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


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