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

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

Archive