Delaware LLC Operating Agreement—All You Need To Know

Delaware offers some of the most business-friendly laws in the country. One of the state’s most appealing advantages is its flexibility in structuring operating agreements. As a result, LLC members can tailor agreements to align with their specific goals and operational needs.

In this article, we’ll uncover details about drafting a Delaware LLC Operating Agreement and explain how it benefits the business. We’ll also introduce Harbor Compliance, a trusted partner that helps you with your LLC formation.

What Is a Delaware LLC Operating Agreement?

The Delaware LLC operating agreement refers to any written, oral, or implied agreement of members of an LLC to the affairs and conduct of the business. It’s a document that governs the rights and responsibilities of its members.

All members, managers, and individuals holding an interest in the LLC are required to follow the operating agreement, even if they haven’t signed it. Similarly, the LLC itself—including any associated protected or registered series—is also bound by the agreement, even if it hasn’t formally executed it.

The document mainly outlines the LLC’s operational procedures, which members can modify according to their needs. Members can also outline the management structure and define each party’s rights, responsibilities, and powers.

Benefits of Documenting an Operating Agreement for LLC

While the state doesn’t mandate LLCs to draft the operating agreement, it’s recommended to have well-established rules and structures for your business. The reasons are as follows:

• The agreement can help address conflicts between members. Make sure to include a provision about what to do should there be business disputes.
• Having a clear agreement document will make your legal proceedings smooth.
• Operating agreements are often requested by banks when opening business accounts. The document serves as proof of ownership since Delaware LLC members’ names aren’t filed publicly.
• Demonstrating a well-defined organizational hierarchy and structure will make your business attractive to investors.

Note: Without an operating agreement, your LLC will default to being governed by the provisions of Delaware’s Limited Liability Company Act. These statutes may not align with your business’s specific needs or goals. However, an operating agreement can override Delaware’s laws for LLCs.

What Is Included in the Delaware LLC Agreement?

Ideally, an operating agreement must have the following information and provisions:

1. Basic information—Include your LLC’s name, purpose, principal office, and registered agent details.
2. Membership details—Add an overview of how the LLC is structured, who the core members are, and how the ownership is divided.
3. Rights and responsibilities—Specify what each member can and cannot do within the LLC, including voting rights. You should also describe the process for adding new members, including consent requirements and financial terms.
4. Management style—State whether the LLC is member-managed or manager-managed. Define how decisions will be made (like majority or unanimous votes) and what actions require member approval.
5. Profit and loss allocation—Define how profits and losses will be distributed among members and whether the distributions are proportional to ownership percentages.
6. Voting procedures—Detail voting processes for major decisions, including quorum requirements and the weight of each member’s vote.
7. Transfer of membership interests—Specify whether members have the right of first refusal or buyout options if another member exits.
8. Dispute resolution—Provide detailed procedures for resolving disputes before resorting to litigation.
9. Financial matters—Specify procedures for maintaining records, filing taxes, and distributing financial reports.
10. Liability—Protect members and managers from personal liability for business debts or obligations and specify circumstances where indemnification applies.
11. Dissolution—Detail the steps for dissolving the LLC, including the distribution of remaining assets after liabilities are settled.

The Importance of an LLC Operating Agreement in Delaware

An LLC operating agreement is a critical document for any business, especially in Delaware, where the state’s business-friendly laws allow for great flexibility in how LLCs are structured. While Delaware does not require LLCs to file their operating agreements with the state, having one is essential for maintaining internal order, resolving disputes, and ensuring that your LLC is compliant with state laws. Without a well-crafted operating agreement, members risk confusion or even legal conflicts down the line.

As with all aspects of forming and running a business, getting the details of your LLC’s operating agreement right from the start is vital. And that’s where Harbor Compliance can help. We specialize in guiding business owners through the entire LLC formation process, making sure that all state-required documents are filed properly. This helps ensure that your operating agreement is tailored to meet your specific needs.

Outsource Your LLC Formation to Harbor Compliance

When you partner with Harbor Compliance to form your Delaware LLC, we make the process as simple and straightforward as possible.

With our LLC Formation Service, we can help you set up your LLC without getting overwhelmed. Our team of professionals will handle all the essential steps, including filing your Articles of Organization with the Delaware secretary of state, obtaining your Employer Identification Number (EIN), and providing ongoing compliance support.

Beyond formation, we also assist you in maintaining good standing with the secretary of state by filing annual reports, processing business licensing, and registering for taxes in Delaware.

Our proprietary Software Suite helps you keep track of your registrations, filings, and renewals, so you’re always meeting deadlines. You can also contact us for personalized guidance on drafting a Delaware LLC operating agreement, and our team of experts will simplify the process for you.

With us managing the legal formation and foundational documents, you can be confident that everything is in order from the start. This will give you more time and peace of mind to focus on running and growing your business.

Ordering Harbor Compliance’s LLC Formation Service

To avail of our LLC formation service, follow these steps:

1. Go to the LLC formation page.
2. Click on Order Online.
3. Enter your business details.
4. Apply by clicking Checkout.

Additional Harbor Compliance Services

Harbor Compliance can assist you with numerous other legal requirements to ensure compliance with Delaware’s secretary of state. Refer to the table below to view our entire range of services:

Service Category	Services
Registered Agent Service	Registered agent Change of registered agent Foreign qualification
Tax registration	Payroll tax registration Sales and use tax registration
Beneficial Ownership Information (BOI) reporting	BOI reporting service Records Manager
Entity lifecycle management	Incorporation Name reservation Amendment Dissolution and withdrawal Reinstatement Publishing
Document filing and retrieval	Initial report Annual reports Certificates of good standing Certified copies Drop-off Filing
Business licensing	General business licensing service Industry-specific business licensing: Architecture & engineering Construction
Nonprofit formation	Nonprofit incorporation Nonprofit tax exemption

Make Your LLC Formation a Smooth Ride With Harbor Compliance

A well-drafted LLC operating agreement in Delaware is crucial for clearly defining ownership, management, and operational procedures. It ensures legal protection and minimizes potential conflicts among members. To draft an error-free LLC operating agreement, a smooth LLC formation is essential—and that’s where Harbor Compliance helps!

Order our LLC Formation Service, and we’ll handle your LLC formation, ensuring you meet all the legal requirements and submit applications on time. Want to test our Software Suite modules? Book a demo to explore how our award-winning software helps you manage your entity.

Not sure where you stand with the state? Try the FREE Harbor Compliance Score™ for a detailed evaluation. You can also get assistance from our team of professionals or personalized advice on drafting operating agreements and other complex processes—all you have to do is contact us or visit our Information Center.