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

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

Archive