authority granted under this
  Agreement, except for acts of fraud, willful misconduct, bad faith, or acts taken
  outside that authority.
`[TODO — attorney review: confirm indemnification scope, especially given the
Company's operating (not passive-holding) risk profile.]`

## 10. Insurance, Licensing, and Staffing

Given the Company's mobile food-service operations, the following are required
before operations begin (see `../requirements.md` for current cost estimates and
status):

- **Workers' Compensation** — mandatory under Indiana law from employee #1, if the
  direct-hire staffing model is used.
- **General Liability** — required for the mobile food vendor permit.
- **Commercial Auto** — required for the truck; a personal auto policy will not cover
  commercial use.
- **Mobile food vendor / health department permit** — required from South Bend /
  St. Joseph County before operating.

**Staffing model:** Direct W-2 hire — 1 full-time cook/manager ($24/hr) and 2
part-time crew members ($12/hr, 25 hrs/wk each). Total loaded monthly labor:
approximately $7,800.

## 11. Minimum Operating Requirements & Financial Targets

The Company shall operate a minimum of **288 days per calendar year** (6 days per
week, 48 weeks), accounting for up to 4 weeks of planned downtime due to weather,
maintenance, holidays, or unforeseen events.

### 11.1 Investment & Loan Repayment

- **Total initial investment:** $50,000 (contributed by the Parent Company)
- **Repayment target:** Full repayment of invested capital within **24 months** of
  the Opening Date
- **Required pre-tax annual profit (to meet repayment after taxes):** $38,462/yr
  (~$3,205/mo at the Parent Company's 75% share, grossed up for ~35% combined
  federal, state, and self-employment taxes)

### 11.2 Monthly Financial Obligations

The Company's fixed monthly costs, payable regardless of revenue:

| Item | Monthly Cost |
|------|-------------|
| Labor (loaded — cook + 2 PT crew + employer taxes) | $7,800 |
| Truck payment (48mo @ ~8%) | $854 |
| Workers' Compensation insurance | $150 |
| General Liability insurance | $42 |
| Commercial Auto insurance | $170 |
| Commissary kitchen rental | $400 |
| Fuel | $500 |
| Software (payroll + ERP) | $100 |
| LegalShield (legal services) | $60 |
| Phone/POS | $100 |
| Miscellaneous/repairs buffer | $490 |
| **Total fixed monthly** | **$10,666** |

During downtime weeks, fixed costs continue. Labor reduces to cook-only retention
(~$1,085/wk loaded) to avoid losing a key employee; part-time crew is zeroed.

### 11.3 Revenue Targets

Assuming 30% food cost and 288 operating days per year:

| Metric | Target |
|--------|--------|
| **Breakeven revenue (annual)** | $182,640 ($15,220/mo) |
| **Revenue to meet 2-year payback** | $232,641/yr ($808/operating day) |
| **Minimum daily revenue target** | $808/day |
| **At $14/plate** | **58 customers/day** |
| **At $15/plate** | 54 customers/day |
| **At $12/plate** | 68 customers/day |

### 11.4 Reporting

The Company shall maintain monthly records sufficient to track:
- Total operating days vs. the 288-day minimum
- Daily revenue and customer count
- Cumulative net profit vs. the invested capital repayment schedule
- Food cost percentage (target: ≤30% of revenue)

These records support the vesting milestones in §5 and are available to both Members
upon request.

## 12. Transfer of Membership Interest

- **Economic vs. management rights.** A Member may assign, pledge, or transfer the
  economic rights (right to distributions/profits) in all or part of their Membership
  Interest at that Member's discretion, without that alone making the transferee a
  member.
- **Admission as a member.** A transferee is admitted as a member — with voting and
  management rights, not just economic rights — only upon amendment of this Agreement
  under §12.
- **Repurchase right.** The Parent Company's repurchase right over Kiowa's unvested
  tranche under §5.3 is not a general transfer restriction — it applies only in the
  specific forfeiture circumstance described there.
`[TODO — attorney review: consider whether a right of first refusal should apply to
either Member's Membership Interest before any transfer to a third party is
attempted.]`

## 13. Amendments

This Agreement may be amended only by a **written instrument signed by all Members**.
`[TODO — attorney review: given the Parent Company holds a voting majority (85%),
consider whether any amendment that would change Kiowa's Membership Interest, the §5
vesting/forfeiture terms, or her distribution rights should specifically require
Kiowa's consent, even though general amendments could otherwise be read to need only
majority approval.]`

## 14. Dissolution

The Company shall continue in perpetuity unless dissolved by:

- The written election of Members holding a majority of the Membership Interests; or
- Operation of Indiana law.

Upon dissolution, the Company's assets shall be applied first to creditors, then
distributed to the Members pro rata in proportion to their (then-vested) Membership
Interests, after which Articles of Dissolution shall be filed with the Indiana
Secretary of State.

## 14. Governing Law and Severability

This Agreement is governed by and construed in accordance with the laws of the
**State of Indiana**. If any provision is held invalid or unenforceable, the
remaining provisions remain in full force and effect.

## 15. Definitions

- **"Company"** — Foodtruck1 LLC.
- **"Parent Company"** — SnS Network Solutions Holdings LLC.
- **"Kiowa"** — `Kiowa Scott`, the Company's second Member.
- **"Membership Interest"** — a Member's ownership, economic, and (unless limited)
  management rights in the Company, expressed as a percentage per §3, subject to §5.
- **"Opening Date"** — the date the Company begins revenue-generating operations, as
  defined in §5.1.

---

## Execution

The undersigned, being all of the Members of Foodtruck1 LLC, adopt and agree to this
Operating Agreement as of the Effective Date first written above.

**MEMBER — 85% Membership Interest**

By: ______________________________________

Name: **Samuel S. James**

Title: Authorized Representative / Sole Member of SnS Network Solutions Holdings LLC

Date: ______________________________________

<br>

**MEMBER — 15% Membership Interest (vesting per §5)**

Signature: ______________________________________

Printed name: **`Kiowa Scott`**

Date: ______________________________________

<br>

*Prepared as a working draft. Review with an Indiana-licensed attorney and a CPA
before either party signs.*