Illinois LLC Operating Agreement: Everything You Need to Know
An Illinois LLC operating agreement is a legal document that outlines specifics for the business. 3 min read
An Illinois LLC operating agreement is a legal document that outlines specifics for the business. This helps ensure that all company members follow the same rules and guidelines, resulting in a well-run, well-organized business.
Operating Agreement for Your Illinois LLC
An operating agreement works for businesses of all sizes. It allows members to outline operational procedures and policies. LLCs in Illinois don't have to file an operating agreement with the state, but it's still recommended to create one.
One of the main functions of an operating agreement is to make clear how money flows in and out of the business. Your LLC's agreement should include provisions relating to any capital contributions that each member provides.
The agreement should also detail the following:
- When and how members receive compensation
- When and how the business distributes profits to members
- Whether any member will be an employee
- Management type, i.e., member-managed or manager-managed
- Who the manager is, if any
- Limitations on a manager's authority
The agreement helps to create separation between personal assets and business assets, so it gives you protection from personal loss. As long as your agreement has no terms or conditions that conflict with the state's LLC Act, it can have the terms and conditions you desire. You might also enjoy some tax benefits from having an agreement.
You might need to produce a copy of your operating agreement for any of the following situations:
- You need financing from a lender.
- You're buying real estate and a title company asks for it.
- An accountant requires it.
- An attorney requests it if you need legal advice.
- Partners or investors who have an interest in your company request it.
An operating agreement is a working document. As your business expands, you should be able to make changes to the agreement. If you change anything, you'll need to print out a new agreement and all members will have to sign the amended document. You should file a copy of all previous versions of any operating agreements.
You can lessen the chance of conflict between members when you clearly outline expectations and responsibilities in your agreement. Make sure all members read the agreement in full so that they know what to expect and what's expected of them.
Every member should have a copy of the agreement.
How to Write an Operating Agreement
You can download a template and fill in the information in the appropriate spaces, depending on whether your LLC is a single- or multi-member business.
- Enter the name of your company at the top of the document.
- Enter the date the involved parties are entering into the agreement as well as necessary information pertaining to management type. If it's a single-member business, enter the name and state where the business is located, as well as the owner's name and address. For multi-member businesses, include the name and address of each member.
- Enter the business name and physical address, including the city, and the company's registered agent name and address. Enter all information relating to formation, i.e., the formation date, business purpose, term, and capital contributions. You'll check the appropriate box indicating single- or multi-member LLC.
- Check appropriate boxes and review all information relating to company management and bank accounts.
- Each member must check appropriate boxes and review information relating to member meetings, or to a yearly date when all members will meet. All members should also review details concerning the assignment of Interests, ownership of company property, admission of new members, dissolution and liquidation, notices, amendments, and arbitration, among several other miscellaneous bits of information.
- Provide the effective date of the agreement, the company name, and all member signatures.
Every member should receive a copy when the agreement is complete and everyone agrees to all aspects in it. Keep your operating agreement in a safe location.
An operating agreement, though not a requirement in Illinois, can be a very important legal document outlining your company's operations. It's smart practice to have an agreement in place so that all members of your company are on the same page.
If you need help with an operating agreement for your LLC, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.