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


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