Illinois LLC Operating Agreement Template

In Illinois, your limited liability company (LLC) is not required to have an operating agreement in place. But it’s highly recommended, as an effective operating agreement can help avoid disputes and lawsuits that could threaten the stability of your LLC. 

What is an LLC Operating Agreement?

An Illinois LLC operating agreement is an important legal document that details who owns the business and provides essential information pertaining to member duties. An LLC operating agreement establishes the financial relationship between members and the basics of the working relationships between those members and the managers who oversee daily operations. 

The operating agreement is not filed with the state of Illinois, but instead remains private. It’s advisable to hire an attorney to ensure your operating agreement is thorough and legally binding.

What Should Your Illinois LLC’s Operating Agreement Include?

The operating agreement should clearly define:

Basic Information:
a. LLC name
b. Principal office address
c. Purpose of the LLC
d. Duration (perpetual or limited)

Formation and Organization:
a. Formation date
b. Statement of compliance with Illinois law
c. Name and address of the registered agent

Member Information:
a. Names and addresses of members
b. Member ownership interests (expressed in percentages or units)
c. Initial capital contributions and any future capital contribution requirements
d. Rights, duties, and obligations of members
e. Voting rights and decision-making process
f. Transfer of membership interests and restrictions
g. Admission of new members

Management Structure:
a. Indication of member-managed or manager-managed
b. Roles, responsibilities, and authority of managers
c. Process for appointing or removing managers
d. Procedures for meetings, voting, and decision-making

Financial Matters:
a. Allocation of profits, losses, and distributions
b. Frequency and timing of distributions
c. Accounting and recordkeeping requirements
d. Tax classification election (partnership, corporation, or disregarded entity)
e. Fiscal year-end
f. Procedures for handling disputes or deadlocks

Dissolution and Winding Up:
a. Events triggering dissolution
b. Procedures for winding up and liquidation
c. Distribution of remaining assets and liabilities among members

Amendments and Modifications:
a. Process for amending or modifying the operating agreement
b. Requirements for member consent

Miscellaneous Provisions:
a. Governing law (typically Illinois law)
b. Severability clause
c. Indemnification and liability protection for members and managers
d. Non-compete and confidentiality agreements, if applicable
e. Dispute resolution methods (e.g., mediation, arbitration)
f. Execution, including signatures of all members

An LLC operating agreement provides legal and financial recourse for a number of situations. If conflicts arise between LLC owners pertaining to any of the above issues, the operating agreement will provide clarity. The specific language of the operating agreement lays out exactly how such conflicts will be resolved, how the business is structured, the dynamics of operations, and more. 

Though Illinois has default rules on the books that address some of the issues that might arise between LLC members, your LLC operating agreement would override these default laws and give you greater control. Remember to consult with an attorney to ensure that your operating agreement is legally sound and adequately addresses your business needs.

How Much Does an Operating Agreement Cost? 

Creating an operating agreement is free if you just draw it up yourself. Alternatively, you can pay for guidance from an online business advisory like ZenBusiness.

This is an extremely important document, so it’s recommended that you hire a professional service or law firm. If you choose to use an attorney to help you create this document, the price will be around $500 for a single-member LLC and $2,500 for a multi-member LLC. 

Who Needs my LLC Operating Agreement?

One of the key reasons to have an operating agreement in place is that it makes your LLC more appealing to financial backers. Banks are likely to request to see your operating agreement when you apply for a loan. If you seek funding from investors, they will also want to see your operating agreement. 

Conclusion 

Though not legally required in Illinois, an operating agreement is a crucial document for LLC operations, ensuring your company is able to access adequate financing and settle any disputes. Keep in mind, you do not need to file your operating agreement with any state body. You simply need to take certain steps to ensure it’s legally binding and keep it in your records. 

Comments