The Delaware Limited Liability Company Act sets a light formation requirement and a handful of ongoing obligations, but its practical importance lies in the default rules that govern voting, profit allocation, transfers of interests, fiduciary duties, and dissolution whenever an operating agreement stays silent. Filing a Certificate of Formation costs $90 and creates the entity. Keeping it alive means maintaining a registered agent, paying a $300 annual franchise tax, and either living with the statute’s defaults or drafting an operating agreement that overrides them.
What the Act Requires to Form an LLC
A Delaware LLC comes into existence when the Certificate of Formation is filed with the Division of Corporations. The certificate needs only three items: the LLC’s name, the address of the registered office, and the name and address of the registered agent.1Justia. Delaware Code 6-18-201 – Certificate of Formation Members, managers, capital structure, and business purpose are not part of the public filing.
The name must include “Limited Liability Company,” “L.L.C.,” or “LLC” and must be distinguishable from any existing entity on the Secretary of State’s records. A similar name is available only with the written consent of the existing entity. The word “bank” is reserved for entities supervised by the State Bank Commissioner or regulated under federal banking law.2Delaware Code Online. Delaware Code Title 6 Chapter 18 – Limited Liability Company Act – Section: 18-102 The standard filing fee is $90.3Delaware Division of Corporations. Certificate of Formation of a Limited Liability Company
The Registered Agent Requirement
Every Delaware LLC must keep a registered agent and a registered office in the state at all times. The agent receives legal notices and service of process. Eligible agents include a Delaware resident, a domestic or foreign business entity authorized to operate in Delaware, or the LLC itself.4Justia. Delaware Code 6-18-104 – Registered Office; Registered Agent The registered office must be a physical address that matches the agent’s business office. A P.O. box does not qualify.
If an agent resigns and files a certificate of resignation with the Secretary of State, the LLC has 30 days to appoint a replacement. Missing that window causes the Certificate of Formation to be canceled, which dissolves the entity. Reviving a canceled LLC requires filing a Certificate of Revival, appointing a new registered agent, and paying all back taxes plus a $220 filing fee.5Delaware Division of Corporations. Certificate of Revival for Limited Liability Company
Why the Operating Agreement Does the Real Work
Delaware does not require an LLC to adopt a written operating agreement, but the statute treats any agreement about the LLC’s affairs — written, oral, or implied — as binding on all members, managers, and assignees. Even a single-member LLC’s agreement is enforceable.6Justia. Delaware Code 6-18-101 – Definitions – Section: Subsection 9 When the agreement is silent, the Act’s default rules apply, and those defaults often do not match what founders assume.
Voting Runs on Profit Interests, Not Headcount
The default management structure is member-managed, but members do not vote per capita. Unless the operating agreement says otherwise, decisions are controlled by members holding more than 50 percent of the profit interests, and votes are weighted in proportion to those interests.7Justia. Delaware Code 6-18-402 – Management of Limited Liability Company A 60 percent holder decides ordinary matters alone. An operating agreement can shift to manager-managed governance, in which one or more designated managers (who need not be members) hold day-to-day authority.
Members and managers can also delegate authority to officers, agents, employees, or committees. The statute expressly permits delegation, allows it to be made irrevocable, and clarifies that a delegate does not become a member or manager by virtue of the delegation.8Justia. Delaware Code 6-18-407 – Delegation of Rights and Powers to Manage That is how Delaware LLCs create CEO, CFO, and similar titles without a separate officer statute.
Profits and Losses Follow Contribution Value
The operating agreement controls how profits and losses are allocated. If it says nothing, the Act allocates them based on the agreed value of each member’s contributions, not equally.9Justia. Delaware Code 6-18-503 – Allocation of Profits and Losses Preferred returns, waterfall distributions, and any other split that departs from contribution-based allocation must be written into the agreement.
Transferring an Interest Does Not Transfer Control
A member’s LLC interest is freely assignable unless the operating agreement restricts it, but an assignee gains only economic rights. Without a specific provision in the operating agreement, an assignee can participate in management only with the unanimous consent of all existing members.10Justia. Delaware Code 6-18-702 – Assignment of Limited Liability Company Interest Selling the financial stake and handing over the vote are two different acts under the statute.
Fiduciary Duties: What the Act Lets You Waive
The Act allows an operating agreement to expand, restrict, or eliminate the fiduciary duties that members and managers owe to the LLC and to each other. The one duty an agreement cannot eliminate is the implied contractual covenant of good faith and fair dealing.11Justia. Delaware Code 6-18-1101 – Construction and Application of Chapter and Limited Liability Company Agreement – Section: Subsection c
When an operating agreement is silent on fiduciary duties, Delaware courts fill the gap with the traditional duties of loyalty and care. In Auriga Capital Corp. v. Gatz Properties, LLC, the Court of Chancery held that default fiduciary duties applied where the operating agreement did not waive them, and found the manager liable for a self-dealing transaction at an unfair price.12Delaware Courts. Auriga Capital Corporation v. Gatz Properties, LLC
The Act also permits an operating agreement to limit or eliminate monetary liability for breaches of fiduciary duty, including the duty of care. The only carve-out is that liability cannot be limited for a bad-faith violation of the implied covenant of good faith and fair dealing.13Justia. Delaware Code 6-18-1101 – Construction and Application of Chapter and Limited Liability Company Agreement – Section: Subsection e Exculpation clauses covering duty-of-care breaches are common in Delaware operating agreements.
Series LLCs
Delaware allows a single LLC to create multiple internal “series,” each with its own members, managers, assets, and liabilities. If done properly, the debts of one series cannot reach the assets of another series or of the parent LLC. Real estate investors often place each property in its own series rather than forming a separate LLC per property.
There are two forms. A protected series is created through the operating agreement and internal records only, without any public filing. A registered series requires a Certificate of Registered Series and exists on the Division of Corporations’ records, which lets it obtain its own good standing certificate — useful when a lender wants to confirm status.14Delaware Code Online. Delaware Code Title 6 Chapter 18 – Limited Liability Company Act – Section: 18-218
The liability shield between series depends on meeting the statute’s conditions. The Certificate of Formation must include notice that series liabilities are limited, the operating agreement must reflect the same limitation, and the assets and financial records of each series must be maintained separately from the parent LLC and from every other series.15Justia. Delaware Code 6-18-215 – Series of Members, Managers, Limited Liability Company Interests or Assets Commingling defeats the protection. Each registered series also owes its own $75 annual franchise tax due June 1, in addition to the parent LLC’s $300 tax. Protected series pay no separate tax.
Staying in Good Standing
Franchise Tax
Every Delaware LLC owes an annual franchise tax of $300, due by June 1, regardless of whether it does any business in the state. Unlike Delaware corporations, LLCs file no annual report. Paying the tax is the entire annual filing.16Division of Corporations – State of Delaware. LLC/LP/GP Franchise Tax Instructions Nonpayment leads to penalties, interest, and eventual administrative cancellation, after which revival requires paying all back taxes plus the $220 revival fee.5Delaware Division of Corporations. Certificate of Revival for Limited Liability Company
Gross Receipts Tax
LLCs that actually operate inside Delaware also owe the state’s gross receipts tax, calculated on total revenue with no deduction for expenses. Rates run from roughly 0.09% to 2.0% by business type, and monthly exclusions generally start at $100,000 and reach up to $1,250,000, so smaller operations may owe little or nothing. Late filing carries a 5% monthly penalty plus 0.5% monthly interest.17State of Delaware Division of Revenue. Gross Receipts Tax FAQs A Delaware LLC that operates entirely in other states typically does not owe this tax, though the $300 franchise tax still applies.
Federal Beneficial Ownership Reporting
The Corporate Transparency Act originally required most domestic LLCs to file beneficial ownership information with FinCEN. As of March 2025, FinCEN issued an interim final rule exempting all U.S.-formed entities from the BOI reporting requirement; only foreign entities registered to do business in a U.S. state remain subject to it.18FinCEN.gov. Beneficial Ownership Information Reporting The exemption could change if FinCEN issues a new final rule, so the status is worth monitoring.
Dissolution and Cancellation
Dissolution can happen voluntarily, by an event specified in the operating agreement, or by court order through the Court of Chancery when it is no longer reasonably practicable to carry on the business. The default voting threshold is often misread. Unless the operating agreement sets a different rule, voluntary dissolution requires the vote or consent of members owning more than two-thirds of the profit interests, not unanimity.19Justia. Delaware Code 6-18-801 – Dissolution Absent a fixed term or triggering event in the agreement, the LLC has perpetual existence.
After dissolution, the LLC winds up. Unless the operating agreement provides otherwise, a manager, or members holding more than 50 percent of the profit interests when there is no manager, has authority to settle debts, liquidate assets, handle litigation, and distribute what remains.20Delaware Code Online. Delaware Code Title 6 Chapter 18 – Limited Liability Company Act – Section: 18-803
Distributions follow a statutory priority. Creditors are paid first, including members or managers who are creditors of the LLC. Then members are paid amounts previously owed to them. Members then receive their capital contributions, and anything left is shared according to profit interests, unless the operating agreement changes the order.21Justia. Delaware Code 6-18-804 – Distribution of Assets Members remain liable only up to their capital contributions when assets fall short.
The final step is filing a Certificate of Cancellation and paying a $220 fee.22Delaware Division of Corporations. Certificate of Cancellation of a Limited Liability Company Skip it and the LLC stays on the state’s records, with franchise tax obligations continuing to accrue after the business has stopped operating.