DGAA bLAWg

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


Tags

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

Archive