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

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

Archive