Delaware LLC Operating Agreement
A Delaware LLC operating agreement exists as the company's internal document that defines rules and regulations for running the business. The operating agreement controls every aspect of how the company functions, and the manner that LLC members and managers relate to one another. LLCs in Delaware can draft a written operating agreement with or without legal assistance.
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Considerations
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Delaware does not require an LLC to create an operating agreement. Furthermore, the state of Delaware does not require LLCs to put the company's operating agreement in writing; however, it is not a good idea for the company to operate without a written operating agreement. Creating a written operating agreement will help the members of the company avoid disputes regarding splitting profits and operating the company. Additionally, having a written operating agreement can protect the limited liability status of a single-member Delaware LLC. Without a written operating agreement, the courts may view a single-member LLC in the same light as a sole proprietor.
Management
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The Delaware LLC's operating agreement indicates whether the company gets managed by its members, or if non-members handle the company's management duties. When the members of the company manage the LLC's business affairs, every member has equal rights as far as managing the company. When non-members manage the company's affairs, the managers have control of the company's day-to-day activities. However, the managers cannot make financial decisions without the consent of the LLC's members.
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Profits and Contributions
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The contribution of each member should appear in the Delaware LLC operating agreement, along with each member's ownership interest in the business. The procedure used to split up company profits must get described in the operating agreement. Delaware LLC members do not have to split company profits according to membership interest in the business. This means a member may have a 20 percent membership interest in the business, but the other members of the business may give him a 25 percent share of the company's profits and losses. Without a written operating agreement, the members of a Delaware LLC have to divide company profits and losses according to each member's interest in the business.
Other Provisions
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The operating agreement may contain other provisions such as the time and place of the Delaware LLC's meetings. The voting rights of each member may appear in the Delaware LLC operating agreement, along with procedures detailing how new members get admitted. The operating agreement needs to include policies that address how the company handles the departure of a member. A buy-sell agreement is vital in an operating agreement because it outlays information such as a departing each member's exit compensation.
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