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


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