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


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