What Is a Delaware Single Member LLC Operating Agreement?

A Delaware single-member LLC operating agreement is a document with the purpose to detail who the members of the LLC are and what percentage of the LLC they own (which is also called the membership interest). The operating agreement also details how the LLC will be managed, how losses and profits will be distributed, and how taxes will be paid. It is an essential document for any LLC, for in the course of running your business, you may need an operating agreement to give to:

  • A lender for financing purposes
  • A title company for buying real estate
  • Tax and accounting professionals so they can help with financial planning
  • Lawyers, if legal counsel is needed
  • Potential partners or investors who need to see the details of your business

Additionally, if you are involved in legal proceedings, it is likely that the court will want a copy of your operating agreement. Such a document will show the court that you are running an organized business and are prepared to handle complications that may arise in the course of running it, such as legal actions. For all these reasons and more, it is recommended that you have an operating agreement drawn up if you are running a single member LLC in Delaware.

Introduction to the Delaware Single Member LLC Operating Agreement

As the Delaware single-member LLC operating agreement is a document of such importance, it is essential that it is carefully considered and reviewed. If you are not certain of the language used in the document, consulting an attorney is advised.

That said, despite its importance, an LLC is not required to have an operating agreement, although without it your personal assets could be vulnerable and you could even risk personal bankruptcy if business failure should occur. To prevent this, have this document drawn up and notarized before your LLC is formed, thereby to ensure protection.

It is also important that you understand that the operating agreement is meant to be a fluid, working document that you can change as you see fit. If you need to make changes, all you have to do is open the operating agreement, make the necessary changes, then save a new version of the document.

For complete and thorough documentation, it is recommended that you keep a copy of every version of the operating agreement that you make.

How to Complete a Delaware Single Member LLC Operating Agreement

To complete this operating agreement, you can take the following steps:

  1. Download the operating agreement.
  2. Complete the Agreement section with the required information.
  3. Complete the Organization section. Read and understand the subsections and fill in the required blanks.
  4. Read and understand the following sections: Duration, Registered Office and Resident Agent, Capital Contributions and Distributions, Books, Records and Accounts, Member’s Capital Accounts, and U.S. Federal/Delaware State Income Tax Treatment.
  5. Complete the Rights, Powers, and Obligations of Member section. This section sets out the authority of the owner to act on behalf of the company and how the LLC shall be organized, amongst other details.
  6. Read and understand the Limitation of Liability and Indemnification of Member section. This section sets out the limited liability of the owner from obligations, debts, or liabilities levied against the company.
  7. Read and understand the Death, Disability, Dissolution section. This section sets out the terms of dissolution of the LLC due to death or other circumstances, as well as what will happen in the event of the disability of the member.
  8. Read and understand the Miscellaneous Provisions section.
  9. Sign the document. Do this in the company of a Notary Public, who will also sign and affix their official notary seal to complete the document creation process.

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