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


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