6 Del. C. § 18-306 explained: § 18-306 Remedies for Delaware LLC founders (2026)
Plain-English explanation of 6 Del. C. § 18-306 (Remedies for Breach of Limited Liability Company Agreement) of the Delaware LLC Act. Why it matters for non-resident founders, common pitfalls, and how it interacts with the Operating Agreement.
What 6 Del. C. § 18-306 says
Section 18-306 lets the Operating Agreement specify consequences for member breaches: reduction of interest, forfeiture, liquidated damages, etc. Provides remedy options beyond standard contract law.
Why this section matters
Allows the Operating Agreement to address specific bad behaviors with predictable consequences.
What this means for non-resident Delaware LLC founders
Rarely relevant for solo operations. Important for multi-member partnerships where breach consequences matter.
Common pitfalls
- Forfeiture and liquidated damages can be challenged if unreasonable.
- Standard contract-law remedies always available as default.
How 6 Del. C. § 18-306 interacts with the Operating Agreement
The Delaware LLC Act is largely a set of default rules that apply when the Operating Agreement is silent. Section 18-1101 directs courts to give "maximum effect to the principle of freedom of contract," meaning members can contract around most defaults via their Operating Agreement. The implied covenant of good faith and fair dealing always applies and cannot be eliminated by contract.
Practical implication: 6 Del. C. § 18-306's default rule applies only if your Operating Agreement does not address the same topic. A well-drafted Operating Agreement supersedes most Delaware Act default rules. For solo single-member LLCs, this matters less; for multi-member LLCs and complex structures, it matters significantly.
Primary source
The text of 6 Del. C. § 18-306 can be read at the official Delaware Code website: delcode.delaware.gov/title6/c018/. The Delaware Division of Corporations publishes guidance and forms at corp.delaware.gov.
Related Delaware LLC Act sections
Related sections in the member rights category and adjacent topics include the formation sections (§ 18-201 to § 18-213), member rights (§ 18-301 to § 18-306), management (§ 18-401 to § 18-402), distributions (§ 18-501 to § 18-507), and dissolution (§ 18-801 to § 18-803). For a full mapping, see the Delaware LLC Act glossary entry.
Frequently asked questions
What is a Delaware LLC?
A Delaware LLC is a limited liability company formed under Delaware Title 6 Chapter 18 (the Delaware Limited Liability Company Act). It provides limited liability to its members while allowing pass-through taxation by default. Delaware LLCs are popular among non-resident founders because Delaware allows formation without requiring the owner to be a US citizen or US resident.
Can a non-US resident form a Delaware LLC?
Yes. Non-US residents can form a Delaware LLC without a Social Security Number, US address, or US presence. You need a passport for identity verification, an EIN for IRS purposes, and a Delaware Registered Agent. Delewarellc forms Delaware LLCs for non-resident founders for $297 plus the $110 Delaware state fee.
What does a Delaware LLC cost?
Delaware LLC year-one costs are $110 state filing fee plus registered agent fees ($50-$179/year depending on provider) plus optional service fees. Delewarellc charges $297 plus the state fee for full formation including registered agent for Year 1, EIN application, Operating Agreement, and bank account applications.
Do I need a US address to form a Delaware LLC?
No. You do not need a personal US address. The Delaware LLC needs a registered agent address (which Delewarellc provides) and an address for IRS correspondence (which can be your home address abroad).
First-party context
Delewarellc charges $297 plus the Delaware state fee one-time. No annual compliance fees and no auto-renewals beyond the registered agent. Delewarellc explicitly warns non-resident founders about Form 5472 during onboarding. Most services do not proactively flag this $25,000-penalty requirement.
Primary sources cited
- Delaware LLCs pay a flat $300 annual franchise tax due June 1, regardless of revenue or member count. Delaware Code Title 6 § 18-1107(b)
- Delaware Certificate of Formation filing fee is $110. corp.delaware.gov fee schedule 2026
- The IRS Form 5472 penalty for non-residents who miss filing is $25,000 per occurrence. IRS Instructions for Form 5472
- An EIN (Employer Identification Number) can be obtained without an SSN by non-residents via IRS Form SS-4. IRS Form SS-4 Instructions
Related resources
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