Delaware LLC operating agreement law: default rules and what you can contract around

Delaware sells one thing above every other state: freedom of contract. Your operating agreement can do things here it cannot do anywhere else.

The catch is the other half of the same deal. Whatever your agreement does not say, Delaware says for you, and Delaware’s defaults were not written to protect the person who forgot to draft.

This page is both halves. What the statute decides in your silence, and how far it lets you go when you decide for yourself.

One warning before any of it. Delaware did not adopt a uniform act. The LLC Act is homegrown, amended almost every year since 1992, and its answers do not line up with the default rules of a RULLCA state. Do not reason by analogy from the state next door.

You already have an operating agreement, even if you never wrote one

Start here, because it changes what the rest of the page means.

Delaware defines an operating agreement as any agreement of the members about the company’s business, whether or not anyone calls it that. It can be written. It can be oral. It can be implied. The company is not required to sign one at all.

Source: 6 Del. C. § 18-101(9).

Chancery has enforced an agreement that existed only in how people behaved, inferred from conduct and never written down, where a tacit understanding could be read from what everyone did. Failing to object counts as agreeing.

Skipping the document does not leave the statute in charge. It leaves your conduct in charge.

Members who never signed anything but always split profits the same way, or always let one person run things, or went along with a transfer without complaint, have made an agreement. And an agreement overrides the statutory defaults, so the owner counting on a favorable default may discover it was bargained away years ago, in writing nobody wrote.

Which reframes the entire case for the document. In Delaware the choice is not between having an agreement and going without. It is between an agreement you drafted on purpose and an agreement your habits drafted for you. That is a sharper reason to sit down and write one than the reason people usually give.

What the statute decides when you say nothing

Delaware counts profits, not heads, and the majority runs everything

Management sits with the members in proportion to their share of the company’s profits, and the holders of more than half of that profits interest make the decisions.

Source: 6 Del. C. § 18-402.

Two things fall out of that sentence.

Delaware does not use a per-capita default. In states that do, a 5 percent member and a 60 percent member get the same single vote until the agreement says otherwise, which is a genuine ambush for whoever put in the most money. Delaware does not spring it.

But Delaware also hands the majority everything and gives the minority nothing by default. More than half the profits interest controls the company, checked only by the implied covenant, the agreement’s own terms, and whatever fiduciary duties survive.

Delaware’s default reads one dial: the profits interest. Ownership percentage, voting power, and profit share are three separate dials, and an agreement can set them apart. Silence sets them together.

Where the agreement creates managers, it can give them votes per capita, by number, by class, by financial interest, or on any basis it likes, and can set the notice, quorum, proxy, and written-consent machinery.

Fiduciary duties exist unless you delete them, and that was not always clear

For a decade this was the most contested question in Delaware LLC law. It is settled now.

Where the Act does not provide an answer, the rules of law and equity govern, including the rules of law and equity relating to fiduciary duties. Those last words were added by amendment, effective August 1, 2013.

Source: 6 Del. C. § 18-1104; 79 Del. Laws c. 74.

The legislature’s own explanation was blunt: fiduciary duties not spelled out in the agreement apply in some circumstances, a manager of a manager-managed LLC ordinarily owes them, and the agreement can still expand, restrict, or erase them. It reaches every agreement, not only the ones written after 2013.

The history is worth a sentence because of what it left behind. In 2012 Chancery held that default duties applied. On appeal the Supreme Court called that part of the opinion unnecessary and left the question open. The legislature answered within months.

Every article written in the window between the 2012 decision and the 2013 fix is still online, was written by serious people, and is describing a rule that no longer exists.

Silence means no exit

A member can resign only when, and how, the agreement says. Unless the agreement provides otherwise, a member cannot resign at all before the company dissolves and winds up. The statute says so notwithstanding anything to the contrary in other law.

Source: 6 Del. C. § 18-603.

The assumption that an owner can always quit and be paid fair value is borrowed from other states and other entity forms. It is not Delaware law.

An owner who wants the right to walk away and get bought out has to draft it. Say nothing and you are in until the company ends.

One tell about who the default serves. Almost every market agreement carries a no-withdrawal clause. That clause does not create this result. It copies it. Drafters write the default down because they like it.

Distributions follow contribution value, and they can show up as a building

Distributions go where the agreement sends them. Say nothing, and they go by the agreed value of what each member contributed, as recorded in the company’s books, to the extent received and not returned.

Source: 6 Del. C. § 18-504.

Contribution value, not per capita. One more default Delaware gets right against the states that split evenly no matter who funded what.

Then the one nobody sees coming.

Unless the agreement provides otherwise, a member cannot be forced to take a distribution of property in kind beyond their share of that asset. But a member can be forced to take one that matches their share.

Source: 6 Del. C. § 18-605.

Read it twice. The protection only covers a disproportionate in-kind distribution. A proportionate one can be handed to a member who wanted cash and did not want this.

A 20 percent member in a Delaware LLC that owns a building can be handed a 20 percent undivided interest in the building instead of money, and cannot refuse it.

Now they own an illiquid slice of real estate they cannot sell, cannot manage, and never asked for. A clause saying distributions come in cash is not boilerplate. It is the clause that stops exactly this.

An unlawful distribution, and why the paperwork decides it

The company cannot distribute to the point where, afterward, its liabilities exceed the fair value of its assets. Two things drop off the liability side: money owed to members on account of their interests, and non-recourse debt tied to specific property. Property securing non-recourse debt counts as an asset only for the equity above that debt.

A member who takes a distribution is off the hook for it after three years, unless suit was already filed and liability decided.

Source: 6 Del. C. § 18-607.

Three assumptions this quietly kills.

It is a fair value test. The balance sheet you built for the lender or the tax return does not answer it.

Money owed to members on account of their interests is not a liability here. The same dollars documented as a member loan are a liability; the same dollars called a preferred return on the interest are not. How you papered the capital decides whether the distribution was legal.

And non-recourse debt nets against its own collateral instead of counting in full. For a leveraged real estate company that matters: an underwater building adds nothing to the asset side, but its mortgage falls off the liability side, so negative equity in one property does not poison distributions from the rest.

Transfers move economics only, and admission takes everyone

An LLC interest is personal property. A member owns no piece of any specific thing the company holds.

An interest is assignable unless the agreement says otherwise. But unless the agreement provides otherwise, an assignment gives the assignee economics only: the right to distributions and allocations, and nothing to do with running the company. The assignee becomes a member only as the agreement provides, or on the vote of all members.

Source: 6 Del. C. §§ 18-701, 18-702, 18-704.

The default consent threshold for turning a buyer into a member is unanimity. That is the real answer to “can I sell my share.”

Information rights, with a 2021 limit most writeups predate

A member has a statutory right to true and full information about the company’s business and finances, on reasonable terms, for a purpose reasonably related to being a member.

Since August 1, 2021, where a member is entitled to information for a stated purpose, the right runs only to what is necessary and essential to that purpose. The amendment answered a Delaware Supreme Court decision and reaches statutory and contractual demands alike.

Chancery can put limits and conditions on inspection, and can order the records brought into Delaware and kept there.

Source: 6 Del. C. § 18-305.

Duration and dissolution

The standard for judicial dissolution is whether it is no longer reasonably practicable to run the business in conformity with the agreement.

Source: 6 Del. C. § 18-802.

Chancery grants it rarely. The cases land on two situations: management so broken the business cannot operate, usually a deadlock the agreement gives no way around, or a defined purpose that has become impossible. Failing to make money is not enough, and a deadlock manufactured to force a buyout has been thrown out.

How far you can contract around it

You can delete the duty of loyalty. You cannot delete the covenant.

An operating agreement can expand, restrict, or eliminate the duties, fiduciary duties included, that a member or manager owes. The duty of loyalty itself can be written out of existence.

That one sentence is what sets Delaware apart from nearly every other LLC statute in the country, and there is no reason to soften it. This is the freedom of contract the state sells.

The floor comes in two pieces that do different jobs.

An agreement cannot eliminate the implied covenant of good faith and fair dealing.

And an agreement can limit or eliminate liability for breach of contract and breach of duty, fiduciary duty included, but cannot eliminate liability for a bad-faith violation of that implied covenant.

Source: 6 Del. C. § 18-1101(c), (e).

Subsection (c) decides which duties you can delete. Subsection (e) decides which liability survives when a duty turns out to exist anyway. Handle one and miss the other and you have a hole.

Deleting duties is a whole-document job, not a clause

Here is the part that catches the people who should know better.

The same statute that lets an agreement delete duties lets an agreement create them. Delaware courts have found fiduciary obligations in agreements that never used the phrase. In the case that set the point, nobody wrote “fiduciary duty,” but a clause barring affiliate deals on worse-than-arm’s-length terms did the work of entire fairness, and it stuck.

No magic words, in either direction.

Delete duties in the governance article, then leave a line three pages later requiring a manager to act in the company’s best interests, and you have put back by accident what you cut on purpose.

Elimination is not a clause you drop in. It is a consistency obligation across the whole document. The sponsor who bought a duty waiver and left stray best-interests language in the transfer terms or the indemnity bought less than they think. Search the entire agreement for duty language, not just the article with the heading.

Delaware lets you contract members out of the books

The right of a member or manager to get or examine information can be expanded or restricted in the original agreement, or in a later amendment approved by all members.

Source: 6 Del. C. § 18-305(g).

Sources will tell you Delaware inspection rights cannot be eliminated by the operating agreement. That is wrong on the face of the statute.

The comparison is the point. Delaware’s corporate books-and-records provision has no equivalent permission. A Delaware corporation cannot contract its stockholders out of inspection the way a Delaware LLC can contract its members out. Same state, opposite answer, and that gap is a real part of why people pick the LLC.

There are no appraisal rights, on anything

Unless the agreement or the deal documents say otherwise, a Delaware LLC interest carries no appraisal rights.

Not on an amendment. Not on a merger. Not on a division, a conversion to another entity, a move to another state, or a sale of all or substantially all the assets.

Source: 6 Del. C. § 18-210.

Chancery will hear an appraisal claim the agreement created. It cannot invent one the agreement left out.

Set that beside the approval thresholds. A merger passes on more than half the profits interest absent contrary language. So does a move out of Delaware.

Source: 6 Del. C. §§ 18-209(b), 18-213(b).

Both provisions also let the agreement strip those powers entirely, a real option that almost nobody takes.

Delaware protects the deal, not the person who never made one

Line up every default on this page and Delaware’s answer to a minority member is the same answer every time.

More than half the profits interest runs management. The same majority approves a merger or moves the company to another state. Fiduciary duties can be deleted. Information rights can be cut. A member cannot resign before dissolution. A distribution cannot be forced. And there are no appraisal rights on any of it.

A Delaware minority member whose agreement is silent can be outvoted on the sale of the whole business, cannot demand fair value, cannot quit, cannot force a distribution, and may have no fiduciary claim.

The majority can convert the company into a different entity in a different state, and the minority’s remedy is whatever the agreement gave them.

That is not a flaw. It is the statute doing exactly what it was built to do, and it is why the document matters more in Delaware than anywhere else. Delaware sells freedom of contract, and freedom of contract is worth precisely what your contract is worth.

For anyone arriving from the corporate side, the contrast is stark. Delaware corporations have appraisal rights by statute. An LLC member in the identical spot has none, in the same state, in the same courthouse.

What survives, and it is a short list

Two things cannot be signed away.

The implied covenant of good faith and fair dealing, and liability for its bad-faith breach.

And the right of a member who is not a manager to sue in Delaware on matters relating to the organization or internal affairs of the company. That one comes with an exception written into the same sentence: it yields where the parties agreed to arbitrate.

Source: 6 Del. C. § 18-109(d).

Delaware guards a passive investor’s access to Delaware courts against a forum selection clause, and hands it away to an arbitration clause.

Arbitration clauses sit in nearly every market agreement, sold as a cost and speed measure. In Delaware that clause is also the one that deletes the single structural protection a passive member has. How that plays out, and Delaware’s reach over managers who never set foot in the state, is on the protection page.

Derivative actions

A member bringing a derivative claim has to plead, with particularity, the effort made to get the managers or members to act, or why the effort was excused. Demand or demand futility, in the same shape as the corporate rule.

Source: 6 Del. C. §§ 18-1001 to 18-1004.

The bottom line

You have an agreement whether you wrote one or not. Delaware enforces oral and implied agreements, and your conduct can bargain away a default you were counting on.

The defaults serve the majority. More than half the profits interest runs everything, and Delaware supplies no minority protection unless the agreement builds it.

Silence locks a member in. No resignation before dissolution, no forced distribution, and a proportionate in-kind distribution can be pushed on someone who wanted cash.

You can delete almost anything, consistently or not at all. Deleting fiduciary duties is a whole-document job, and stray best-interests language puts them back by accident.

No appraisal rights, on anything. A minority member can be outvoted on selling the business with no right to fair value, which a Delaware corporation’s stockholder would have.

Two things survive every waiver. The implied covenant, and a passive member’s Delaware forum right, and even that yields to an arbitration clause.

What this page does not cover

How a creditor reaches a member’s interest, veil piercing, trusts, and exemptions are on the protection page.

Where the entity legally lives, series LLCs, anonymity, and the tax cost of moving property in or changing ownership are on the structure and cost page.

Fees, forms, and deadlines are on the filing page.

Last verified July 2026.