If you are planning to start a limited liability company (LLC) in Illinois, it is important to know what your legal obligations are. One of the most important documents you need to prepare before forming an LLC is the operating agreement. In Illinois, an LLC operating agreement is not only recommended, but it is also required by law.

What is an LLC operating agreement?

An LLC operating agreement is a legal document that outlines the management structure, ownership, and operating procedures of your business. It is essentially a contract between the members of your LLC that defines their rights and responsibilities.

Why is an LLC operating agreement required in Illinois?

Illinois state law requires all LLCs to have an operating agreement. This requirement is outlined in the Illinois Limited Liability Company Act (805 ILCS 180). The act states that LLCs must have a written operating agreement that governs the relations among its members and between its members and the LLC.

What should be included in an LLC operating agreement?

While there is no specific format for an LLC operating agreement in Illinois, there are some key provisions that are typically included. These may include:

1. Ownership and Management: This section should outline the ownership structure of the LLC and the roles and responsibilities of each member. It will also detail how the LLC will be managed, whether by the members themselves or by designated managers.

2. Capital Contributions: This section defines how much each member will contribute to the LLC and how those contributions will be made.

3. Profit and Losses: This section outlines how profits and losses will be allocated among members.

4. Voting Rights: This section defines how voting rights will be distributed among members and how decisions will be made.

5. Dissolution: This section outlines the process for dissolving the LLC, including how assets will be distributed and how debts will be settled.

6. Buyout Provisions: This section outlines how members can buy out other members or sell their own interests in the LLC.

Conclusion

An LLC operating agreement is a critical document that governs the essential workings of your business. It is a legally binding contract that outlines the roles and responsibilities of each member and the management structure of the LLC. In Illinois, it is not only recommended but also required to have an operating agreement. This document is crucial in maintaining the integrity and stability of your business, protecting the interests of all members involved.