Operating Agreement
(Member-Managed, Multiple Members) (DE LLC)

Summary

This template is for an Operating Agreement for a member-managed limited liability company with multiple members in Delaware. This template includes practical guidance, drafting notes, and alternate clauses. Every LLC should be governed by an operating agreement, which serves as bylaws, a shareholder agreement and an equity purchase agreement combined into one. Although most states' LLC statutes refer to such governing document as an "operating agreement," the Delaware Limited Liability Company Act refers to it as a "limited liability company agreement." Delaware law requires a limited liability company agreement be entered into or otherwise existing either before, after or at the time of the filing of a certificate of formation. Counsel should note that great latitude is afforded to limited liability companies in terms of economic, voting and tax matters and, accordingly, careful consideration should be given to the needs of a given enterprise. Consultation with tax counsel is advised in connection with the negotiation and terms of an operating agreement. On January 1, 2018, the Bipartisan Budget Act of 2015 (BBA) took effect governing IRS tax audits of partnerships and limited liability companies (and other entities) taxed as partnerships. This template takes into account these rules bringing significant changes to the assessment and collection of tax at the partnership level, calculating imputed underpayment, the introduction of a "partnership representative" or "tax member representative" that differs in certain critical ways from the former legislation's "tax matters partner," requirements to elect out of the new rules, and an election to push out imputed underpayments to the partners in an affected year. For a full listing of key content covering Delaware Limited Liability Company formation, organization, maintenance, ownership, management, and dissolution, see Limited Liability Company Resource Kit (DE). For more information on Delaware limited liability companies, see Formation and Qualification (DE LLC), and Ownership Interests (DE LLC). To compare state laws on Operating Agreements, see the following topics in the Business Entities State Law Comparison Tool: Limited Liability Company: Formation and Qualification and Limited Liability Company: Management and Indemnification.