DGAA bLAWg

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


Tags

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

Archive