Single-Member LLC Operating Agreement Template | Delaware

Single-Member LLC Operating Agreement

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Delaware note: Delaware does not legally require an operating agreement for single-member LLCs. However, having one is critical for liability protection, banking, and tax purposes. Banks almost always require this document to open a business account.

OPERATING AGREEMENT OF [LLC NAME], LLC This Operating Agreement (the "Agreement") of [LLC Name], LLC, a Delaware limited liability company (the "Company"), is entered into and effective as of [Date], by [Member Name], as the sole member of the Company (the "Member"). RECITALS WHEREAS, the Company was formed as a Delaware limited liability company by the filing of a Certificate of Formation with the Delaware Secretary of State on [Filing Date]; WHEREAS, the Member is the sole member of the Company and owns 100% of the membership interest in the Company; WHEREAS, the Member desires to set forth the rights, powers, duties, and obligations of the Member and to establish the manner in which the business and affairs of the Company shall be conducted; NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the Member hereby agrees as follows: ARTICLE I ORGANIZATION 1.1 Formation. The Company has been formed as a Delaware limited liability company pursuant to the provisions of the Delaware Limited Liability Company Act, 6 Del. C. Section 18-101, et seq., as amended from time to time (the "Act"), by the filing of a Certificate of Formation with the Delaware Secretary of State. 1.2 Name. The name of the Company is [LLC Name], LLC. 1.3 Purpose. The purpose of the Company is to engage in any lawful act or activity for which limited liability companies may be formed under the Act. 1.4 Principal Place of Business. The principal place of business of the Company shall be located at [Full Address] or such other place as the Member may from time to time determine. 1.5 Registered Office and Agent. The registered office of the Company in the State of Delaware shall be [Registered Agent Address], and the registered agent for service of process shall be [Registered Agent Name]. 1.6 Term. The Company shall continue in existence perpetually unless sooner dissolved and terminated in accordance with the provisions of this Agreement and the Act. ARTICLE II MEMBER 2.1 Sole Member. [Member Name] is the sole member of the Company and owns 100% of the membership interest in the Company. 2.2 Additional Members. No additional members may be admitted to the Company without the prior written consent of the Member. 2.3 Limited Liability. Except as otherwise provided by the Act, the debts, obligations, and liabilities of the Company, whether arising in contract, tort, or otherwise, shall be solely the debts, obligations, and liabilities of the Company. The Member shall not be obligated personally for any such debt, obligation, or liability solely by reason of being a member of the Company. ARTICLE III CAPITAL CONTRIBUTIONS 3.1 Initial Capital Contribution. The Member has made or shall make an initial capital contribution to the Company in the amount of $[Amount] in the form of [cash / property]. 3.2 Additional Capital Contributions. The Member may, but shall not be required to, make additional capital contributions to the Company at any time and in any amount as the Member may determine. 3.3 No Interest on Capital Contributions. No interest shall be paid on any capital contribution. 3.4 Return of Capital Contributions. Except as provided in this Agreement or the Act, the Member shall have no right to withdraw or to receive any return of the Member's capital contribution. ARTICLE IV DISTRIBUTIONS 4.1 Distributions. Distributions shall be made to the Member at such times and in such amounts as the Member may determine. 4.2 Limitation on Distributions. No distribution shall be made if, after giving effect to the distribution, (a) the Company would not be able to pay its debts as they become due in the usual course of business, or (b) the Company's total assets would be less than the sum of its total liabilities. ARTICLE V MANAGEMENT 5.1 Management by Member. The business and affairs of the Company shall be managed by or under the direction of the Member, who shall have full, exclusive, and complete authority and discretion in the management and control of the business and affairs of the Company. 5.2 Powers of Member. The Member shall have all powers necessary or convenient to carry out the business and affairs of the Company, including without limitation the power to: (a) Open and maintain bank accounts and borrow money on behalf of the Company; (b) Enter into contracts, agreements, and other undertakings binding the Company; (c) Purchase, lease, or otherwise acquire property for the Company; (d) Sell, transfer, or otherwise dispose of Company property; (e) Hire employees, consultants, and independent contractors; (f) Prosecute, defend, settle, or compromise any legal proceeding on behalf of the Company; (g) Make all decisions regarding the business and affairs of the Company; and (h) Do any and all other acts necessary or incidental to the foregoing. 5.3 Compensation. The Member shall not be entitled to compensation for services rendered to the Company, except as may be determined by the Member or as otherwise provided in a separate agreement. 5.4 Indemnification. The Company shall indemnify and hold harmless the Member from and against any and all claims, demands, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or resulting from the Member's performance of duties on behalf of the Company, except to the extent such claims arise from the Member's gross negligence, willful misconduct, or breach of this Agreement. ARTICLE VI ALLOCATIONS AND TAX MATTERS 6.1 Allocations. All profits, losses, and other tax items of the Company shall be allocated 100% to the Member. 6.2 Tax Classification. The Company shall be disregarded as an entity separate from the Member for U.S. federal income tax purposes (unless the Member elects otherwise). 6.3 Tax Elections. The Member shall have the authority to make all tax elections on behalf of the Company, including the election to be classified as a corporation under Treasury Regulation Section 301.7701-3 ("check-the-box" election). 6.4 Tax Matters. The Member shall serve as the "tax matters partner" (or equivalent) of the Company for purposes of federal, state, and local tax matters. ARTICLE VII TRANSFER OF MEMBERSHIP INTEREST 7.1 Transfer Restrictions. The Member may transfer all or any portion of the Member's membership interest in the Company to any person or entity at any time, without restriction. 7.2 Effect of Transfer. Upon any transfer of the Member's entire membership interest, the transferee shall become the sole member of the Company and shall succeed to all rights and obligations of the Member under this Agreement. ARTICLE VIII DISSOLUTION AND WINDING UP 8.1 Events of Dissolution. The Company shall be dissolved upon the earliest to occur of the following: (a) The written consent of the Member to dissolve the Company; (b) The death, resignation, expulsion, bankruptcy, or dissolution of the Member, unless the business of the Company is continued by a successor member; or (c) The entry of a decree of judicial dissolution under Section 18-802 of the Act. 8.2 Winding Up. Upon dissolution, the Member (or, if the Member is unable to act, a person appointed by a court of competent jurisdiction) shall wind up the affairs of the Company and liquidate the Company's assets. 8.3 Order of Payment. The proceeds from the liquidation of Company assets shall be applied in the following order of priority: (a) To the payment of debts and liabilities of the Company (other than to the Member); (b) To the payment of debts and liabilities owed to the Member; and (c) To the Member, in accordance with the Member's positive capital account balance. 8.4 Certificate of Cancellation. Upon completion of the winding up, a Certificate of Cancellation shall be filed with the Delaware Secretary of State. ARTICLE IX GENERAL PROVISIONS 9.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of law principles. 9.2 Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether written or oral. 9.3 Amendment. This Agreement may be amended or modified only by a written instrument executed by the Member. 9.4 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Member and the Member's successors, assigns, heirs, and legal representatives. 9.5 Severability. If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall continue in full force and effect. 9.6 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Member has executed this Operating Agreement as of the date first written above. MEMBER: _________________________________ [Member Name] [Title, if entity member] Date: _______________

Note: This Delaware single-member LLC operating agreement template is provided for educational purposes. While it covers essential provisions, consult a Delaware attorney before using for your specific situation.

Understanding Your LLC Operating Agreement

An operating agreement is your LLC's internal "rule book." Even though Delaware doesn't legally require one for single-member LLCs, you absolutely need it for liability protection, banking access, and business credibility. This guide breaks down each article so you understand exactly what you're signing.

I Organization Foundation

What this does: Establishes the basic facts about your LLC including name, purpose, registered agent, principal address, and perpetual term.

Why it matters:

This information must match your Certificate of Formation filed with Delaware. Any mismatch can cause problems with banks or in legal proceedings.
The "purpose clause" defines what your LLC can legally do (the broad "any lawful activity" language gives maximum flexibility).
Your registered agent is where the state sends legal notices and service of process.

Watch out for: Your registered agent must be a Delaware resident or an entity authorized to do business in Delaware. If you use a service (CT Corporation, Incfile, Northwest), use their exact legal name and address. Failure to maintain a registered agent can result in administrative dissolution.

Pro tip: "Any lawful act or activity" is the standard purpose clause that gives maximum flexibility. Narrower purposes can limit your ability to pivot your business without amending the operating agreement.

II Member Ownership

What this does: Identifies you as the sole member and owner of 100% of the LLC, restricts adding new members without consent, and establishes the liability shield.

Why it matters:

Documents your ownership stake (critical for banking, financing, and future exit).
The limited liability provision is the core protection of an LLC it shields your personal assets from business debts.
Banks, investors, and vendors will reference this section to verify ownership.

Future planning: If you bring in another member later, you'll need to completely replace this operating agreement with a multi-member version that includes ownership percentages, voting rights, profit allocation, and exit provisions.

III Capital Contributions Financial

What this does: Documents your initial investment in the LLC (cash or property) and establishes that additional contributions are optional.

Why it matters:

Your capital account balance determines your tax basis and affects your ability to take tax losses.
It shows you treated the LLC as a real business, not a shell (important for maintaining liability protection).
Courts look at capitalization when deciding whether to "pierce the corporate veil."

Best practice: Even if you only contribute $100 initially, document it clearly. You can add more capital later as needed, but having some initial capitalization strengthens your liability protection.

IV Distributions Cash Flow

What this does: Gives you the authority to take money out of the LLC ("distributions") whenever you want, subject to solvency limitations.

Why it matters:

Single-member LLCs are usually taxed as "disregarded entities" (like sole proprietorships), meaning all profit flows through to your personal tax return whether you take it out or not.
This clause lets you actually withdraw the money from the business bank account.
The solvency limitation protects you from fraudulent transfer claims.

Legal limit: You cannot make distributions if it would leave the LLC unable to pay its debts. Taking money out when the company is insolvent can expose you to personal liability ("fraudulent transfer").

V Management Authority

What this does: Gives you full authority to manage the LLC including signing contracts, hiring people, opening bank accounts, buying/selling property, and making all business decisions.

Why it matters:

Banks and vendors will ask for proof that you have authority to act on behalf of the LLC.
This article (plus a "Member Resolution" or "Certification of Authority") provides that proof.
The indemnification clause protects you from personal liability when acting in good faith.

Member-managed vs. Manager-managed: This template is "member-managed" (you run it). If you want to appoint someone else to manage the LLC while you retain ownership, you'd need a "manager-managed" version instead.

VI Allocations & Tax Matters Tax

What this does: Confirms the LLC is treated as a "disregarded entity" for tax purposes (default for single-member LLCs) and gives you authority to make tax elections.

Tax classification options:

Disregarded Entity (default): You report LLC income on Schedule C of your personal return. Simple, but you pay self-employment tax on all profit.
S-Corporation: Pay yourself a W-2 salary; remaining profit avoids self-employment tax. Requires IRS Form 2553.
C-Corporation: LLC taxed at corporate rates (21%); you pay personal tax on distributions. Rare for small LLCs (double taxation).

When to consider S-Corp election: If you're making $60K+ in annual profit, S-Corp election can save significant self-employment tax. Consult a CPA before making this election it has ongoing payroll requirements.

VII Transfer of Membership Interest Exit

What this does: Allows you to sell or transfer your ownership freely (since you're the only member) with no restrictions.

Why it matters:

If you sell the business, the buyer becomes the new sole member and assumes the operating agreement.
If you die, your heir/estate becomes the new member (subject to your will or state intestacy laws).
This unrestricted transfer provision maximizes your flexibility as sole owner.

Watch out for: Some bank accounts, contracts, or licenses may have restrictions on ownership transfers. Review those separately before any sale or transfer.

VIII Dissolution & Winding Up Termination

What this does: Specifies the circumstances under which the LLC can be dissolved and the procedure for winding up its affairs.

Dissolution triggers:

Your written consent to dissolve
Your death, bankruptcy, or incapacity (unless a successor continues)
Court order (judicial dissolution)

Payment order on dissolution:

Pay outside creditors first
Pay any debts owed to you as member
Distribute remaining assets to you based on capital account

Critical: Proper dissolution requires filing a Certificate of Cancellation with Delaware. Failure to do so means ongoing franchise tax liability ($300/year) and registered agent fees even if you've stopped doing business.

IX General Provisions Boilerplate

What this does: Standard "boilerplate" clauses covering governing law (Delaware), amendment procedures, severability, and signature requirements.

Key provisions:

Governing Law: Delaware law applies (Delaware has the most developed LLC case law in the country).
Amendment: You can modify this agreement at any time since you're the sole member just sign an amendment.
Severability: If one provision is found invalid, the rest of the agreement remains enforceable.
Entire Agreement: This document supersedes any prior oral or written understandings.

Variations & Alternative Structures

This template covers the most common single-member Delaware LLC structure. Depending on your business needs, you may want to consider these alternative approaches:

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Multi-Member LLC

2+ owners with shared ownership

When you have partners, you need a completely different operating agreement that addresses ownership percentages, voting rights, profit allocation, and exit provisions.

Capital contributions and ownership percentages
Voting requirements (majority, supermajority, unanimous)
Profit and loss allocation formulas
Transfer restrictions and right of first refusal
Buy-sell provisions and valuation methods
Dispute resolution mechanisms

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Manager-Managed LLC

Separate ownership from management

When you want to appoint a manager (yourself or someone else) to run the day-to-day operations while members retain ownership but delegate authority.

Passive investors who don't want operational involvement
Professional managers running the business
Liability protection for non-managing members
Clear separation of duties and decision-making

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Series LLC (Delaware)

Multiple asset-protected "cells"

Delaware allows "Series LLCs" where one LLC contains multiple "series" (like sub-LLCs), each with separate assets, liabilities, and members.

Real estate investors with multiple properties
One filing fee, one registered agent for all series
Each series insulated from others' liabilities
Requires specialized operating agreement

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Holding Company LLC

Parent entity owning subsidiaries

When you want one LLC to hold ownership interests in other entities (like a parent holding company structure).

Asset protection across multiple businesses
Centralized ownership and control
May offer tax planning opportunities
Common for real estate or multi-business owners

State Comparisons

This template is Delaware-specific. Other popular formation states have different requirements and benefits:

Feature	Delaware	Wyoming	Nevada	California
Annual Franchise Tax	$300	$60	$350	$800 min
State Income Tax	None (LLC)	None	None	Yes (8.84%)
Privacy (member names)	Not public	Not public	Not public	Public
Court of Chancery	Yes	No	No	No
Series LLC allowed	Yes	Yes	Yes	No
Operating agreement required	No (recommended)	No	No	No

Tax Election Variations

You can modify Article VI to elect different tax treatment for your LLC:

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Disregarded Entity (Default)

Schedule C taxation

Report LLC income on Schedule C of your personal return. All profit subject to self-employment tax (15.3%).

Simplest option no separate business return
All profit subject to SE tax
Best for: Low-profit or early-stage businesses

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S-Corporation Election

Salary + distribution split

Pay yourself a reasonable W-2 salary (subject to payroll tax); remaining profit distributed tax-free from SE tax.

File IRS Form 2553 to elect
Must run payroll for yourself
Best for: $60K+ annual profit
Consult CPA before electing

Delaware LLC Customization Playbook

How to customize this template: The operating agreement is highly flexible. Below are common modifications you might consider for your specific situation. Click to expand each section for details and sample language.

🔒 Adding Restrictive Transfer Provisions ▼

Even as a single-member LLC, you may want to restrict future transfers to protect your business or comply with investor requirements.

When to use:

You've taken investment and want to prevent unauthorized transfers
You want to ensure the LLC stays in your family
A contract or license requires ownership restrictions

7.1 Transfer Restrictions. The Member may not transfer, sell, assign, pledge, or otherwise dispose of all or any portion of the Member's membership interest without first obtaining written consent from [specify: spouse / investors / lender / etc.]. Any attempted transfer in violation of this Section shall be null and void.

👤 Adding Succession Planning ▼

Plan for what happens if you die or become incapacitated. Without this, your LLC may dissolve automatically.

When to use:

You want the LLC to continue after your death
You have a specific successor in mind
You want to coordinate with your estate plan

8.1(b) Continuity. Notwithstanding the death, bankruptcy, or incapacity of the Member, the Company shall not be dissolved if, within ninety (90) days thereof, a successor member is admitted pursuant to the Member's estate plan, will, or the applicable laws of intestacy. The personal representative of the Member's estate shall have authority to admit such successor member and to manage the Company during the interim period.

💰 Adding Distribution Limitations ▼

If you have lenders or investors, they may require restrictions on when you can take distributions from the LLC.

When to use:

You've taken a business loan
You have investors who want to ensure cash stays in the business
You want to enforce savings discipline

4.1 Distributions. Distributions shall be made to the Member at such times and in such amounts as the Member may determine, provided that: (a) No distribution shall be made until the Company has maintained a minimum cash reserve of $[Amount] for at least [30] consecutive days; (b) No distribution shall be made if the Company has any outstanding loan or credit facility with a balance exceeding $[Amount]; and (c) Distributions shall not exceed [X]% of the Company's net income in any fiscal year.

📋 Converting to Manager-Managed ▼

Change the management structure to appoint a manager (could be yourself or another person) separate from ownership.

When to use:

You want to delegate day-to-day operations
You're bringing in a CEO or operator
You have multiple passive investors

ARTICLE V MANAGEMENT 5.1 Manager-Managed. The business and affairs of the Company shall be managed by a Manager or Managers appointed by the Member. The initial Manager shall be [Manager Name]. 5.2 Authority of Manager. The Manager shall have full authority to manage the day-to-day operations of the Company, including the powers set forth in Section 5.2 of the prior version. 5.3 Removal of Manager. The Member may remove any Manager at any time, with or without cause, upon written notice. 5.4 Member Reserved Rights. Notwithstanding the foregoing, the following actions shall require the prior written consent of the Member: (a) Any sale of substantially all Company assets; (b) Any merger, consolidation, or conversion of the Company; (c) Any amendment to this Agreement; (d) Any admission of additional members; and (e) Any dissolution of the Company.

Frequently Asked Questions

Common questions about single-member Delaware LLCs and operating agreements, answered by attorneys.

Q Do I legally need an operating agreement in Delaware? +

No Delaware does not require single-member LLCs to have an operating agreement by law. However, you absolutely should have one because:

Banks almost always require it to open a business bank account
It strengthens your liability protection by showing you treat the LLC as a real entity (not an alter ego)
It clarifies your management authority for contracts, hiring, and vendor relationships
It's essential if you ever want to bring in investors, get financing, or sell the business
Courts may look at your operating agreement to determine whether to "pierce the corporate veil"

Q Should I form my LLC in Delaware or my home state? +

It depends on your business:

Delaware pros:

Most business-friendly LLC laws in the country
Specialized Court of Chancery (no juries, expert judges)
Strong legal precedent and predictability
Privacy member names not public
Preferred by investors and VCs

Delaware cons:

$300/year franchise tax regardless of revenue
Must register as "foreign LLC" in your home state (double fees)
More complexity if you operate locally

Rule of thumb: Delaware makes sense if you plan to raise venture capital, your business operates nationally/online, or you want maximum legal flexibility. For local service businesses, your home state is often simpler and cheaper.

Q Can I be my own registered agent in Delaware? +

Yes, but only if you:

Have a physical street address in Delaware (no P.O. boxes)
Are available during normal business hours (9am-5pm M-F) to accept legal papers

Most people use a registered agent service instead, which typically costs $50-150/year. Popular options include:

CT Corporation (oldest, most established)
Northwest Registered Agent (good value)
Incfile / ZenBusiness (budget options)

Q What's the difference between an operating agreement and bylaws? +

Operating Agreement: For LLCs. Internal governance document that establishes management, ownership, and operating rules. Not filed with the state.
Bylaws: For corporations (C-Corps and S-Corps). Also internal governance, not filed with the state.

Both serve the same fundamental purpose (setting the rules for how the entity operates), but they're used by different entity types. If you have an LLC, you use an operating agreement. If you have a corporation, you use bylaws.

Q Can I convert to a multi-member LLC later? +

Yes. When you bring in additional members, you'll need to:

Replace this operating agreement with a multi-member version that includes ownership percentages, voting rights, profit allocation, and exit provisions
File IRS Form 1065 (partnership return) instead of Schedule C for tax purposes
Consider whether you want the LLC taxed as a partnership or elect S-Corp status
Get all members to sign the new operating agreement

This is a significant change that usually requires attorney assistance to do properly.

Q Do I need to file this operating agreement with Delaware? +

No. Operating agreements are internal documents you keep them in your LLC records, but you don't file them with the state.

The only document filed with Delaware is your Certificate of Formation. Your operating agreement is a private contract between you (as member) and the LLC.

That said, you'll need to provide copies to banks, investors, landlords, and other third parties who want to verify your authority to act on behalf of the LLC.

Q How do I amend my operating agreement? +

Article IX.3 allows you to amend the agreement by written instrument. Since you're the sole member, the process is simple:

Write an amendment document that references the original operating agreement
Describe the specific changes being made
Sign and date the amendment
Keep the original + all amendments together in your LLC records

There's no need to file amendments with Delaware. Just keep them organized with your other LLC documents.

Q What if I don't have any initial capital contribution? +

You can technically contribute $0 or $1, but it's not recommended. Contributing at least a nominal amount ($100-1,000+) shows the LLC is a real business, not just a shell.

Why this matters:

Courts look at "undercapitalization" when deciding whether to pierce the corporate veil
If your LLC is sued and has no assets, creditors may argue you never treated it as a real entity
Banks may question accounts with zero initial capital

Best practice: Start with at least enough capital to cover initial business expenses and maintain a reasonable operating reserve.

Q Can I use this for a holding company or real estate LLC? +

Yes. This template works for any single-member Delaware LLC purpose:

Operating businesses (service, e-commerce, consulting)
Holding companies (owning other entities or investments)
Real estate LLCs (owning rental properties)
IP holding companies (owning patents, trademarks)

For real estate, you may want to customize the purpose clause in Article I to specifically mention real estate activities. For holding companies, consider whether a Series LLC structure might be more appropriate.

Q Do I need an attorney to form my LLC? +

Not legally required, but helpful in certain situations:

DIY is usually fine if:

Simple single-member LLC
No outside investors
Straightforward business model
You're comfortable with legal documents

Consider an attorney if:

Raising money from investors (especially VCs or angels)
Complex IP or assets to protect
Regulated industry (healthcare, finance, cannabis)
Multi-entity structures or holding companies
Converting from an existing business with debts or contracts
Tax planning needs (S-Corp election, multi-state issues)

A one-time attorney consultation typically costs $500-1,000 and can catch issues before they become expensive problems.

Single-Member LLC Operating Agreement