Is a Delaware LLC agreement legally required?

No. Delaware does not require an LLC to adopt a written operating agreement, but having one is strongly recommended for liability protection and operational clarity.

Can a Delaware LLC agreement be oral?

Yes, Delaware law recognizes oral or implied agreements. However, written agreements are far safer and enforceable.

Do single-member Delaware LLCs need an operating agreement?

Yes. Even a single-member LLC benefits from an agreement to establish liability protection, financial rules, and succession planning.

How does a Delaware LLC agreement differ from other states?

Delaware offers more flexibility, including series LLCs, customized voting and profit allocations, and the ability to limit fiduciary duties.

Should I hire a lawyer to draft a Delaware LLC agreement?

Yes. While templates exist, an attorney ensures compliance with Delaware law and customizes terms to protect your interests.

Delaware LLC Agreement: Drafting, Benefits, and Legal Risks

Learn why a Delaware LLC agreement is essential. Discover key provisions, benefits, and risks of not having one to protect your LLC and its members. 7 min read updated on August 19, 2025

Key Takeaways:

A Delaware LLC agreement is the governing contract that sets the rules for managing and operating a Delaware LLC.
While Delaware law does not require LLCs to have a written operating agreement, having one is strongly recommended for liability protection, smooth operations, and credibility with investors and banks.
Essential provisions include ownership percentages, voting rights, profit distribution, and member exit rules. Delaware agreements often include flexible terms that allow members to customize management and financial structures.
Without an agreement, Delaware’s default LLC Act rules apply, which may not align with member intentions.
Common mistakes include using generic templates, failing to update terms, or omitting key provisions such as buy-sell clauses.
Drafting with the guidance of an attorney ensures the agreement complies with Delaware law and protects both the business and its members.

What is an Operating Agreement?

An operating agreement is a written legal agreement among the members of your Limited Liability Company (LLC). The operating agreement explains how your company will be run, the rights and responsibilities of LLC members, the process for adding and removing LLC members, and other important operating rules. While LLC operating agreements are not mandatory in all states, it's generally advisable for LLCs to have an operating agreement in place.

LLC operating agreements can be created either at the time of the LLC’s formation or at any time after formation.

Delaware LLC Agreement Basics

A Delaware LLC agreement, also called an LLC operating agreement, is the legal contract that governs the internal affairs of a Delaware Limited Liability Company. Under the Delaware Limited Liability Company Act, members are permitted to structure their business arrangements flexibly, customizing ownership, management, and profit allocations to meet their needs.

Unlike some states, Delaware does not require LLCs to file their operating agreement with the Secretary of State. However, it is vital to create and maintain a written agreement, as it becomes the controlling document for resolving disputes, defining rights and obligations, and protecting the LLC’s limited liability status.

Essential Components of an LLC Operating Agreement

An LLC operating agreement should be comprehensive to ensure smooth operations and prevent legal disputes. Key components typically include:

Ownership Structure – Specifies each member’s ownership percentage.
Voting Rights and Decision-Making – Details how decisions are made and the weight of each member’s vote.
Profit and Loss Distribution – Defines how profits and losses will be shared among members.
Roles and Responsibilities – Clarifies managerial duties and operational responsibilities.
Dispute Resolution – Establishes procedures for resolving conflicts among members.
Member Changes and Exit Strategies – Outlines rules for adding or removing members and handling member exits.
Dissolution Terms – Specifies how the LLC will be dissolved if necessary.

A well-drafted operating agreement can help avoid costly disputes and ensure the business operates according to the members' intentions.

Delaware-Specific Provisions to Consider

When drafting a Delaware LLC agreement, business owners should account for specific provisions that reflect Delaware law:

Series LLC Provisions – Delaware allows the creation of series LLCs, where separate “series” can hold distinct assets and liabilities. If used, your agreement must clearly establish each series’ independence.
Indemnification and Limitation of Liability – Delaware law permits broad indemnification of members and managers, but it should be explicitly stated in the agreement.
Default Management Rules – Without specifying otherwise, Delaware assumes an LLC is member-managed. If a manager-managed structure is desired, it must be clearly outlined.
Capital Contributions and Interests – The agreement should define how initial and future contributions are made and how ownership percentages are adjusted.
Voting Flexibility – Delaware LLCs may allocate voting rights independently of ownership percentages, so this should be expressly addressed.

Including these Delaware-specific clauses ensures that your LLC enjoys the maximum benefits of Delaware’s flexible legal framework.

Other names for LLC Operating Agreements.

When researching LLC operating agreements, bear in mind that they may also be referred to as:

LLC Agreement
Operating Agreement
LLC Bylaws
LLC Operations Agreement
LLC Setup Agreement

Why Are Operating Agreements Important?

There are a number of reasons to create an operating agreement. Operating agreements provide the following important benefits:

Minimize the number and impact of managerial disagreements.
Protect the limited liability status of your company.
Allows you to create the business structure that best suits your specific needs.
Most importantly, without an operating agreement, state laws may dictate how your company will be run.

Legal and Financial Benefits of an Operating Agreement

An LLC operating agreement provides several crucial benefits, including:

Preserving Limited Liability Status – Ensures courts recognize the LLC as a separate legal entity, protecting personal assets.
Avoiding Default State Rules – Prevents state-imposed operating rules that may not align with the members’ intentions.
Clarifying Business Operations – Establishes clear rules for decision-making, profit distribution, and dispute resolution.
Strengthening Business Credibility – Banks, investors, and partners often require an operating agreement for financial transactions.
Preventing Member Disputes – Reduces the likelihood of misunderstandings that could lead to legal battles.

Consulting an operating agreement lawyer can help ensure your agreement meets legal requirements and serves the best interests of all members.

Why Delaware Is a Popular State for LLC Agreements

Delaware is one of the most business-friendly jurisdictions in the U.S., and its LLC Act offers unique benefits that enhance the value of having a Delaware LLC agreement:

Strong Liability Protection – Delaware courts are well-established in upholding the liability shield provided by LLCs.
Confidentiality – Delaware does not require member or manager names to be publicly listed in formation documents, making the operating agreement the primary record of ownership.
Judicial Expertise – Delaware’s Court of Chancery specializes in business law and provides predictable rulings on LLC disputes.
Investor Confidence – Venture capital firms and institutional investors are accustomed to Delaware LLC structures, making a Delaware LLC agreement critical for raising funds.

These advantages explain why many companies, from small startups to large investment entities, choose to form in Delaware.

Potential issues from running your LLC without an Operating Agreement

An LLC operating agreement reinforces your limited liability status and helps to ensure that you, as an individual, are legally separate from your business. Conversely, running your company without an LLC operating agreement could damage your personal finances.
A properly written operating agreement clearly lays out the rules and procedures for the management of your business and prevents problems that could arise from misunderstandings. Without an operating agreement, managerial disputes can remain unresolved, often resulting in lawsuits against your company and among the members.
By putting an operating agreement in place, you proactively set the rules under which you will operate your company.
Without an operating agreement, state rules may apply that could result in the loss of personal control of your business, as well as your business running less efficiently.

Legal Risks of Not Having an Operating Agreement

Failing to draft an LLC operating agreement can expose your business to various legal risks:

State Default Rules Apply – Without a formal agreement, state law will dictate how your LLC operates, which may not align with your business goals.
Disputes and Litigation – Lack of defined management roles and profit-sharing rules can lead to disagreements among members.
Limited Liability Protection at Risk – Courts may “pierce the corporate veil” if there’s no clear separation between personal and business finances.
Challenges in Attracting Investors or Lenders – Many financial institutions require an operating agreement before approving loans or investments.
Difficult Member Exits – Without predefined rules for member departures, disputes over buyouts or ownership transitions may arise.

An operating agreement lawyer can help draft an agreement that mitigates these risks and protects your business.

Common Mistakes in Operating Agreements

Failing to have all members sign the operating agreement.
Neglecting to update the agreement when important changes occur.
Including rules that are not allowed under state law.
No rules for departing members.
Not fully explaining member duties.

Mistakes Specific to Delaware LLC Agreements

While general drafting errors can weaken any operating agreement, Delaware LLC agreements present additional pitfalls to avoid:

Failing to Address Fiduciary Duties – Delaware law allows fiduciary duties to be limited or even waived, but this must be expressly stated in the agreement.
Ignoring Series LLC Structure Requirements – If operating as a series LLC, failure to properly segregate assets and liabilities can result in loss of protection.
Relying Solely on Oral Agreements – Delaware law recognizes oral or implied operating agreements, but they are difficult to enforce. A written contract is essential.
Overlooking Dissolution Rules – Delaware law provides default dissolution rules, but members should specify procedures to prevent disputes during wind-up.

Correcting these oversights ensures that the Delaware LLC agreement reflects members’ intentions and withstands legal scrutiny.

How to Draft a Strong LLC Operating Agreement

To ensure your operating agreement is legally sound and comprehensive, consider the following best practices:

Customize for Your Business – Avoid generic templates and tailor the agreement to your specific industry and business structure.
Ensure Legal Compliance – Work with an operating agreement lawyer to comply with state laws and prevent enforceability issues.
Define Key Business Terms Clearly – Outline decision-making processes, profit-sharing, and member responsibilities in unambiguous language.
Include Buy-Sell Provisions – Specify how ownership interests can be transferred if a member exits.
Regularly Review and Update – Revisit your agreement periodically to reflect changes in business structure or state regulations.

A well-drafted agreement minimizes disputes and keeps your business legally protected.

Steps to File an Operating Agreement

There is no requirement to file your operating agreement with the state. The operating agreement is merely intended for your records and to be referenced whenever an issue or disagreement occurs. It is recommended that you keep additional copies of your LLC operating agreement on file and easily accessible to all members.

Frequently Asked Questions

Is a Delaware LLC agreement legally required?
No. Delaware does not require an LLC to adopt a written operating agreement, but having one is strongly recommended for liability protection and operational clarity.
Can a Delaware LLC agreement be oral?
Yes, Delaware law recognizes oral or implied agreements. However, written agreements are far safer and enforceable.
Do single-member Delaware LLCs need an operating agreement?
Yes. Even a single-member LLC benefits from an agreement to establish liability protection, financial rules, and succession planning.
How does a Delaware LLC agreement differ from other states?
Delaware offers more flexibility, including series LLCs, customized voting and profit allocations, and the ability to limit fiduciary duties.
Should I hire a lawyer to draft a Delaware LLC agreement?
Yes. While templates exist, an attorney ensures compliance with Delaware law and customizes terms to protect your interests.

Whether you are forming a new LLC or are already running an LLC without an operating agreement, you can post your legal need in UpCounsel's marketplace to find a competent attorney to assist you in drafting one. Only 5% of attorneys who apply to UpCounsel are accepted onto the platform, so you can be assured that your business will receive top-tier legal help from professionals from the country’s best law schools.