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

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

Archive