Delaware Operating Agreement
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Creating an LLC in Delaware means that you need to create certain documents. It may sound complicated, but it’s really not that many things on the list.
One is the Delaware operating agreement, which isn’t actually required by the state. However, it’s still a good idea to have one, as it’ll come in handy in the future. In this article, we’ll discuss what an operating agreement is, how you can write one, and more.
What's a Delaware Operating Agreement?
A Delaware operating agreement is a legal document that shows how your LLC’s members agree to handle the business. This includes how ownership’s distributed and how operations go on a day-to-day basis.
In most states, it’s not legally required to have an operating agreement, but Delaware’s an exception. It’s mandatory, and it’ll cover you anyway. Should disputes arise in your LLC, a judge will make their ruling based on what’s written in this document.
Other benefits include:
- Limiting your liability
- Providing clear direction
- Promoting financial and operational stability
- Helping with legal and regulatory compliance
- Allowing for future planning and contingency measures
What's in a Delaware Operating Agreement?
There are key components that are included in a Delaware operating agreement. They are:
- Ownership structure
- Management structure
- Decision-making procedures
- Profit and loss allocation
- Distributions
- Rights and responsibilities of members
- Buyout and transfer of membership interests
- Dispute resolution
- Dissolution
As you can see, it thoroughly outlines every possible scenario that could happen in your LLC. Even if you’re a single-member LLC, this can still be beneficial, as you never know when you might add more members or if you’ll hand off the company to someone else.
Here’s more on each section if you’re interested in what they consist of.
How to Write a Delaware Operating Agreement
To write a Delaware operating agreement, you’ll essentially copy your Delaware certificate of formation. There’s basic information found in both papers, such as the LLC’s:
- Name
- Effective date
- Registered agent
- Purpose
- Duration
You’ll also include the information from the above section. If you’re having trouble, you can easily find sample operating agreement templates online. You can download them and fill out the information for your LLC accordingly.
Once you’ve finished drafting the Delaware operating agreement, you’ll have to give each LLC member a copy.
If you want to save time and energy, you can have Business Anywhere come up with your Delaware operating agreement instead. As part of our free business formation service, we have an operating agreement service for just $97.
Delaware Operating Agreement FAQs
Can an operating agreement be customized?
Yes, the Operating Agreement is a flexible document and can be tailored to the specific needs of the LLC and its members.
Why is an operating agreement important for a Delaware LLC?
An operating agreement has several benefits. It provides structure to the LLC, defines the rights and responsibilities of members, helps protect limited liability status, and can override default state laws that may not align with the owners’ preferences.
How does an operating agreement affect an LLC’s taxation?
The agreement can specify how the LLC elects to be taxed (e.g., sole proprietorship, partnership, S-corp, or C-corp taxation). It can also show how profits and losses are distributed among members.
Do I need to file my operating agreement with the state?
No, Delaware does not require you to file the Operating Agreement with the Secretary of State. It is an internal document maintained by the LLC.
Do I have to notarize my Delaware LLC operating agreement?
No, you don't have to notarize it. You only have to have every LLC member sign the document.
Can I amend my Delaware LLC operating agreement?
Yes. Amendments can be made as long as all members agree and the process follows the amendment provisions outlined in the agreement.
What happens if I don’t have an operating agreement?
If an LLC does not have an operating agreement, Delaware’s default LLC laws will govern its operations, which may not align with the owners’ intentions.
What if a member wants to leave the LLC?
The operating agreement should outline the process for a member’s exit. This should include buyout terms, valuation methods, and transfer restrictions.
What happens if a member dies or becomes incapacitated?
The agreement can specify succession planning. It should detail the transfer of ownership interests or buyout procedures.
Step-by-Step Guide to
Forming a Delaware LLC
Delaware LLC Starter Guide
A step-by-step guide to forming an LLC in Delaware, covering all legal and operational requirements.
1. Delaware Name Search
Learn how to check the availability of your desired LLC name and ensure compliance with Delaware naming rules.
3. Delaware Certificate of Formation
Find out how to file the Certificate of Formation, the official document that establishes your LLC.
4. Delaware Operating Agreement
Discover why an Operating Agreement is crucial for defining the structure and management of your LLC.