Every Delaware LLC must have an Operating Agreement, but getting one doesn’t have to be expensive. You can download and customize your own Delaware Operating Agreement using our free template below.
Delaware LLC Operating Agreement (Member-managed)
Delaware LLC Operating Agreement (Manager-managed)
What is a Delaware LLC Operating Agreement?
A Delaware LLC Operating Agreement (aka Limited Liability Company Agreement) is a written agreement or contract between the LLC Members (LLC owners). This legal document includes detailed information about LLC ownership structure, who owns the company and how the LLC is managed.
Operating Agreement Required
In Delaware, all Single-Member LLCs and Multi-Member LLCs must draft an Operating Agreement, keep it with their business records, and give a copy to all Members.
In some other states, having an Operating Agreement is optional but strongly recommended. But in Delaware, a Limited Liability Company Agreement is required by law for every Delaware Limited Liability Company.
An LLC Operating Agreement is usually required when you open a bank account for the LLC, and it contains important information about the company’s management structure.
What should be included in LLC Operating Agreements?
Your Operating Agreement will include basic information about your Limited Liability Company. Some of the information will be the same as what is listed in your Delaware LLC Certificate of Formation. Operating Agreements should include:
- LLC Name
- LLC effective date
- Delaware Registered Agent (if applicable)
- purpose of your LLC
- duration of your LLC
- management structure (and management responsibilities)
- and how your LLC will be taxed
Your Delaware LLC Operating Agreement will list every LLC Member and how much of the Limited Liability Company they each own.
How much of the LLC someone owns is called their “LLC Membership Interest” (aka Limited Liability Company Interest).
LLC Membership Interests are most often expressed as a percentage (like 5%, 50%, 100%, etc.).
Initial Capital Contributions (putting money into your LLC)
After your LLC is approved, you should open an LLC bank account and put money into that account.
Each LLC Member makes an initial capital contribution. Capital contribution simply means a deposit of money into the business bank account.
You will list the capital contributions in your LLC’s Operating Agreement (aka Limited Liability Company Agreement).
Pro tip: If you complete your Operating Agreement before you have opened an LLC bank account, just enter the amount the Members plan to deposit. If the amount of your deposit changes, it’s okay to edit your Operating Agreement with the actual amounts later.
- Related article: To learn more about capital contributions, like how much you should contribute, check out LLC Capital Contributions.
Statement about taxes
You will list how your LLC will be taxed in your Operating Agreement. There are four common ways an LLC can be taxed:
- LLC taxed as a Sole Proprietorship
- LLC taxed as a Partnership
- LLC taxed as an S-Corporation
- LLC taxed as a C-Corporation
Voting Rights of LLC Members
The rules of membership voting will be spelled out in your Delaware LLC Operating Agreement (aka Limited Liability Company Agreement).
If you use the Member-managed Operating Agreement, the voting powers are proportionate to the LLC Membership Interest. Usually, all Members are “voting Members”.
If you use the Manager-managed Operating Agreement, the voting powers are also proportionate to the LLC Membership Interest. Then the Members vote to elect a Manager or Managers. The Manager(s) then has authority to make certain decisions on behalf of the LLC (without needing a vote by the other Members).
However, certain things, like adding or removing an LLC Member, require a vote of the Members (and the Manager has no say). And the Operating Agreement can require written notice about certain types of votes, require a unanimous vote for some items, or contain other rules about voting rights.
Make sure every LLC Member has a copy
Once you finalize your Operating Agreement, make sure all the Members have a copy of the entire agreement.
We recommend keeping a copy of the Operating Agreement with your Limited Liability Company business records.
Operating Agreement FAQs
An Operating Agreement is required for an LLC to transact business in the state of Delaware. The Members can sign the Operating Agreement before, at the same time, or after you file the Certificate of Formation paperwork.
This requirement also applies to a Foreign Limited Liability Company registered in Delaware.
Plus: If you go to court, LLC Operating Agreements help prove that your Single-Member LLC is being run as a separate legal entity. This confirms the company’s limited liability status, and that is what protects your assets from personal liability.
This document will spell out ownership percentages (and details of deposits into capital accounts), profit distribution, and management structure and responsibilities (to the extent assigned).
Plus: If you go to court, an Operating Agreement helps prove that your Multi-member LLC is being run as a separate entity. A signed Operating Agreement helps protect the members’ personal assets.
Remember, all the LLC Members must sign the Operating Agreement.
Operating Agreements are “internal documents”. Meaning, the Members just need to keep a copy with their business records.
The Operating Agreement is a legally binding document upon the LLC Members because of the Members’ signatures. It doesn’t need a government stamp of approval.
However, in the future, if your company were involved in a lawsuit or an audit, a court or government agency might ask to see a copy of your Operating Agreement.
Additionally, you may also need to show this document to:
- financial institutions when you open business bank accounts
- financial institutions if you apply for a loan for the LLC
- a title company if your LLC is buying real estate
Once you (and the other LLC Members, if applicable) sign the Operating Agreement, then it becomes a legal document.
An Operating Agreement is a legal document. You don’t have to hire a lawyer to write one, though. Using a template helps make sure you cover everything you need to.
LLC University® offers free Operating Agreement templates that you can download and customize to write your own LLC Operating Agreement.
For example, at a minimum, you’d want your Delaware LLC name, your Registered Agent information, your business purpose, the names of the LLC Members, and information about initial capital contributions.
However, there is a lot more information that is important to document about your LLC.
It’s probably a lot easier to start with an existing template. We have a free Operating Agreement template you can download on this page.
An Operating Agreement is an internal document that governs how your LLC is run. It contains rules about how much of the company each Member of the LLC owns, and other details about management and taxes.
Said another way, the LLC is your legal entity. And the Operating Agreement is a written set of rules for how the LLC will operate.
You could have an LLC without an Operating Agreement (but you shouldn’t). But you can’t have an Operating Agreement without an LLC.
- Choose an LLC name and make sure it’s available
- Choose who will be your Delaware Registered Agent
- File the Delaware LLC Certificate of Formation
- Complete and sign an LLC Operating Agreement
- Get a Tax ID Number (EIN) from the Internal Revenue Service
- Research business license requirements
- Open a business bank account
IRS: Paying Yourself
Delaware LLC Act: Section 18-201 (Formation of LLC)
Delaware LLC Act: Subchapter 3 (Members)
Delaware LLC Act: Subchapter 4 (Managers)
Delaware Division of Corporations: How to Form a New Business Entity