The Delaware Act Is Mostly an Empty Frame Waiting for Your Agreement
Delaware calls the document a limited liability company agreement. Section 18-101(9) of Title 6 defines it broadly. It is any agreement, whether referred to as a limited liability company agreement, operating agreement or otherwise. It may be written, oral or implied. It is the agreement of the member or members as to the affairs of a limited liability company. And it covers the conduct of its business.
The same paragraph adds two things. First, a one member company's agreement stands. It shall not be unenforceable by reason of there being only one person who is a party to it. Second, a limited liability company agreement is not subject to any statute of frauds.
Then comes the sentence people are reaching for when they say Delaware requires one. Section 18-201(d) provides that a limited liability company agreement shall be entered into or otherwise existing. That can happen either before, after or at the time of the filing of a certificate of formation. The verb is shall.
Read with the definition, the Act assumes every Delaware LLC has an agreement. It allows that agreement to be unwritten. And it never asks to see it. Nothing is filed with the Division of Corporations. There is no form and there is no fee.
The policy behind all of this is stated in the Act itself. Section 18-1101(b) reads: it is the policy of this chapter to give the maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements. Delaware supplies a thin set of defaults. Then it gets out of the way. That is the attraction and the exposure at the same time. Our Delaware operating agreement page covers the drafting.
The defaults that apply if you write nothing
Delaware weights everything by profits interest. Section 18-402 vests management in the members. It does so in proportion to their then current percentage or other interest in the profits owned by all the members. The decision of members owning more than fifty percent of that interest controls. Sections 18-503 and 18-504 allocate profits, losses and distributions. They use the agreed value of the contributions made by each member and not returned, as stated in the records of the company.
Two defaults surprise people. First, the last sentence of § 18-402: unless otherwise provided in a limited liability company agreement, each member and manager has the authority to bind the limited liability company. Every member can sign.
Second, § 18-603: a member may not resign from a limited liability company before the dissolution and winding up of the company unless the agreement provides otherwise. There is no exit. Say the agreement does permit resignation and says nothing about price. Then § 18-604 entitles the resigning member to the fair value of the interest within a reasonable time.
Dissolution needs more than a majority. Section 18-801(a)(3) requires the vote or consent of members owning more than two thirds of the current percentage or other interest in profits. And § 18-801(b) covers what does not dissolve the company. Unless otherwise agreed, the death, retirement, resignation, expulsion, bankruptcy or dissolution of any member does not. The company continues without dissolution.
Why a Delaware sole member writes it down
Section 18-101(9) removes the technical objection by confirming that a one party agreement is enforceable. And § 18-201(d) says the agreement shall exist. What the sole member gains from writing it is everything the Act leaves blank. Who signs. What happens on incapacity or death. Whether the ninety day window in § 18-801(a)(4) lets the personal representative continue the company. And the record that the company is a separate business.
Delaware also gives a single owner the strongest creditor position in the country, described below. That position is easier to defend when the company looks like a company. Our single-member LLC guide covers the operating discipline that goes with it.
What Belongs in a Delaware Operating Agreement
The Delaware position in one table
| Question | Delaware answer |
|---|---|
| Required by statute? | The Act says one shall be entered into or otherwise existing |
| Must it be written? | No. Written, oral or implied, with no statute of frauds |
| Filed with the state? | No. No form, no filing, no fee |
| Governing act | Delaware Limited Liability Company Act, Title 6 Chapter 18 |
| Fiduciary duties | May be eliminated except the implied covenant |
| Series | Protected series and registered series both available |
| File.Business custom agreement | $97 flat |
Ten decisions carry the weight. In Delaware more than anywhere else, an omission is a decision.
1. Members and the profits interest that drives everything
Name the members and fix the percentage interest in profits, because § 18-402 measures voting against it. And §§ 18-503 and 18-504 measure money against the agreed value of contributions in the records. Keep the records current. The statute points at them.
2. Contributions, calls and the enforcement mechanism
Record contributions and agreed values. Section 18-502(c) lets the agreement specify penalties or consequences for a member who fails to perform an obligation. Those include reduction of the interest, subordination, forced sale, forfeiture or a loan by other members. Delaware will enforce those. Decide which you want before you need it.
3. Member managed or manager managed, and who signs
Section 18-402 leaves management with the members. It gives every member and manager authority to bind the company. Overriding that is the first thing most Delaware agreements do. Name the managers, state their term, set signature thresholds and say who may not sign.
4. Voting weights and consent thresholds
Section 18-404 lets the agreement create classes or groups of managers with different rights. The same flexibility applies to members. Set your own thresholds. They replace the more than fifty percent rule in § 18-402 and the more than two thirds rule in § 18-801(a)(3).
5. Allocation, distribution and the waterfall
This clause replaces §§ 18-503 and 18-504. Delaware imposes almost no constraint on how you divide the money, subject to the solvency limit in § 18-607. Preferred returns, catch ups, carried interest and clawbacks all work here.
6. Assignment, admission and the transferee's rights
Section 18-702 gives an assignee the right to share in profits and receive distributions to the extent assigned. It gives nothing else. Section 18-603 also lets the agreement provide that an interest may not be assigned before dissolution at all. Add consent gates, first refusal and the treatment of involuntary transfers.
7. Resignation, which Delaware bars by default
This is the clause Delaware members most often need and most often lack. Section 18-603 says a member may not resign before dissolution unless the agreement allows it. Allow resignation and stay silent on price, and § 18-604 gives the resigning member fair value within a reasonable time. That is an appraisal fight waiting to happen. Write the formula.
8. Dissolution triggers and continuation
Section 18-801(a)(1) gives the company perpetual existence unless the agreement sets a time. Section 18-801(a)(4) saves a company that loses its last member. Within ninety days, the personal representative must agree to continue and to admit a nominee. The agreement can shorten, lengthen or make that obligation mandatory. See our Delaware dissolution guide for the filing side.
9. Federal election and the Delaware annual tax
Say who signs Form 2553 or Form 8832 and who may revoke it. Delaware LLCs do not file an annual report. But they owe an annual tax of $400 due on June 1. Delaware corporations are different. They pay a $50 annual report plus franchise tax starting at $175, due March 1. The agreement should name who is responsible for paying and for keeping the entity current. Our Delaware annual tax and report guide sets out the mechanics.
10. Forum, remedies and amendment
Delaware members usually want the Court of Chancery. It has the deepest body of limited liability company agreement decisions in the country. Section 18-111 gives the Court of Chancery jurisdiction to interpret and enforce the agreement. Set the amendment threshold explicitly. Delaware supplies no default, and an agreement silent on amendment invites an argument about whether unanimity applies.
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The Provision That Makes Delaware Delaware
Section 18-1101(c) is the single most consequential sentence in this chapter for anyone drafting a Delaware agreement. Here is what it provides.
To the extent that, at law or in equity, a member or manager or other person has duties, including fiduciary duties, to the company or to another member or manager or to another person bound by the agreement, those duties may be expanded or restricted or eliminated by provisions in the limited liability company agreement. But the agreement may not eliminate the implied contractual covenant of good faith and fair dealing.
Eliminated. Not narrowed. Not made subject to a reasonableness test. Not conditioned on informed consent. California requires a written agreement plus documented informed consent before a duty can be modified at all. Arkansas, Connecticut and the District of Columbia allow changes only if they are not manifestly unreasonable. Delaware allows the duty to be removed entirely. The only survivor is the implied covenant.
Two guard rails sit alongside it. Section 18-1101(e) lets the agreement limit or eliminate liability for breach of contract and breach of duties. But it expressly forbids one thing. There can be no limit on liability for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing. And § 18-1101(d) offers separate protection. A member or manager who relies in good faith on the agreement is not liable for breach of fiduciary duty.
The practical implication is that in Delaware the agreement is the whole of the relationship. A fund manager who has eliminated the duty of loyalty may pursue competing deals. That leaves the investor one argument. It is that the manager used a contractual discretion in a way that defeated the reasonable expectations the agreement itself created. Investors negotiating a Delaware agreement should read the duty clause first. Read the economics second.
Creditors, Protected Series and Registered Series
Section 18-703(d) is the strongest charging order text in the United States. The entry of a charging order is the exclusive remedy. It is the only way a judgment creditor of a member, or of a member's assignee, may satisfy a judgment out of the judgment debtor's limited liability company interest. Attachment, garnishment, foreclosure or other legal or equitable remedies are not available to the judgment creditor. That holds whether the limited liability company has one member or more than one member.
The final clause settles a question most states leave open or answer against the owner. Arkansas, Florida and the District of Columbia each permit a court to sell the entire interest of a sole member. Delaware forbids it in terms.
On series, Delaware now has two creatures and they are not the same. Section 18-215(b) creates a protected series. The liability separation works only on three conditions. The records maintained for the series must account for its assets separately. The limited liability company agreement must so provide. And notice of the limitation on liabilities must be set forth in the certificate of formation.
Section 18-218 creates a registered series. You create it by filing a certificate of registered series with the Secretary of State. It can get its own certificate of good standing and be named in a financing statement. A protected series is invisible to the public record. A registered series is not. Choose deliberately, and make sure the agreement carries the § 18-215(b) language either way.
Three Delaware Companies in Practice
Example one: Brandywine Analytics, Wilmington
A software company took $2.4 million from two investors. The agreement eliminated the manager's duty of loyalty under § 18-1101(c), so the founder could run a second venture. Three years later the second venture sold a product line to the same customer base.
The investors had no fiduciary claim. The duty had been eliminated, and Delaware enforces that. Their remaining argument under the implied covenant depended entirely on what the agreement said about the field of business. The clause the investors should have negotiated was two lines long. It cost nothing at the time.
Example two: Red Clay Ventures, Wilmington
A manager launched four investment vehicles under one Delaware LLC. The lenders financing two of them wanted a certificate of good standing for the borrowing pool specifically. A protected series cannot produce one. So the manager filed certificates of registered series under § 18-218 for those two. He left the others as protected series under § 18-215(b). Both forms required the same three conditions in the agreement and the certificate of formation. The agreement was amended once to carry them.
Example three: Coastal Sussex Rentals, Rehoboth Beach
A sole member held four beach rentals worth about $3.8 million. He then lost a $420,000 personal judgment from a motor accident. Section 18-703(d) closed attachment, garnishment and foreclosure, expressly including the single member case. So the creditor could reach distributions and nothing more. The owner had also written a resignation bar and a fair value formula into the agreement. There was no route to force a buyout. The judgment settled for a fraction of face value over four years.
Five Mistakes That Cost Delaware Members Money
Mistake 1: Treating the Delaware Act as a safety net
In most states an incomplete agreement is topped up by protective statutory defaults. Delaware's defaults are thin by design. And § 18-1101(b) instructs courts to enforce what the parties wrote. A gap in a Delaware agreement is not filled with fairness. It is filled with § 18-402, § 18-504 and § 18-603, which may be nothing like what anyone intended.
Mistake 2: Relying on the implied agreement in a one member company
Section 18-201(d) says an agreement shall be entered into or otherwise existing. And § 18-101(9) allows it to be implied. That is enough to satisfy the statute. It is nowhere near enough to satisfy a bank, a lender or a buyer. Write it, sign it, and date it before or at formation.
Mistake 3: Leaving the amendment mechanic undefined
Delaware supplies no default amendment threshold. So an agreement silent on the point invites an argument that every change needs every member. Fix a threshold. Fix who may sign an amendment. And restate the agreement rather than stacking side letters. That is how Delaware disputes about inconsistent documents begin.
Mistake 4: Trying to file it with the Division of Corporations
There is no Delaware filing for a limited liability company agreement, no form and no fee. The Division will not accept it. Confidentiality is one reason people choose Delaware in the first place. Your public filings are the certificate of formation, the annual tax, and your Delaware registered agent record.
Mistake 5: Forgetting that every member can bind the company
The closing sentence of § 18-402 gives each member and each manager authority to bind the company unless the agreement says otherwise. Delaware has no statement of authority filing that would give constructive notice of a limit. So a minority member can sign a lease or a purchase order that binds everyone. The counterparty will point at the statute. State the limits in the agreement. Repeat them in your contract signature blocks.
What Happens Financially When the Delaware Defaults Decide
Delaware charges nothing for the missing agreement, because the Act presumes you have one. The cost lands elsewhere. The figures below are arithmetic on the facts stated, not a survey of professional fees.
The largest exposure is the duty clause. On the Wilmington facts, $2.4 million of investment sat behind an agreement that had eliminated the duty of loyalty. The investors' recovery depended on a covenant argument rather than a fiduciary one.
The second is the resignation bar in § 18-603, combined with the § 18-604 fair value rule. A member who can leave but has no agreed price gets an appraisal. A contested fair value determination in the Court of Chancery is the most expensive way to answer a question a formula would have settled.
The third is the signature exposure under § 18-402. A single member committing the company to a contract nobody approved is a live risk in Delaware. It is not a live risk in Connecticut, whose § 34-251(a) says the opposite. The fourth is administrative. An LLC that misses the $400 annual tax due June 1 loses good standing. A lender that asked for a certificate of good standing will stop the closing. Handle revival before the meeting, not after.
What Delaware Banks and Counterparties Ask For
Expect a request for four things. The filed certificate of formation. The EIN letter. Beneficial owner identification. And the executed limited liability company agreement. Delaware has no statement of authority filing, and § 18-402 gives every member signing authority by default. So lenders read the agreement for the limits, and often ask for a certified resolution alongside it. Many Delaware companies bank outside Delaware. Out of state banks routinely ask for a certificate of good standing as well, which is where the annual tax matters.
The same file supports entity separateness. Delaware courts respect the entity strongly. But the argument still turns on separate accounts, honest capital, and decisions made by the body the agreement names. Trading in another state means producing the documents for foreign qualification there. And Delaware entities are asked for a Delaware certificate of good standing more often than most.
How File.Business Drafts Delaware Operating Agreements
The first question in Delaware is always the duty clause, because § 18-1101(c) makes it a genuine choice rather than a formality. From there the intake covers profits interests and the allocation and distribution waterfall. It covers signature authority against the § 18-402 default. It covers resignation and buyout terms against §§ 18-603 and 18-604. And it covers the amendment threshold and the continuation mechanism in § 18-801(a)(4).
For fund and asset holding structures we set out the § 18-215(b) protected series conditions. We also cover whether a registered series under § 18-218 is worth the extra filing.
Free templates against a drafted Delaware agreement
Free Delaware templates fail in a specific way. They copy the freedom of contract language without making any of the choices it enables. That leaves thin statutory defaults in place while looking sophisticated. A drafted agreement decides the duty question explicitly. It sets signature limits, prices an exit and defines amendment. Trading under another name needs a Delaware registration of trade name. Changing agents is covered in changing a Delaware registered agent. Amending the public record is in amending a Delaware certificate of formation. And the general framework is in operating agreement essentials.
Delaware Operating Agreement FAQ
Does Delaware require an LLC to have an operating agreement?
In substance, yes. 6 Del. C. § 18-201(d) provides that a limited liability company agreement shall be entered into or otherwise existing. That can be before, after or at the time the certificate of formation is filed. But § 18-101(9) allows the agreement to be written, oral or implied. So the requirement is satisfied without any document, which is not the same as being useful.
Does a Delaware LLC agreement have to be in writing?
No. 6 Del. C. § 18-101(9) defines it as any agreement, written, oral or implied, of the member or members. It states that the agreement is not subject to any statute of frauds. A one member agreement is also expressly enforceable despite having only one party.
Do I file the agreement with the Delaware Division of Corporations?
No. There is no filing, no form and no fee. The limited liability company agreement is a private internal document. The certificate of formation and, for series, a certificate of registered series are the public filings.
Can a Delaware agreement eliminate fiduciary duties?
Yes, almost entirely. 6 Del. C. § 18-1101(c) permits duties, including fiduciary duties, to be expanded, restricted or eliminated by the agreement. One exception survives: the implied contractual covenant of good faith and fair dealing may not be eliminated. Section 18-1101(e) separately bars limiting liability for a bad faith violation of that covenant.
Does a single-member Delaware LLC keep charging order protection?
Yes. 6 Del. C. § 18-703(d) makes the charging order the exclusive remedy. It states that attachment, garnishment, foreclosure and other legal or equitable remedies are not available to the judgment creditor. That holds whether the limited liability company has one member or more than one member.
Can a member resign from a Delaware LLC?
Not by default. 6 Del. C. § 18-603 sets the rule. Unless the agreement provides otherwise, a member may not resign before the dissolution and winding up of the company. Where resignation is permitted and the agreement is silent on price, § 18-604 applies. It entitles the resigning member to the fair value of the interest within a reasonable time.
What does a Delaware protected series need in the agreement?
6 Del. C. § 18-215(b) sets three conditions. The records maintained for the series must account for its assets separately. The limited liability company agreement must so provide. And notice of the limitation on liabilities must be set out in the certificate of formation. A registered series under § 18-218 also requires a certificate filed with the Secretary of State.
Need a custom Delaware Operating Agreement?
File.Business drafts Delaware-specific Operating Agreements at $97 flat: customized for single-member or multi-member structure, ownership percentages, capital contributions, tax election preferences, and management structure. Includes member-signature template and document-vault storage.
Doing this in Delaware specifically: our Delaware operating agreement page covers the drafting itself, including the duty clause under section 18-1101(c) and the series conditions the certificate of formation has to match.
Every statutory reference on this page was read in the Delaware Code on the state's official code site. Sections are amended each summer. Confirm the current text before you rely on it.
Disclosure. File.Business is a private filing service, not a government agency and not a law firm. We prepare and submit filings at your direction, and nothing on this page is legal or tax advice. Filing fees, deadlines, and statutory references are current as of the last-updated date shown above and can change. Confirm current requirements with the relevant state agency before you file.
