Multi-Member LLC Operating Agreement — Delaware

Multi-Member LLC Operating Agreement (Delaware)

This Multi-Member Limited Liability Company Agreement (this "Agreement") is entered into and made effective as of [__/__/____] (the "Effective Date") by and among the persons listed on Schedule A (each, a "Member" and collectively, the "Members") and [____], a Delaware limited liability company (the "Company").

Quick-Reference Summary

Article I — Formation

1.1 Formation. The Company was formed as a Delaware limited liability company on [__/__/____] by the filing of a Certificate of Formation with the Delaware Secretary of State pursuant to 6 Del. C. § 18-201. The Members adopt and ratify that filing.

1.2 Name. The name of the Company is "[____]," which complies with 6 Del. C. § 18-102, including the required designation "Limited Liability Company," "LLC," or "L.L.C."

1.3 Registered Agent and Registered Office. Pursuant to 6 Del. C. § 18-104, the Company's registered agent in Delaware is [____], whose registered office address is [____].

1.4 Principal Office. The principal place of business of the Company is located at [____].

1.5 Duration. The Company has perpetual existence under 6 Del. C. § 18-801 unless dissolved as provided in Article XIV.

1.6 Limited Liability Company Agreement Authority. This Agreement is the "limited liability company agreement" within the meaning of 6 Del. C. § 18-101(9). It is the policy of the Act to give maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements (6 Del. C. § 18-1101(b)).

Article II — Purpose and Powers

2.1 Purpose. The Company is formed to engage in [____] and any other lawful business, purpose, or activity for which a limited liability company may be formed under 6 Del. C. § 18-106.

2.2 Powers. The Company has all powers granted to limited liability companies under the Act.

2.3 No Unlawful Activity. Nothing in this Agreement authorizes any business prohibited by Delaware or federal law.

Article III — Members and Membership Interests

3.1 Initial Members; Percentage Interests. The names, addresses, capital contributions, and Percentage Interests of the initial Members are set forth on Schedule A.

For this Agreement, "Governance Body" means the Members when the Member-managed choice in Section 7.1 is selected, and the named Managers when the Manager-managed choice is selected.

3.2 Limited Liability Company Interest. Pursuant to 6 Del. C. § 18-701, a limited liability company interest is personal property.

3.3 Limited Liability. Pursuant to 6 Del. C. § 18-303, no Member or Manager is obligated personally for any debt, obligation, or liability of the Company solely by reason of being a Member or acting as a Manager, except as expressly provided by the Act or a written guaranty.

3.4 Admission of Additional Members. A new Member may be admitted under 6 Del. C. § 18-301 only with the consent of all existing Members and upon execution of a joinder.

Article IV — Capital Contributions and Capital Accounts

4.1 Initial Capital Contributions. Each Member shall contribute the cash, property, services, or obligations described on Schedule A by the date stated there (6 Del. C. § 18-501).

4.2 Capital Accounts. The Company shall maintain a separate capital account for each Member and engage a qualified tax adviser to determine the required federal tax accounting treatment.

4.3 No Interest. No Member is entitled to interest on capital contributions.

4.4 No Withdrawal of Capital. No Member may withdraw capital except as provided in this Agreement or by unanimous written consent.

4.5 Liability for Promised Contributions. A Member's obligation to contribute is enforceable under 6 Del. C. § 18-502 even if the Member is unable to perform.

Article V — Capital Calls

5.1 No Mandatory Capital Calls. No Member is obligated to make additional contributions except as provided in Section 4.5 or by separate unanimous written agreement.

5.2 Additional Contributions. An additional contribution becomes an obligation only when every affected Member signs a writing stating the amount, that Member's share, the due date, and any consequences of nonpayment.

5.3 Remedies for Failure to Fund an Agreed Obligation. If the signed writing under Section 5.2 selects a remedy, a Member who fails to make that agreed contribution may be subjected to the selected remedy, consistent with 6 Del. C. § 18-502(c):

(a) deemed demand loan at [____]% per annum;
(b) pro-rata dilution of Percentage Interest;
(c) forced sale at [____]% of fair market value; or
(d) any other remedy at law or equity specified in this Agreement.

Article VI — Allocations and Distributions

6.1 Allocations. Subject to applicable federal tax law, items of income, gain, loss, deduction, and credit shall be allocated among the Members in proportion to their Percentage Interests. The Company’s tax adviser shall prepare any adjustments required by federal tax law.

6.2 Distributions. Distributions of cash and other property shall be made to the Members in proportion to their Percentage Interests, at the times and amounts determined by the Governance Body, consistent with 6 Del. C. § 18-504.

6.3 Tax Distributions. Subject to Section 6.4 and unless waived by unanimous consent, the Company shall distribute, before each applicable estimated-tax due date, an amount equal to each Member's allocated taxable income multiplied by [____]%.

6.4 Limitations on Distributions. The Company shall not make a distribution prohibited by 6 Del. C. § 18-607(a), including its required treatment of Member-interest liabilities and property subject to limited-recourse liabilities.

6.5 Liquidating Distributions. Upon winding up under Article XIV, the Company shall first satisfy or make reasonable provision for creditors and then pay any unpaid distributions owed under Section 6.2. Remaining assets shall be distributed to Members in proportion to their Percentage Interests, subject to 6 Del. C. § 18-804 and applicable federal tax law.

6.6 Federal Tax Classification. Unless otherwise elected, the Company is classified as a partnership for federal income-tax purposes under Treas. Reg. § 301.7701-3.

Article VII — Management

7.1 Management Structure. The Company is (check one):

☐ Member-managed (default under 6 Del. C. § 18-402). Decisions are made by a Majority by Percentage Interest (Section 8.1), except for actions reserved in Sections 7.3 and 8.2.

☐ Manager-managed. The initial Manager(s) is/are [____]. Management is vested in the named Manager(s). Only those Managers may bind the Company in ordinary business, unless a Manager authorizes another person in writing. This sentence replaces the otherwise applicable member authority under 6 Del. C. § 18-402.

7.2 Authority. Subject to Sections 7.3 and 8.2, the Governance Body may:

(a) execute contracts, deeds, leases, notes, and other instruments;
(b) open, maintain, and close financial accounts;
(c) hire, supervise, and terminate employees, contractors, and agents;
(d) acquire, hold, encumber, and dispose of property;
(e) borrow money and incur indebtedness; and
(f) institute, defend, settle, and compromise legal actions.

7.3 Major Decisions. The following actions require written consent of Members holding at least [____]% of the Percentage Interests, except that the actions listed in Section 8.2 require unanimous consent:

(a) approving any merger, conversion, domestication, sale of all or substantially all of the Company's assets, or dissolution;
(b) authorizing an act outside the ordinary course of business;
(c) incurring indebtedness in excess of $[____];
(d) changing federal tax classification or making material tax elections; or
(e) appointing or removing a Manager.

7.4 Compensation. Reasonable compensation may be paid to Managers and Managing Members as approved by disinterested Members.

7.5 Removal. A Manager may be removed with or without cause by the Member consent required for that action in Section 7.3.

Article VIII — Voting Rights and Member Meetings

8.1 Percentage-Interest Voting. All Member votes shall be cast in proportion to Percentage Interests (6 Del. C. § 18-402). "Majority" means more than 50% of the Percentage Interests; other thresholds are as specified in this Agreement.

8.2 Matters Requiring Unanimous Member Consent. The following matters require the unanimous consent of all Members:

(a) amending the Certificate of Formation or this Agreement;
(b) admitting a new Member; and
(c) any other matter for which this Agreement requires unanimous consent.

8.3 Annual Meeting. An annual meeting of the Members shall be held on [____] of each year.

8.4 Special Meetings. A special meeting may be called by any Manager or Members holding at least [____]% of the Percentage Interests, on not less than [____] days' written notice.

8.5 Action Without Meeting. Any action may be taken by written or electronic consent signed by Members holding the percentage required to approve the action (6 Del. C. § 18-302(d)).

8.6 Quorum. Members holding at least [____]% of the Percentage Interests constitute a quorum.

8.7 Remote Participation. Members may participate by conference telephone or other communications equipment through which all participants can hear one another, as permitted by 6 Del. C. § 18-302(d).

Article IX — Fiduciary Duties and Standards of Conduct

9.1 Contractual Freedom (6 Del. C. § 18-1101). The Members acknowledge that Delaware permits the maximum modification of duties by agreement. To the extent that, at law or in equity, a Member, Manager, or other person has duties (including fiduciary duties) to the Company or to another Member, Manager, or other person bound by this Agreement, those duties may be expanded, restricted, or ELIMINATED by this Agreement, except as provided in Section 9.3 (6 Del. C. § 18-1101(c)).

9.2 Elected Modification. The Members elect one of the following (check one):

☐ The fiduciary duties of loyalty and care of each Member and Manager are ELIMINATED to the fullest extent permitted by 6 Del. C. § 18-1101(c), and replaced solely with the obligations expressly set forth in this Agreement.
☐ The fiduciary duties are RESTRICTED as follows: [DESCRIBE EACH DUTY CHANGED AND THE CONDUCT STILL PROHIBITED]. Any limitation of liability remains subject to Section 9.3.
☐ Standard duties of loyalty and care are RETAINED, subject to the authorizations below.

9.3 Nonwaivable. Notwithstanding Sections 9.1 and 9.2, this Agreement may NOT eliminate the implied contractual covenant of good faith and fair dealing (6 Del. C. § 18-1101(c)), and may not limit or eliminate liability for any act or omission that constitutes a bad-faith violation of that implied covenant (6 Del. C. § 18-1101(e)).

9.4 Permitted Activities and Transactions. Subject to the duty election in Section 9.2, each Member and Manager may engage in outside activities, including competing activities, except for opportunities arising directly from the use of Company resources. A transaction between the Company and a Member, Manager, or Affiliate requires disclosure and approval by disinterested Members before it binds the Company.

9.5 Good-Faith Reliance. Under 6 Del. C. § 18-1101(d), unless otherwise provided, a Member, Manager, or other person is not liable for a breach of fiduciary duty based on good-faith reliance on this Agreement. A Member or Manager may also rely in good faith on Company records and competent expert reports as provided in 6 Del. C. § 18-406.

9.6 Indemnification and Exculpation. Subject to 6 Del. C. § 18-108 and § 18-1101(e), the Company shall indemnify each Member, Manager, and officer for claims arising from authorized Company activities, excluding that person’s fraud, intentional misconduct, or bad-faith violation of the implied contractual covenant. An advance of defense expenses requires written approval by disinterested Members and an undertaking to repay any advance later found unauthorized.

Article X — Transfer Restrictions, ROFR, Tag-Along, Drag-Along

10.1 General Transfer Restriction. No Member may sell, assign, pledge, encumber, or otherwise transfer all or any part of the Member's limited liability company interest, except in accordance with this Article. An assignee acquires only the rights of an assignee under 6 Del. C. § 18-702 and not the rights of a Member, unless admitted under Section 3.4.

10.2 Permitted Transfers. A Member may transfer all or part of the economic interest, without other Member consent, to (a) a revocable living trust of which the Member is settlor, (b) the Member's spouse, descendants, or a trust for their benefit, or (c) an entity wholly owned by the Member, subject in each case to a written joinder. The transfer does not itself admit the transferee as a Member; admission remains subject to Section 3.4 and 6 Del. C. § 18-702.

10.3 Right of First Refusal (ROFR). A Selling Member who receives a bona fide third-party offer shall deliver a ROFR Notice to the Company and other Members. The Company has [____] days to elect to purchase; non-selling Members then have [____] additional days to elect pro rata.

10.4 Tag-Along. If Members holding more than 50% of the Percentage Interests propose to sell to a third party, the other Members may tag along pro rata within [____] days on the same terms.

10.5 Drag-Along. If Members holding at least [____]% of the Percentage Interests approve a sale of all membership interests or substantially all of the Company's assets to a bona fide third party, the remaining Members shall sell on the same terms.

10.6 Spousal Consent. A Member whose spouse may have an interest in the membership interest shall request that spouse's acknowledgment in Schedule B. The spouse does not become a Member by signing it.

Article XI — Buy-Sell Provisions

11.1 Triggering Events. A "Triggering Event" includes:

(a) death;
(b) Permanent Disability (Section 11.7);
(c) divorce affecting the membership interest;
(d) attempted transfer in violation of Article X;
(e) resignation or dissociation; or
(f) voluntary withdrawal.

11.2 Company First Right; Other Members Second. Upon a Triggering Event, the Company has the option for [____] days to purchase the affected Member's interest; any unexercised portion is offered to the non-affected Members pro rata for [____] additional days.

11.3 Purchase Price. ☐ Fair market value (Section 11.5); ☐ book value; ☐ [____ × trailing-12-month EBITDA] less debt; or ☐ most-recent value agreed at the annual meeting.

11.4 Payment Terms. [____]% in cash at closing; balance by [____]-year promissory note at [____]% per annum.

11.5 Appraisal Procedure. Each side selects an appraiser; if values differ by 10% or less, the average controls; otherwise the two appraisers select a third whose appraisal controls.

11.6 Permanent Disability Defined. "Permanent Disability" means a Member's inability, by reason of physical or mental impairment, to perform customary services for [____] consecutive days or [____] days in any 12-month period, as determined by a physician selected by the Company.

Article XII — Charging Order (6 Del. C. § 18-703)

12.1 Charging Order. On application by a judgment creditor of a Member or assignee, a court having jurisdiction may charge the limited liability company interest of the judgment debtor with payment of the unsatisfied amount of the judgment (6 Del. C. § 18-703(a)).

12.2 Lien; Limited Rights. To the extent so charged, the judgment creditor has only the right to receive any distribution to which the judgment debtor would otherwise be entitled (6 Del. C. § 18-703(a)). The charging order constitutes a lien on the judgment debtor's interest (6 Del. C. § 18-703(b)).

12.3 Sole and Exclusive Remedy; No Foreclosure. Under 6 Del. C. § 18-703(d), the entry of a charging order is the SOLE AND EXCLUSIVE remedy by which a judgment creditor of a Member or assignee may satisfy a judgment out of the judgment debtor's limited liability company interest. No creditor of a Member or assignee has any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the Company (6 Del. C. § 18-703(e)). THE INTEREST CANNOT BE FORECLOSED UPON, and attachment, garnishment, foreclosure, or other legal or equitable remedies are not available to the judgment creditor — a protection that, by the express terms of § 18-703(d), applies whether the Company has 1 member or more than 1 member (6 Del. C. § 18-703(d)).

12.4 No Member Rights to Creditor. A charging order entitles the judgment creditor only to distributions otherwise payable to the judgment debtor; it does not itself confer Member voting or management rights (6 Del. C. § 18-703(a)).

12.5 No Automatic Management Rights or Dissolution. A charging order does not by itself confer Member inspection, voting, or management rights and is not an event of dissolution under this Agreement.

Article XIII — Deadlock and Dispute Resolution

13.1 Deadlock Defined. A "Deadlock" exists if (a) the Members or Managers fail to reach the required vote on a Major Decision for [____] consecutive days, or (b) any Member meeting fails to achieve a quorum twice in succession.

13.2 Mediation. The Members will attempt one good-faith mediation session with [MEDIATOR / PROVIDER] before an ordinary contract action. This agreement does not delay urgent relief or a petition for judicial dissolution under Section 13.4.

13.3 Buy-Sell Election (if selected). ☐ If Deadlock continues for [____] days after mediation, any Member may deliver an Offer Notice specifying a price per 1% Percentage Interest. The receiving Members must elect within [____] days to either sell to the Initiating Member or buy out the Initiating Member at the stated price.

13.4 Judicial Dissolution. A Member may apply to the Delaware Court of Chancery for dissolution under 6 Del. C. § 18-802 whenever it is not reasonably practicable to carry on the business in conformity with this Agreement.

13.5 Governing Law. This Agreement is governed by Delaware law in accordance with 6 Del. C. § 18-1101(i), without regard to conflict-of-laws principles.

13.6 Venue. A dispute under this Agreement may be brought in a Delaware court with subject-matter jurisdiction and proper venue. A petition for judicial dissolution under Section 13.4 belongs in the Court of Chancery.

Article XIV — Dissolution and Winding Up

14.1 Events Causing Dissolution. The Company is dissolved on the first to occur of (6 Del. C. § 18-801):

(a) an event specified in this Agreement;
(b) the Member consent required for dissolution under Section 7.3, which replaces the default vote rule in § 18-801(a)(3);
(c) at any time there are no members, subject to § 18-801(a)(4); or
(d) entry of a decree of judicial dissolution under 6 Del. C. § 18-802.

14.2 Winding Up. Upon dissolution, the Company shall wind up its affairs under 6 Del. C. § 18-803 and apply proceeds in the order required by 6 Del. C. § 18-804:

(a) creditors (including Members who are creditors), other than for distributions;
(b) Members and former Members for unpaid distributions; and
(c) Members in accordance with Section 6.5.

14.3 Certificate of Cancellation. Upon completion of winding up, the Company shall file a Certificate of Cancellation with the Delaware Secretary of State under 6 Del. C. § 18-203.

Article XV — Delaware-Specific Provisions

15.1 Annual LLC Tax. The Company shall pay the Delaware LLC annual tax of $400, due June 1 following the close of each calendar year or upon cancellation of the certificate of formation, under 6 Del. C. § 18-1107(b)–(c). Late payment carries the $200 addition and monthly interest specified in § 18-1107(c), (e).

15.2 Registered Agent. The Company shall continuously maintain a registered agent and registered office in Delaware under 6 Del. C. § 18-104; failure may result in cancellation of the Certificate of Formation.

15.3 Maximum Freedom of Contract. The Members acknowledge that 6 Del. C. § 18-1101(b) gives maximum effect to freedom of contract, and that the elections in Article IX are intended to be enforced accordingly, subject to the nonwaivable implied covenant of good faith and fair dealing.

15.4 Series. This Agreement does not itself establish a protected or registered series. A series may be established by a separate written amendment that identifies its assets and members and satisfies the applicable requirements of 6 Del. C. §§ 18-215 and 18-218, including separate records and any required certificate notice or filing.

15.5 Tax Contact. The Members appoint [NAME] as the Company's tax contact. If applicable federal law requires a separate partnership-representative designation, the Members shall make that designation in the required tax filing.

Article XVI — General Provisions

16.1 Notices. All notices shall be in writing and delivered by hand, certified mail, overnight courier, or email (with confirmation) to the addresses on Schedule A.

16.2 Amendments. This Agreement may be amended only by a writing signed by all Members, as required by Section 8.2.

16.3 Entire Agreement. This Agreement, together with the Certificate of Formation and the schedules and exhibits, constitutes the entire agreement among the Members and supersedes all prior agreements, written or oral.

16.4 Severability. If any provision is held invalid or unenforceable, it shall be limited or construed so as to be valid; remaining provisions remain in full force.

16.5 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts. A signature may be manual, facsimile, conformed, or electronic under 6 Del. C. § 18-113(a)(2), subject to the exceptions in § 18-113(b).

16.6 No Third-Party Beneficiaries. Except for indemnified persons under Section 9.6, this Agreement creates no rights in any person other than the Members and the Company.

16.7 Construction. Captions are for convenience only and do not control the construction of this Agreement.

Signature Block

THE COMPANY

[____], a Delaware limited liability company

By: [____]
Name: [____]
Title: [☐ Managing Member / ☐ Manager]
Date: [__/__/____]

MEMBERS

Member 1: [____]
Signature: [____]
Date: [__/__/____]

Member 2: [____]
Signature: [____]
Date: [__/__/____]

Member 3: [____]
Signature: [____]
Date: [__/__/____]

SPOUSAL CONSENT (See Schedule B)

Schedule A — Members, Contributions, and Voting Interests

Complete one row for every initial Member. Percentage Interests must total 100%.

Schedule B — Spousal Acknowledgment (if applicable)

I, [SPOUSE NAME], spouse of Member [MEMBER NAME], acknowledge receipt of this Agreement and agree that any interest I may have in the Member's limited liability company interest is subject to the transfer and buy-sell provisions of this Agreement to the extent I may lawfully agree. I do not become a Member or guarantee Company debts by signing.

Spouse signature: __________________________ Date: [__/__/____]

Member signature: __________________________ Date: [__/__/____]

Pre-Execution Checklist

☐ Certificate of Formation filed with Delaware Secretary of State (6 Del. C. § 18-201)
☐ Delaware registered agent and registered office maintained (6 Del. C. § 18-104)
☐ Tax identification and filing needs reviewed
☐ Fiduciary-duty election made (Section 9.2)
☐ $400 annual LLC tax calendared (due June 1 following the calendar year under 6 Del. C. § 18-1107)
☐ Schedule A completed
☐ Schedule B (Spousal Consent) signed where applicable
☐ Any separate series amendment and filing completed before a series is used (Section 15.4)
☐ Buy-sell valuation method selected (Section 11.3)
☐ Major-Decision threshold completed (Section 7.3)
☐ Tax contact appointed and any required tax representative designated
☐ Operating Agreement reviewed by Delaware-licensed counsel
☐ Insurance needs reviewed and selected by the Members

Sources and References

• Delaware Limited Liability Company Act, 6 Del. C. Chapter 18: https://delcode.delaware.gov/title6/c018/index.html
• 6 Del. C. § 18-703 (Charging order): https://delcode.delaware.gov/title6/c018/sc07/index.html
• 6 Del. C. § 18-1101 (Construction; modification of fiduciary duties): https://delcode.delaware.gov/title6/c018/sc11/index.html
• 6 Del. C. § 18-802 (Judicial dissolution): https://delcode.delaware.gov/title6/c018/sc08/index.html
• 6 Del. C. § 18-1107 (Annual LLC tax): https://delcode.delaware.gov/title6/c018/sc11/index.html
• Delaware Division of Corporations: https://corp.delaware.gov/