Delaware Limited Liability Company Act

The Delaware statute governing all Delaware LLCs, codified at 6 Del. C. Chapter 18, sections 18-101 to 18-1109.

Definition

The Delaware LLC Act is the foundational statute for Delaware LLCs. It is intentionally permissive: § 18-1101 directs that the Act be liberally construed to give effect to the principle that LLCs are creatures of contract. Most provisions can be modified by the Operating Agreement. The Act authorizes Series LLCs (§ 18-215), blockchain-based records (§ 18-104(d)), and broad fiduciary-duty modification.

Context

The LLC Act is distinct from the Delaware General Corporation Law (DGCL, 8 Del. C.) which governs Delaware Corporations. LLCs file under Title 6; Corporations file under Title 8. The two regimes have different fiduciary defaults, governance rules, and tax-related consequences.

Example

A Delaware LLC's Operating Agreement modifies the default fiduciary duties under 6 Del. C. § 18-1101 to limit member-to-member loyalty obligations. The Act's permissiveness supports this contractual freedom; the same modification would not be possible under the DGCL.

Common pitfalls

Most provisions of the LLC Act are default rules that the Operating Agreement can modify; founders sometimes assume defaults are mandatory.
The implied covenant of good faith and fair dealing cannot be eliminated by the Operating Agreement even though most other fiduciary duties can.
Series LLC structure under § 18-215 is Delaware-specific; other states may not recognize the series-asset isolation.

What is the Delaware LLC Act and why does it matter to a non-resident founder?

The Delaware Limited Liability Company Act is the body of law that brings your LLC into existence and governs how it operates for its entire life. It lives in Title 6 of the Delaware Code, Chapter 18, running from section 18-101 through section 18-1109. When you pay the $110 state fee and file a Certificate of Formation, you are not creating something out of thin air. You are invoking a statute that already defines what an LLC is, what powers it has, how members relate to one another, and how the company can be dissolved. For a founder in Dhaka, Lagos, or Karachi who will never set foot in Delaware, this statute is the real backbone of the entity, far more than any address or website.

The single most important quality of the Act is that it is intentionally permissive. Section 18-1101 instructs courts to construe the Act liberally so that limited liability companies are treated as creatures of contract. In plain terms, the law sets sensible defaults and then steps back, allowing the people who own the company to rewrite most of the rules in their Operating Agreement. This is the opposite of a rigid system that dictates how you must run things. For a single-member foreign-owned LLC, this flexibility means you can shape governance around your actual situation rather than forcing your business into a fixed mold designed for large committees of owners.

Understanding the Act matters because almost every other concept a non-resident founder encounters, from the Certificate of Formation to the registered agent requirement to dissolution, traces back to a specific section of this statute. When a bank, a payment processor, or a counterparty asks what law your company is organized under, the answer is the Delaware LLC Act. Knowing that gives you a stable reference point as you build the rest of the structure.

How does the principle that LLCs are creatures of contract apply to a single-member LLC?

The phrase creatures of contract is the heart of Delaware LLC law, and it shapes how a one-owner company should think about its own governance. The idea is that the relationship among members, and between members and the company, is primarily a matter of private agreement rather than statutory command. Section 18-1101 directs that the Act be liberally construed to give maximum effect to the freedom of contract and the enforceability of LLC agreements. For a sole owner this might sound abstract, since there is only one person at the table, but it has very real consequences for how seriously your Operating Agreement is treated.

In a single-member foreign-owned LLC, your Operating Agreement is the contract the statute is referring to, even though it is essentially an agreement between you and your own company. Delaware courts respect what that document says, so the choices you write down about management, profit allocation, and decision-making carry weight. A founder in Manila who states clearly that the company is member-managed, that the sole member holds 100 percent of the membership interest, and that distributions are at the member's discretion is using the contractual freedom the Act grants. The statute fills any gaps you leave blank, but it defers to your written choices wherever you make them.

The practical takeaway is that you should treat your Operating Agreement as a genuine governing document rather than a formality to file in a drawer. Because the Act lets contract override most defaults, a thoughtful agreement protects you, clarifies how the company runs, and reassures banks like Mercury or Relay that the structure is intentional. A weak or missing agreement leaves you relying entirely on the statutory defaults, which may not match what you actually want.

Which rules in the Act are defaults you can change, and which are mandatory?

One of the most common misunderstandings among new founders is assuming that every provision of the Delaware LLC Act is a fixed rule they must obey. In reality, the large majority of the Act consists of default rules. A default rule applies only if your Operating Agreement is silent on the subject. If you address the matter in your agreement, your language controls and the default falls away. This is why the same statute can comfortably govern a sprawling investment fund and a one-person consulting LLC owned by a founder in Nairobi. The defaults bend to fit the contract each company writes.

There are, however, a small number of provisions that cannot be waived no matter what the Operating Agreement says. The clearest example is the implied covenant of good faith and fair dealing. Even though the Act allows owners to limit or eliminate most fiduciary duties under section 18-1101, it expressly preserves this implied covenant. You cannot draft it away. This means that however much freedom you have to customize duties, there is a floor of basic fairness that the law keeps in place. Other structural requirements, such as maintaining a registered agent and registered office in Delaware, are also mandatory rather than optional.

For a single-member LLC the distinction is still worth understanding even though there is no second member to be unfair to. Knowing which rules are defaults helps you decide what to actively address in your Operating Agreement and what you can safely leave to the statute. It also prevents the mistake of believing a default is carved in stone when in fact you could have chosen differently. Treat the Act as a starting menu, not a locked cage.

How does the Delaware LLC Act differ from the Delaware General Corporation Law?

Delaware governs LLCs and corporations under two separate statutes, and confusing them is a frequent source of error for international founders. The Delaware LLC Act sits in Title 6 of the Delaware Code. The Delaware General Corporation Law, usually shortened to the DGCL, sits in Title 8. They are different regimes with different filing offices within the Division of Corporations, different governance assumptions, and different fiduciary defaults. When you form an LLC you are filing under Title 6, and the DGCL simply does not apply to your entity.

The contrast matters because much of the general advice circulating online about Delaware entities is written about corporations, especially venture-backed startups that issue stock and have boards of directors. Those concepts come from the DGCL. An LLC has members and membership interests, not shareholders and shares. It can be member-managed or manager-managed rather than governed by a board. Its fiduciary duties are highly customizable under the LLC Act, whereas the DGCL imposes a more fixed framework on directors and officers. A founder in Istanbul who reads startup guidance about board approvals and stock options may apply rules that have nothing to do with the LLC he actually owns.

For most non-resident solo founders, the LLC is the right fit precisely because the Act is flexible and the compliance burden is lighter than a corporation. The LLC pays the flat $300 Delaware franchise tax due June 1 each year rather than the more complex corporate franchise tax calculation. Keeping the two statutes straight helps you read the right guidance, file the right forms, and avoid importing corporate obligations into a company that does not have them.

What does the Act allow you to do with fiduciary duties in your Operating Agreement?

Fiduciary duties are the obligations that members or managers owe to the company and to each other, traditionally including the duty of loyalty and the duty of care. Under the Delaware LLC Act, section 18-1101 gives owners unusually broad power to expand, restrict, or eliminate these duties through the Operating Agreement. This is one of the most distinctive features of Delaware LLC law and a major reason the state is popular for structuring deals where the parties want certainty about who owes what to whom. The Act treats these duties as adjustable terms rather than fixed commands.

In a multi-member context this matters enormously. Suppose two founders, one in Cairo and one in London, form a Delaware LLC and one of them also runs a competing side business. Their Operating Agreement can modify the default duty of loyalty so that pursuing the side business is permitted and does not breach any obligation to the company. The Act supports this kind of tailoring because it respects the contract the parties struck. The same modification would generally not be available under the DGCL for a corporation, which keeps a firmer grip on director loyalty.

For a single-member LLC the practical effect is more modest, since there is no second owner to owe duties to, but the principle still shapes drafting. A sole founder can confirm in the Operating Agreement that the member may engage in other ventures freely and that no conflicting fiduciary obligations restrict outside activity. Even here, remember the limit described earlier. The implied covenant of good faith and fair dealing survives any modification, so the Act never lets the structure become a tool for outright bad faith.

What is a Series LLC under section 18-215 and should a solo founder use one?

The Delaware LLC Act authorizes a structure called the Series LLC under section 18-215. A Series LLC lets a single master company create internal compartments, called series, each of which can hold its own assets, have its own members, and carry its own liability shield separate from the other series and from the master. The intent is to let one entity isolate risk across several distinct pools of property without forming a separate LLC for each one. This is a Delaware-specific innovation that grew out of the Act's flexible, contract-driven design.

The classic use case is real estate. An investor holding several rental properties might place each property in its own series so that a lawsuit arising from one building cannot reach the assets held in another. For that kind of portfolio the structure can be efficient. For a typical non-resident founder running a single online business, a freelance practice, or a small product company, the Series LLC usually adds complexity without a matching benefit. One straightforward single-member LLC is simpler to bank, simpler to file taxes for, and simpler to explain to processors like Stripe.

There is also an important edge case to understand. The series-asset isolation is recognized in Delaware, but not every other US state honors it. If your activities cause you to register or operate in a state that does not recognize series separation, the liability walls you relied on may not hold there. Because most solo foreign-owned founders do not need internal compartments at all, the safer default is a standard LLC. Reach for a Series LLC only when you genuinely hold multiple separable asset pools and have guidance on the states involved.

How does the Act treat electronic and blockchain-based records?

The Delaware LLC Act has been updated to keep pace with how modern companies actually keep their books. Section 18-104(d) and related provisions recognize that an LLC may maintain its records using electronic networks or databases, including distributed ledger or blockchain technology. This reflects the broader spirit of the Act, which favors practical flexibility over rigid formality. A company does not need a physical filing cabinet in Delaware. It can keep membership records, the Operating Agreement, and financial documents in digital form wherever its owner happens to be.

For a non-resident founder this provision quietly removes a barrier that might otherwise feel intimidating. A founder in Jakarta running a fully remote business can keep all company records in cloud storage and still be in full compliance with how the Act expects records to be maintained. There is no requirement to mail original paper documents to the registered agent or to store anything in the state. The registered agent receives official service of process at the registered office, but your internal books live with you in whatever electronic format you prefer.

It is worth separating two ideas here so they are not confused. The Act permitting blockchain-based records does not mean your company must touch cryptocurrency or operate on a blockchain to exist. It simply means the law will not reject electronic recordkeeping methods. Most founders keep ordinary digital files and never think about distributed ledgers. The relevance of the provision is reassurance that Delaware law is comfortable with paperless, remote operation, which is exactly how an internationally owned LLC tends to run.

How does the Act connect to your Certificate of Formation and the start of the company?

Your Delaware LLC does not legally exist until a Certificate of Formation is filed with the Delaware Division of Corporations, and that filing happens under the authority of the LLC Act. The Act specifies what the certificate must contain, which for a simple LLC is mostly the company name and the name and address of the registered agent in Delaware. The state fee for this filing is $110. Once accepted, the certificate is the public birth record of the company, and from that moment the statutory framework of Chapter 18 applies to it.

The Act deliberately keeps the public certificate minimal. Almost everything about how the company is actually run lives in the private Operating Agreement rather than the certificate, which is consistent with the creatures-of-contract philosophy. A founder in Accra does not have to disclose ownership percentages, management structure, or business purpose on the public filing. That information stays private in the agreement. This separation between a thin public certificate and a detailed private contract is a defining feature of how the Act structures formation.

Understanding this connection helps a founder sequence the formation process correctly. First the Certificate of Formation is filed under the Act, bringing the entity to life. Then the Operating Agreement is adopted to set the internal rules the Act otherwise fills with defaults. Then practical steps follow, such as obtaining an EIN and opening a bank account. The Act is the thread running through all of it, defining the entity that the certificate creates and the agreement then customizes.

What does the Act require for a registered agent, and why can a founder abroad not be one?

The Delaware LLC Act makes a registered agent and registered office mandatory, and this is one of the non-negotiable requirements that no Operating Agreement can waive. Section 18-104 requires every Delaware LLC to continuously maintain a registered agent in Delaware whose registered office is a physical street address within the state. The registered agent exists to receive service of process and official state correspondence on behalf of the company. Because this is a structural requirement of the statute, it applies equally to a billion-dollar fund and to a single-member LLC owned by one person overseas.

A founder living in Dhaka or Manila cannot serve as their own registered agent because they do not maintain a physical address in Delaware where they are reachable during business hours. A Delaware post office box does not satisfy the requirement either, since the statute calls for a physical office where the agent has presence. This is why non-resident founders use a registered agent service. The service maintains a real Delaware office, accepts documents on the company's behalf, and forwards them to the founder wherever they are in the world.

This requirement ties directly into the practical cost of keeping an LLC alive. The registered agent service is an ongoing relationship, and losing it puts the company out of compliance with the Act. Bundled formation offerings such as the $297 one-time package handle the registered agent setup alongside the Certificate of Formation so that the statutory requirement is met from day one. Keeping the agent current is as essential under the Act as paying the annual franchise tax.

How does the Act relate to federal tax obligations like Form 5472?

It is important to separate what the Delaware LLC Act governs from what federal tax law governs, because they operate on different levels and a founder needs to satisfy both. The Act is a state statute that defines the existence, governance, and dissolution of the company. It says nothing about US federal income tax. How your LLC is taxed by the Internal Revenue Service is a separate federal question, and for a single-member foreign-owned LLC the default federal treatment is that the company is a disregarded entity.

Because the entity is disregarded for federal purposes, a foreign-owned single-member Delaware LLC generally must file Form 5472 together with a pro forma Form 1120 each year, due April 15. This requirement comes from federal regulations, not from the Delaware LLC Act, but it attaches to the very entity the Act created. The penalty for failing to file Form 5472 on time is $25,000, which makes this one of the most consequential obligations an internationally owned LLC carries. A founder in Lagos who forms the company under the Act still must meet this federal filing on schedule.

The relationship to remember is that the Act gives you the entity and the federal tax rules tell you how to report it. Forming the LLC correctly under Delaware law is necessary but not sufficient. You also need an EIN, which a non-resident can obtain free from the IRS by filing Form SS-4, typically taking around 8 to 10 business days. The state framework and the federal framework run in parallel, and compliance means staying current with both.

How does the Act support opening a bank account and running payments?

Banks and payment processors do not lend an LLC its legitimacy. The Delaware LLC Act does that by creating a recognized legal entity, and the bank simply relies on the documents that prove the entity exists. When a founder applies to a provider such as Mercury, Wise, Relay, Lili, or Payoneer, the institution wants to see the Certificate of Formation filed under the Act, the EIN issued by the IRS, and usually the Operating Agreement that the Act allows you to write. These documents together show that a properly formed Delaware LLC stands behind the application.

The Operating Agreement is where the contractual freedom granted by the Act becomes practically useful for banking. A clear agreement that names the sole member, confirms member-managed structure, and identifies who has authority to act for the company answers exactly the questions a compliance reviewer asks. A founder in Karachi who presents a clean Certificate of Formation, an EIN, and a coherent Operating Agreement gives the bank a complete picture of an entity that the Act recognizes and that the founder controls. Weak or missing documents slow these reviews down.

One point reduces unnecessary worry for many international founders. Because the LLC is formed in the United States, it is exempt from the federal beneficial ownership information reporting that FinCEN had been rolling out, following the FinCEN interim final rule of March 26, 2025 that removed that obligation for US-formed companies. That exemption is a federal matter rather than part of the Act, but it affects the overall paperwork picture. The Act creates the entity, the federal rules set the reporting obligations, and the bank relies on both being in order.

What are the most common misunderstandings non-resident founders have about the Act?

The first widespread misunderstanding is treating statutory defaults as mandatory commands. As discussed, most of the Act consists of default rules that the Operating Agreement can override. Founders who do not realize this sometimes believe they are locked into arrangements they could have changed, or they neglect their Operating Agreement because they assume the statute already dictates everything. The healthier view is that the Act offers a flexible framework and invites you to customize it within broad limits.

A second misunderstanding is blending corporate concepts into LLC thinking. Because so much Delaware commentary focuses on corporations under the DGCL in Title 8, founders import ideas like boards, directors, shares, and shareholder votes into an LLC that has none of those things. An LLC under Title 6 has members, membership interests, and a choice between member-managed and manager-managed structures. Keeping the two statutes mentally separate prevents a founder from applying rules that simply do not exist for their entity.

A third misunderstanding is assuming that forming under the Act handles every obligation automatically. The Act creates and governs the entity, but it does not pay your annual $300 Delaware franchise tax due June 1, it does not file your federal Form 5472 and pro forma Form 1120 by April 15, and it does not maintain your registered agent for you. These are separate ongoing duties that sit on top of the entity the Act created. A founder who understands that the statute is the foundation rather than a complete autopilot is far better positioned to stay compliant.

How does the Act handle dissolution and the end of the company?

The Delaware LLC Act governs not only how a company is born but also how it can be wound down and ended, and a founder benefits from knowing that the exit path is as defined as the entry. The Act sets out events that can trigger dissolution, allows the Operating Agreement to specify its own dissolution events, and describes the winding-up process by which the company settles its affairs before ceasing to exist. As with formation, the certificate side of dissolution is a public filing with the Delaware Division of Corporations, while the internal decisions live in the agreement.

For a single-member foreign-owned LLC, dissolution typically becomes relevant when the business is no longer active and the founder wants to stop the recurring obligations. Simply abandoning the company is a mistake, because the entity continues to exist under the Act until it is properly cancelled, and the annual $300 franchise tax keeps accruing whether or not the business is operating. A founder in Cairo who has stopped trading should follow the statutory wind-up and file the certificate of cancellation rather than letting the entity drift into delinquency.

Understanding dissolution also clarifies why ongoing compliance matters during the company's active life. Because the Act keeps the entity alive until formal cancellation, the franchise tax, the registered agent, and the federal filings all continue to apply until you deliberately close the company down. Treating dissolution as a real legal step with its own filing, rather than something that happens by neglect, protects a founder from accumulating penalties and keeps their record with Delaware clean for any future formation.

How should a non-resident founder put knowledge of the Act into practice?

The most useful way to apply an understanding of the Delaware LLC Act is to let it guide a clean, well-sequenced setup rather than to memorize statutory citations. Start by recognizing that the Act is the foundation that makes the company real, then build the standard layers on top of it. File the Certificate of Formation for the $110 state fee, adopt an Operating Agreement that uses the contractual freedom the Act grants, obtain a free EIN from the IRS by filing Form SS-4 over roughly 8 to 10 business days, and open a business account with a provider such as Mercury, Wise, Relay, Lili, or Payoneer.

Next, hold the recurring obligations in view because the Act keeps the entity alive and accountable year after year. Mark the $300 Delaware franchise tax due June 1 on your calendar, keep the registered agent and registered office current as the statute requires, and plan for the federal Form 5472 and pro forma Form 1120 due April 15, remembering the $25,000 penalty for missing the 5472. A founder in Manila or Lagos who tracks these few dates turns the statutory framework into a manageable routine rather than a source of anxiety.

Finally, keep the philosophy of the Act in mind whenever you make a decision about how the company runs. Because Delaware treats LLCs as creatures of contract, the choices you write into your Operating Agreement genuinely matter and are genuinely respected. This material is general information and not legal or tax advice, so for a specific or unusual situation it is sensible to consult a qualified Delaware attorney or a US tax professional. Used well, the Act gives a non-resident founder a stable, flexible, and internationally respected home for a small business.

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