Multi-member Delaware LLC Operating Agreement: what to include

Why multi-member is structurally different from single-member

Single-member Operating Agreements mostly confirm the sole member's full ownership and control. Multi-member agreements must handle disputes, exits, and voting because the members have potentially conflicting interests.

Without explicit provisions, default statutory rules under 6 Del. C. Chapter 18 apply. The defaults may not match what the members actually wanted; explicit agreement provisions override the defaults.

Critical provisions to include

Tax distributions clause: ensures members have cash to pay tax on allocated income they have not yet received as cash. Without this, members can owe tax on phantom income.

Right of first refusal on member transfers: if a member wants to sell their interest, the LLC and other members get first chance to buy.

Drag-along right: supermajority of members can require minority to join a sale of the entire LLC.

Tag-along right: if a member sells, others can join the sale on the same terms.

Deadlock provisions: for 50/50 LLCs, a procedure for breaking ties (mediation, then arbitration, then buy-sell at appraised value).

When to engage a Delaware corporate lawyer

Always for non-50/50 ownership splits. Always for profits-interest grants. Always for vesting schedules. Always for plans to raise outside capital within 12 months. For straightforward 50/50 co-founder LLCs with identical contribution patterns, a multi-member template can sometimes work, but a lawyer review is still recommended.