Operating Agreement
The internal contract among Delaware LLC members defining ownership, management, distributions, and exit rules.
Definition
The Operating Agreement is the private governance document of a Delaware LLC. Unlike the Certificate of Formation, it is not filed with the state and is not public. Delaware's LLC Act (6 Del. C. § 18-101) gives members broad freedom to write their own internal rules through the Operating Agreement; statutory defaults fill gaps when the agreement is silent.
Context
Single-member Operating Agreements are typically 2-5 pages. Multi-member agreements are 10-25 pages because they must handle disputes, exits, voting, capital calls, and member transitions. Delewarellc's $297 bundle includes a single-member template; multi-member structures usually warrant a Delaware corporate lawyer.
Example
A two-founder Delaware LLC sets ownership at 60/40, requires unanimous vote for major decisions, and includes a buy-sell provision for founder exit. All of this is in the Operating Agreement, not the Certificate of Formation.
Common pitfalls
- Single-member LLCs without an Operating Agreement default to statutory rules that may not match what the founder wanted.
- Multi-member LLCs without explicit tax-distribution provisions can leave members owing tax on phantom income.
- Vague exit provisions cause expensive disputes when a co-founder wants out.