Most passive investors never read the operating agreement—and that's a mistake. The operating agreement is the rulebook for how the syndication operates. It defines your rights, the sponsor's powers, how profits are distributed, when you get paid, and what happens if things go wrong. In this episode, CREI Collin decodes the operating agreement, breaking down the 10 key sections every investor must understand. You'll learn what rights you have as a limited partner or non-managing member, what red flags to watch for, and what questions to ask before you sign.

Learn how to read an operating agreement with confidence. CREI Collin decodes the 10 key sections that define your rights as a passive investor.

• What is an operating agreement (and limited partnership agreement)?
• The 10 key sections of an operating agreement
• Your rights as a limited partner or non-managing member
• What you can and can't do as a passive investor
• Red flags to watch for in an operating agreement
• Questions to ask sponsors about the operating agreement
• How to protect yourself when reviewing an operating agreement

• [00:00] Introduction: Why most investors don't read the operating agreement
• [02:30] What is an operating agreement and why it matters
• [04:45] Section 1: Definitions
• [05:30] Section 2: Capital Contributions
• [06:15] Section 3: Allocations of Profits and Losses
• [07:00] Section 4: Distributions
• [08:15] Section 5: Management and Control
• [09:30] Section 6: Voting Rights
• [10:45] Section 7: Transfer Restrictions
• [11:45] Section 8: Capital Calls
• [12:45] Section 9: Sponsor Removal
• [13:45] Section 10: Dissolution and Liquidation
• [14:45] Your rights as a limited partner or non-managing member
• [16:30] Red flags to watch for
• [18:15] Questions to ask sponsors
• [20:00] Recap and action steps

1. The operating agreement (for LLCs) or limited partnership agreement (for LPs) is the governing document that defines your rights, the sponsor's powers, and the rules for how the deal operates.
2. Focus on 10 key sections: Definitions, Capital Contributions, Allocations, Distributions, Management and Control, Voting Rights, Transfer Restrictions, Capital Calls, Sponsor Removal, and Dissolution.
3. As a limited partner or non-managing member, you have the right to receive distributions, financial information, and a K-1, and you may have limited voting or consent rights. You generally don't have day-to-day control or the right to easily exit.
4. Red flags include unclear governance, broad discretion without guardrails, mandatory capital calls with severe penalties (dilution, loss of rights, reduced distributions, or forfeiture), vague distribution language, difficult or impossible sponsor removal, severe transfer restrictions, and overly broad indemnification clauses.
5. Ask detailed questions about control, distributions, capital calls, voting or consent rights, transfers, and exit strategy.
6. Read the operating agreement carefully, consult with an attorney if investing significant capital, and evaluate calmly if something feels off.

• (00:00:01) - Building Passive Income
• (00:01:46) - What Am I Signing?
• (00:02:44) - Subscription Agreement and Investor Questionnaire
• (00:05:21) - Representations and Warranties
• (00:07:43) - Accredited Investors: Final Checks and Red flags
• (00:12:53) - The subscription agreement and investor questionnaire are the final legal documents you sign