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.

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 on or before the Effective Date (6 Del. C. § 18-501).

4.2 Capital Accounts. A separate capital account shall be maintained for each Member in accordance with Treas. Reg. § 1.704-1(b)(2)(iv).

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 Voluntary Capital Calls. Written notice shall specify the aggregate amount, each Member's pro-rata share by Percentage Interest, due date (not less than [____] days), and consequences of nonpayment.

5.3 Remedies for Failure to Fund. Consistent with 6 Del. C. § 18-502(c), a Delinquent Member may be subjected to any one or more of:

(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. All items of income, gain, loss, deduction, and credit shall be allocated among the Members in proportion to their Percentage Interests, subject to Treas. Reg. § 1.704-1(b) and § 1.704-2.

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. Unless waived by unanimous consent, the Company shall distribute, before each estimated-tax due date, an amount equal to each Member's allocated taxable income multiplied by [____]%.

6.4 Limitations on Distributions. No distribution shall be made if, after giving effect to it, the Company's liabilities (other than to Members on account of their interests and nonrecourse liabilities) would exceed the fair value of the Company's assets, consistent with 6 Del. C. § 18-607.

6.5 Liquidating Distributions. Upon winding up under Article XIV, liquidating distributions shall be made as required by 6 Del. C. § 18-804 and, to the extent consistent therewith, (a) first, to return positive capital-account balances, and (b) thereafter, in proportion to Percentage Interests.

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 to Member supermajority or unanimous consent in Section 7.3.

☐ Manager-managed. The initial Manager(s) is/are [____]. Non-Manager Members have no agency authority by default. Managers are elected and removed as provided in 6 Del. C. § 18-402 and this Agreement.

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 Requiring [Supermajority / Unanimous] Member Consent. The following actions require the written consent of Members holding at least [____]% of the Percentage Interests (or, where this Agreement requires, unanimous consent):

(a) amending the Certificate of Formation or this Agreement;
(b) admitting a new Member;
(c) approving any merger, conversion, transfer, domestication, sale of all or substantially all of the Company's assets, or dissolution;
(d) authorizing an act outside the ordinary course of business;
(e) incurring indebtedness in excess of $[____];
(f) changing federal tax classification or making material tax elections; or
(g) 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 Members holding at least [____]% of the Percentage Interests.

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). References to "Majority," "Supermajority," and similar thresholds refer to the specified percentage of the Percentage Interests.

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. Permitted under 6 Del. C. § 18-302 and the Delaware Uniform Electronic Transactions Act.

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 the following (check all that apply):

☐ 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 such that no Member or Manager is liable except for conduct constituting a bad-faith violation of the implied contractual covenant of good faith and fair dealing.
☐ 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. Each Member and Manager may engage in outside activities, including those competing with the Company, except for opportunities arising directly from the use of Company resources. A transaction between the Company and a Member, Manager, or Affiliate is permitted if approved or ratified after disclosure by disinterested decisionmakers or fair to the Company when entered into.

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 good-faith reliance on the provisions of this Agreement.

9.6 Indemnification and Exculpation. Pursuant to 6 Del. C. § 18-108 and § 18-1101(e), the Company shall indemnify and hold harmless, and may limit or eliminate the liability of, each Member, Manager, and officer to the fullest extent permitted by the Act, except for a bad-faith violation of the implied contractual covenant.

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 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 the benefit of any of them, or (c) an entity wholly owned by the Member, subject in each case to a joinder.

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. Each married Member shall obtain spousal consent in the form attached as Schedule B.

Article XI — Buy-Sell Provisions

11.1 Triggering Events. A "Triggering Event" includes:

(a) death;
(b) Permanent Disability (Section 11.7);
(c) bankruptcy or assignment for the benefit of creditors;
(d) divorce affecting the membership interest;
(e) attempted transfer in violation of Article X;
(f) resignation or dissociation; or
(g) 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, and 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. THE INTEREST CANNOT BE FORECLOSED UPON in a multi-member context, and attachment, garnishment, foreclosure, or other legal or equitable remedies are not available to the judgment creditor (6 Del. C. § 18-703(d)).

12.4 No Member Rights to Creditor. This Agreement does not entitle the judgment creditor to become or to exercise any rights or powers of a Member (6 Del. C. § 18-703(c)).

12.5 No Information Rights; No Dissolution. A charging-order holder has no inspection or information rights and a charging order is not a dissolution event.

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. Before pursuing remedies in Section 13.3 or 13.4, the Members shall participate in good-faith mediation administered by [☐ JAMS / ☐ AAA / ☐ a mediator in Delaware] for at least one session.

13.3 Buy-Sell Election (Optional). 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. Subject to Section 13.7, exclusive venue lies in the Delaware Court of Chancery or, where Chancery lacks jurisdiction, the Superior Court of the State of Delaware or the United States District Court for the District of Delaware.

13.7 Arbitration (Optional). ☐ Any dispute (other than petitions for injunctive relief or judicial dissolution) shall be resolved by binding arbitration administered by [☐ JAMS / ☐ AAA] in [____], Delaware, before [☐ one / ☐ three] arbitrator(s), under the Federal Arbitration Act and the Delaware Uniform Arbitration Act, 10 Del. C. § 5701 et seq.

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 affirmative vote or written consent of Members holding at least [____]% (or, as elected, two-thirds) of the Percentage Interests;
(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 Franchise Tax. The Company shall pay the flat $300 Delaware LLC annual tax, due on or before June 1 of each year, to the Delaware Division of Revenue / Secretary of State, as required by 6 Del. C. § 18-1107.

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 LLC (If Applicable). ☐ The Company is a series limited liability company under 6 Del. C. § 18-215, and each series listed on Schedule C is established with separate rights, powers, and liability limitations, provided the records of each series account for assets separately and the Certificate of Formation gives notice of the limitation on liabilities of a series.

15.5 Partnership Representative. The Company designates [____] as Partnership Representative under I.R.C. § 6223 for the Bipartisan Budget Act of 2015 centralized partnership audit regime.

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 (subject to Section 7.3).

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 (6 Del. C. § 18-1109).

16.5 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, including by electronic signature under the Delaware Uniform Electronic Transactions Act, 6 Del. C. § 12A-101 et seq.

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 (6 Del. C. § 18-1101(f)).

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)

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)
☐ EIN obtained from IRS
☐ Fiduciary-duty election made (Section 9.2)
☐ $300 annual LLC tax calendared (due June 1)
☐ Schedule A completed
☐ Schedule B (Spousal Consent) signed where applicable
☐ Schedule C completed for any series (Section 15.4)
☐ Buy-sell valuation method selected (Section 11.3)
☐ Major-Decision threshold completed (Section 7.3)
☐ Partnership Representative designated
☐ Operating Agreement reviewed by Delaware-licensed counsel
☐ Beneficial Ownership Information evaluated under the Corporate Transparency Act
☐ D&O / E&O / general liability insurance obtained

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://law.justia.com/codes/delaware/title-6/chapter-18/subchapter-vii/section-18-703/
• 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
• Delaware Division of Corporations: https://corp.delaware.gov/