Operating agreements provide your LLC with rules that outline how it will run, helping prevent confusion and keep the business running efficiently.
Delaware’s freedom of contract precept allows you to draft an LLC operating agreement tailored to the unique needs of your company. Terms can be altered as necessary in order to protect you and your business against future legal issues.
Company Name
Delaware single member LLC operating agreements provide sole proprietors with legal tools for setting the rules and ownership structure for their business, while providing similar tax and protection advantages as larger corporations.
This agreement is legally binding and should be carefully read over. If they need assistance in understanding its contents, seeking legal advice could be worthwhile.
Operating agreements are not required in Delaware, but are highly recommended because they enumerate the internal affairs of your company and its members. An operating agreement should be kept with other records for easy accessibility by members of your LLC.
Members
The Delaware single member LLC operating agreement is an important legal document that outlines all of the rules and regulations necessary for running your business effectively, protecting you from liability should anything go awry with it.
Members of a Delaware LLC must agree on the terms and conditions that will govern their business, such as admission of new members, assignment of interests, distribution of profits, voting rights appointments and dissolution. It is essential that these provisions are clearly defined within an operating agreement in order to avoid future confusion and legal complications.
Managers
A Delaware single member LLC operating agreement provides details regarding its ownership, tax structure, purpose of operations and finances as well as policies for accounting and recordkeeping. Furthermore, this document establishes legal protections for both the company and its members should their business fail due to bankruptcy creditors taking personal assets against personal assets in bankruptcy cases.
Operating agreements provide members of an LLC with an outline for its management, giving them the power to decide between manager- or member-managed structures, which can have major ramifications on power, responsibilities and governance of each manager.
Before signing an operating agreement for your LLC, it’s crucial that you determine its ideal management structure. If unsure, seek legal assistance – UpCounsel provides an online marketplace where top-rated lawyers from Harvard Law and Yale have 14+ years of experience can be found to assist.
Taxes
As a one-person LLC, it may not be required to pay state income tax; however, if your business sells goods or employs people in the state of residence, registration and gross receipts taxes are mandatory.
Delaware is one of five states requiring LLC members to enter an operating agreement, outlining exactly how the business will run and providing an essential roadmap for resolving conflicts among shareholders.
Delaware LLC formation also affords you an opportunity to obtain a Federal Employer Identification Number (FEIN), which can be useful if your LLC doesn’t need payroll taxes and instead uses its owner’s Social Security number as its tax ID number.
Dissolution
Dissolution of a single member LLC operating agreement in Delaware occurs when all its members decide to voluntarily dissolve it. This process is regulated by Delaware’s Limited Liability Company Act and must include an affirmative vote or written consent of members who own more than two-thirds of profits owned by the company.
Recently, however, the Delaware Court of Chancery upheld an extremely high threshold for claims for judicial dissolution to succeed. They specifically held that limited liability companies cannot be disbanded when violating an operating agreement.
An operating agreement should include provisions to avoid deadlock situations and safeguard the company against possible dissolution by court order.
