Why Your LLC Needs an Operating Agreement

Web Admin - Tuesday, March 18, 2014

illinois corporate attorney llcsLimited Liability Companies (LLCs) are a form of business structure that allows owners to have some of the benefits of a standard corporation, but with more flexibility to control the particulars of the business. This flexibility makes it important to make thoughtful choices about things like voting rules and members’ rights and responsibilities at the start of the formation process. That is where the LLC operating agreement comes in. While operating agreements are not required by law in Illinois, it is still highly beneficial to have them because of the extra control that they provide.

What is an Operating Agreement?

An operating agreement is a document that controls the structure of the company and the members’ relationships. This can mean many different things, but operating agreements often include provisions related to:

  • - Each member’s percentage of ownership;
  • - Management of the LLC- Member Managed v. Manager Managed;
  • - The rights and responsibilities of the different members;
  • - Voting powers and dispute resolution mechanisms;
  • - Voting and meeting procedures; and
  • - Conditions relating to the sale of the LLC and the members’ related rights.

The Benefits of an Operating Agreement

Given the importance of the types of provisions that operating agreements contain, each LLC should have one, even if it is not technically required by law. The law forgoes this requirement because the legislature drafted a set of default rules to apply to LLCs for cases in which the members decide not to draft an operating agreement. While people often rely on these default rules, that is not the best strategy for their business. The major benefit of the LLC is the freedom and control provided by the operating agreement, so skipping the drafting of the operating agreement defeats the purpose.

This is especially problematic because often times the default rules do not make the most sense for a particular business. For instance, most actions under the default rules require only a simple majority vote of the members to be approved. Drafting an operating agreement would allow the members to introduce supermajority votes and other control provisions on more important issues. Similarly, another central issue to any business is the distribution of profits.

In Illinois, the default rule is that distributions must be made in equal shares to all of the members. This rule seldom makes sense for businesses in which different members have invested different amounts. People often want to tie their distribution to the members’ stakes in the company, which requires a separate provision in the operating agreement. Of course, these are just some of the many choices that operating agreements allow LLC members to make about their business and its structure.

If you are in the process of forming an LLC and need an operating agreement tailored to your business’s specific concerns, contact an Illinois corporate law attorney. We help businesses across the northwest suburbs in towns like Rolling Meadows, Palatine, Schaumburg, and Inverness.

About the Author: Attorney Jay Andrew is founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

Recent Posts


civil rights violation Illinois traffic accident lawyer boating DUI digital media accounts, estate planning, Arlington Heights estate planning attorney, Schaumburg real estate lawyer Schaumburg wrongful death attorney wage theft Rolling Meadows drug defense attorney Illinois insurance attorney Illinois employment law firm Arlington Heights wills and trusts lawyers compensatory time Crystal Lake accident attorney Buffalo Grove personal injury lawyer privacy laws Kenilworth estate planning attorneys Illinois tax attorney Illinois workplace discrimination attorney Crystal Lake car accident lawyer life insurance claim denial, denial of life insurance claim Rolling Meadows corporate lawyer Crystal Lake tax lawyer Arlington Heights real estate lawyer criminal record Affordable Care Act BAC Illinois home inspection digital assets, digital fiduciary, estate planning, digital content, Long Grove estate planning lawyers cell phone Rolling Meadows business lawyer dog bites Des Plaines Traffic Lawyer products liability underage DUI Illinois elder law attorney license reinstatement Liquor Control Act traffic violations Buffalo Grove law firm Thanksgiving back injuries texting and driving LLCs Deer Park DUI lawyer Illinois boating accident lawyer personal injury attorney commercial leases rent to own real estate contracts Chicago life insurance attorney Arlington Heights wills and trusts lawyer Illinois car accident attorney Illinois defective products attorney mass shooting Rolling Meadows employment law attorneys denied insurance claim Self-Directed IRA Accounts employment contract Schaumburg traffic lawyer Illinois pet lawyer Arlington Heights employment attorney DUI penalities manufacturing traumatic brain injuries right to work institutional trustee material misrepresentation insurance agent negligence wrongful death Des Plaines real estate attorney insufficient documentation federal crimes estate planning attorney BUI real estate attorneys Illinois red light cameras living trust benefits Rolling Meadows personal injury lawyer insurance negligence auto accidents Inverness elder law lawyer Illinois wrongful termination lawyer Barrington employment law attorney Federal Food Drug and Cosmetic Act Long Grove estate planning attorney hands free device capital gains tax Illinois speeding lawyer Illinois traffic attorneys wrongful termination, employment law, whistleblower protections, Illinois employment laws, discrimination in the workplace Palatine injury attorney automated cars preventing accidents real estate attorney license revocation Barrington criminal defense lawyer hiring employees Palatine life insurance lawyer employment law, Illinois employment laws Barrington injury attorney Illinois collections attorney Palatine law firm speeding Palatine probate lawyer employee discrimination Deer Park accident attorney irrevocable trust Des Plaines pet law attorney drunk driving statistics Arlington Heights car crash attorneys Illinois jet ski accident lawyer trusts operating agreements Arlington Heights criminal lawyer insurance disputes Rolling Meadows personal injury lawyers brain injury sexual images personal injury, auto accident injuries, delayed injuries, serious injuries, Des Plaines personal injury attorneys elder abuse Chicago estate planning lawyer PTSD drugs Illinois employment lawyer truck collisions underinsured motorist Super Mario Illinois Transfer on Death Instrument Arlington Heights estate planning attorney living wills car crashes low-ball insurance settlement fatal car accidents insurance claim denials liability Illinois employee rights attorney. Illinois lawyer marijuana employment attorney child safety civil litigation attorney Illinois estate planning law firm pedestrian accidents Buffalo Grove corporate attorney motorcycle accident Inverness civil lawyer Palatine corporate law attorneys Long Grove estate planning Palatine employment attorney healthcare claims Illinois employment law attorneys swimming pools estate planning trusts investment property Kenilworth estate planning lawyer Crystal Lake personal injury lawyer Illinois Sales Representative Act Barrington business law firm traffic offenses murder medical malpractice workers compensation jet ski accidents Barrington personal injury attorney sole proprietorship Rolling Meadows accident lawyer guardianship attorney Schaumburg estate planning attorney defective products Rolling Meadows personal injury attorney paid sick leave Schaumburg probate attorney Arlington Heights traffic attorney health insurance dispute Exclusions internet Illinois insurance dispute lawyers clemency Inverness probate lawyer Crystal Lake traffic attorney Chicago insurance claim attorneys Illinois business law atorneys Crystal Lake medical malpractice lawyer DNR Illinois medical malpractice case life insurance lawyer Des Plaines medical malpractice attorney Illinois employment laws driving special needs trust Crystal Lake pedestrian accident lawyer traffic tickets employees traffic accidents insurance claim delay Illinois personal injury attorney Long Grove wills and trusts attorneys car accident Illinois estate planning attorney insurance claims Schaumburg drug defense lawyer cell phone accidents South Barrington real estate attorney Long Grove real estate attorney Rolling Meadows life insurance claim denial attorney insurance disputes, Illinois insurance disputes, Illinois insurance dispute attorneys, denied insurance claims, Arlington Heights insurance dispute attorneys Buffalo Grove real estate attorney minimum wage insurance claim car collision Illinois probate lawyer denied insurance claims probate claims Chicago employment attorney icy parking lots Arlington Heights personal injury attorney trauma after an accident overtime violations living trust Schaumburg car accident attorney Inverness traffic law firm bike accident expungement Barrington boating accident attorney personal injury law firm Barrington drug crime attorney Barrington employment attorney Chicago insurance law firm DUI defense owner responsibility Buffalo Grove medical malpractice lawyers severance agreements construction contracts natural gas agent taxes Illinois traffic attorney uninsured motorist Arlington Heights medical malpractice lawyer car crash slip and fall accidents liens Illinois medical malpractice claim Palatine insurance lawyer drunk driving workers comp employee misclassification Des Plaines homestead rights head on collisions Buffalo Grove injury lawyer Schaumburg personal injury lawyers Barrington workers compensation attorney field sobriety test Rolling Meadows car accident lawyers Long Grove estate planning attorneys insurance dispute Policy Cancellation pedestrian injuries, pedestrian fatality senior citizens trench injuries Illinois personal injury lawyer slip and fall Crystal Lake civil litigation lawyer Arlington Heights lawyer Mount Prospect wills and trusts lawyers construction accidents Illinois driving without license estate planning for college students ObamaCare llinois Real Estate Lawyers Association problem employees Illinois medical malpractice lawyers Arlington Heights personal injury lawyer estate planning, death tax, succession plans, business estate plans, Barrington estate planning lawyers Des Plaines personal injury lawyers Schaumburg Palatine Attorney Illinois insurance claims lawyers Illinois traffic ticket lawyer Rolling Meadows estate planning attorney rumble strips gift taxes Schaumburg elder law lawyer personal injury claim Legal Info probate premises liability Palatine trusts lawyer pizza emoji new real estate form cell phone tower data loss of consortium Rolling Meadows employment attorney Illinois Probate Act of 1975 contracts Illinois mortgages Mount Prospect elder law attorney Barrington civil litigation attorney Rolling Meadows boating crash lawyer landlord tenant law Barrington real estate lawyer IRELA estate planning lawyer holiday statistics foreclosed rental property accidental death benefits bicycle accidents TBI Inverness insurance attorney Palatine traffic lawyer probate fees Des Plaines drug lawyer car accident lawyers Schaumburg personal injury attorney medication errors insurance attorney insurance adjusters Illinois personal injury lawyers Rolling Meadows employment law attorney wrongful termination attorney fees Crystal Lake insurance lawyer living trust vs will meal breaks deadly crashes Employment Discrimination Law Schaumburg construction accident lawyer Crystal Lake employment attorney Illinois workplace lawyer vacation home Rolling Meadows traffic law firm civil litigation Illinois trucking safety small business employment law estate planning Chicago will attorney, social media platforms, Illinois estate planning lawyer, gift tax exemption, estate planning, estate planning strategies, Illinois estate planning, South Barrington estate planning attorneys Crystal lake insurance dispute attorney Inverness DUI lawyer Schaumburg employment law attorneys Inverness injury lawyer insurance claim dispute attorney Rolling Meadows litigation lawyer Des Plaines insurance attorney personal injury lawyer Des Plaines motorcycle accident attorney Palatine personal injury lawyer Illinois job attorney probate claims process unfunded trust Crystal Lake medical malpractice law firm Illinois personal injury landlord Inverness estate planning lawyer Schaumburg Attorney Crystal Lake personal injury attorney Palatine real estate lawyer Arlington Heights injury attorney natural gas explosion rollover car crashes denial of life insurance Illinois employment law breathalyzer test bicycle dooring accidents drug crime insurance agents elder law estate tax tax attorney Arlington Heights accident attorney reckless homicide Illinois employment attorneys Riverwoods estate planning lawyer Crystal Lake pet attorney DGAA Illinois real estate lawyer Crystal Lake bike accident lawyer commercial real estate revenge porn boating accidents employment lawyer jet ski murder charges car crash injuries Rolling Meadows insurance attorney Illinois Smoke Detector Act digital information criminal law rest breaks Fourth of July Illinois employment law attorney Home Sale Contingencies Barrington Illinois estate planning lawyer digital assets job lawyers privacy rollover accidents life insurance policy DMV Chicago employment lawyer Palatine drug lawyer Schaumburg life insurance attorney breach of contract Des Plaines claims law firm insurance dispute attorney real estate closing fiduciary rule delay BAIID Des Plaines tax law firm Food and Drug Administration's Food Safety Modernization Act condo association Palatine elder law attorney Inverness personal injury attorney FSLA no contest clauses beneficiary complications Rolling Meadows commercial leasing Illinois Wage Payment and Collection Act Rolling Meadows criminal lawyer Inverness real estate attorney forming a corporation in Illinois real estate Illinois law Illinois civil litigation lawyer Buffalo Grove car accident lawyer Illinois insurance claim attorney drug crimes lawyer traffic laws pedestrian accident Illinois motorcycle accident lawyer bad faith insurance claims drug possession life insurance Illinois rollover accident lawyers Schaumburg corporate attorney Deer Park traffic lawyer golf accidents Rolling Meadows insurance dispute lawyers traffic crimes wills Inverness accident lawyer power of attorney marijuana crimes attorney Arlington Heights wills and trusts attorneys Schaumburg medical malpractice lawyer defective products lawyer Home Remodeling Repair Act Barrington employment law firm Barrington personal injury lawyer Illinois business lawyer digital evidence Deer Park traffic accident attorney eluding a police officer IRA benefits Illinois insurance lawyer Barrington medical malpractice lawyers Chicago attorney Crystal Lake law firm Arlington Heights tax lawyer nursing home negligence Illinois LLC creation denial of insurance claim Rolling Meadows probate lawyer Arlington Heights Traffic Lawyer Colin Gilbert Joliet general practice lawyers real estate lawyer in terrorem provision Deer Park motorcycle accident lawyer life insurance claims Barrington attorney Deer Park workers compensation lawyer startup company liability claims income distribution deducation filing a medical malpractice claim traffic deaths Forcible Entry employment contract, employment law, employment at-will, Deer Park employment law attorneys, contract, Barrington criminal lawyer FMLA Inverness corporate attorney distracted driving accidents Palatine civil litigation lawyer Palatine traffic accidents Family Medical Leave Act probate lawyer cause-of-death exclusions Retaliatory Discharge car accident lawyer Crystal Lake car accident attorney Des Plaines civil attorney Illinois estate planning, digital assets, Revised Uniform Fiduciary Access to Digital Assets Act, Illinois digital assets, Illinois estate planning, Arlington Heights trucking lawyer real estate zoning dynasty trusts appealing an insurance claim drug crimes Palatine civil attorney Buffalo Grove personal injury attorney top life insurance claim denials School Visitation Rights Act Illinois real estate fiduciary rule Crystal Lake medical malpractice attorneys Des Plaines real estate lawyer caregiver Buffalo Grove traffic lawyers Palatine corporate attorney spinal cord injuries Barrington life insurance lawyer Schaumburg civil litigation attorney Illinois attorney consent to a search license suspension healthcare Buffalo Grove life insurance attorney pay when paid contract Chicago trucking accident attorney whistleblower protections Colin H. Gilbert suspended license Illinois small business Illinois trusts attorney product liability Whistleblower Claims independent contractor medical research IRA trust transfer Barrington Traffic Lawyer financial advisors dram shop law personal injury claims Rolling Meadows insurance lawyer Inverness real estate lawyer Deer Park medical malpractice attorney Illinois wills and trusts attorneys Mount Prospect real estate lawyer Illinois pedestrian accident attorney medical malpractice claims work unions traumatic brain injury Mt Prospect Attorney Arlington Heights pedestrian accidents car accidents Rolling Meadows insurance dispute lawyers, insurance dispute most common reasons for life insurance claim denials power of attorney for healthcare advance healthcare directive Crystal Lake criminal defense attorney how to avoid common denials of life insurance claims Arlington Heights insurance attorney Crystal Lake injury attorney Palatine workers compensation lawyer Illinois insurance disputes involuntary manslaughter Illinois DUI attorney federal regulations for LLCs Des Plaines injury law firm distracted driving accident victims Rolling Meadows DUI lawyer Crystal Lake traffic lawyer Des Plaines drug crimes lawyer unpaid assessment medical malpractice compensation construction accidents, personal injury, wrongful death, Arlington Heights personal injury attorneys, workers' compensation Buffalo Grove criminal defense lawyer CAM Illinois Workers’ Compensation Commission changes to mortgage law Crystal Lake business law attorneys Do Not Resuscitate insurance denial appeals Buffalo Grove probate lawyer caretaker rights Landlord Tenant Ordinance Des Plaines DUI attorney Deer Park employment law attorney Barrington estate planning attorney Palatine business attorney Palatine criminal defense lawyer employment law, meal breaks, rest breaks, hotel employees, Des Plaines employment law attorneys workplace sexual harassment dealing with problem employees spinal cord injury insurance dispute, insurance dispute lawyers, insurance claim denial, insurance claim delays, Rolling Meadows insurance dispute attorneys Rolling Meadows Attorney Crystal Lake employment lawyer South Barrington real estate lawyer Kenilworth estate planning attorney condo Palatine construction attorney Illinois traffic laws ACA Rolling Meadows traffic attorney real estate contract motorcycle accident lawyer social media after death pregnant women Deer Park real estate law firm personal injury accidents pedestrian-automobile accident GM ignition switches trucking accidents foreclosure Chicago estate planning Illinois insurance claim dispute lawyers criminal insurance claim denial Attorney Ken Apicella controlled substance food poisoning Jay Andrew IRS Crystal Lake will lawyer real estate leasing Arlington Heights employment law attorneys Illinois registered agent mortgage Chicago biking tips Illinois workers compensation attorney Rolling Meadows Traffic Lawyer traffic violations defense Schaumburg personal injury lawyer comparative negligence Schaumburg criminal law attorney Palatine employment law lawyer vacation home fines overtime pay trust payments Arlington Heights Attorney Fair Labor Standards Act Chicago car accident lawyer medical malpractice, missed diagnosis, delayed diagnosis, medical mistake, Deer Creek medical malpractice lawyers Chicago will attorney boating under the influence Des Plaines personal injury lawyer Deer Park personal injury lawyer pet law wills and trusts Rolling Meadows criminal attorney license college kids Crystal Lake estate planning lawyer criminal defense Illinois workers compensation lawyer Deer Park criminal attorney unauthorized overtime Transfer on Death Instrument Rolling Meadows marijuana attorney personal injury coronavirus Des Plaines personal injury attorney Buffalo Grove employment lawyer disability benefits Rolling Meadows real estate attorney unpaid overtime Rolling Meadows tax attorney Des Plaines accident attorney Schaumburg criminal attorney Long Grove real estate lawyer Schaumburg employment attorney Class A misdemeanor subcontractor home inspection lawyer comp time Buffalo Grove traffic attorney employee rights pain and suffering insurance denials Schaumburg estate planning lawyer Palatine punch death Illinois living will Buffalo Grove insurance claim dispute lawyers POA Arlington Heights car accident lawyer fault based insurance Illinois will lawyer Chicago traffic lawyer Illinois construction accident attorney underfunded trust preventable medical errors pet bites surgical mistakes DUI Arlington Heights wills and trusts attorney Schaumburg injury lawyer medical marijuana Detainer Actions Rolling Meadows medical malpractice lawyers Illinois medical malpractice attorney Barrington estate planning lawyer Chicago corporate attorney estate plan Illinois injury lawyer crossover accidents Schaumburg estate attorney corporate law trucking accident lawyers Illinois estate planning anesthesia errors first degree murder sexual harassment hit and run accident installment contracts Illinois corporate lawyer insurance claim dispute Illinois Trust Code Crystal Lake employment law attorney lapse in policy deed transfer residential real estate Illinois criminal defense attorney Illinois Human Rights Act Barrington litigation attorney Palatine estate planning lawyer business litigation modern family estate planning trustee Des Plaines collections attorney probate process Arlington Heights TBI attorney blood alcohol content murder defense texting while driving Schaumburg insurance lawyers Illinois wills and trusts creditors Palatine employment lawyer ken apicella Chicago lawyer blended families Des Plaines criminal attorney DUI attorney Illinois bicycle safety loopholes Illinois insurance claim dispute lawyer estate attorney workers compensation benefits