In 1997, the Illinois Limited Liability Company Act was enacted and established the governing LLC statutes in Illinois, cited as 85 Illinois Compiled Statutes (ILCS) 180. The act authorized the formation of LLCs as new business structures that are designed to give business owners the advantages of a corporation -- limited liability -- and a partnership -- flexibility in management and pass-through taxation. In August 2005, the act was amended to authorize a new type of LLC called a "series LLC" and amended again in 2010 to provide for a new type of LLC called a "low-profit LLC.”
The act authorizes Illinois business owners to form a separate legal entity called a domestic limited liability. The act specifies that a new Illinois LLC comes into existence after filing articles of organization with the secretary of state. The articles must include certain minimum information such as a name for the LLC that includes “limited liability company” or the abbreviation "LLC," the LLC’s principal address, the name and address of the LLC’s organizer and registered agent for service of process, a date of dissolution for the LLC or a statement that it is perpetual until voluntarily dissolved, and a statement whether the LLC will be managed by a single manager, more than one manager or all the members. The articles of organization are filed with the secretary of state’s office, which also provides an optional fill-in-the-blank form for use.
Even though filing the articles of organization satisfies the basic requirement to form an LLC, a further step is typically taken to address how the LLC shall operate and the relationship among the members. This is done through preparation of an operating agreement. If the members choose not to prepare an operating agreement, then the default provision of the Illinois LLC statutes will govern the affairs of the LLC, which are set forth at 805 ILCS 180/15-5. Although multi-member LLCs can have a written or oral operating agreement, single member LLCs must put the agreement in writing.
Illinois is one of only eight states that amended its LLC statutes to provide for a series LLC. This type of LLC is authorized to create within its structure separate series or cells, each with its own members, interests and liability. A series LLC would typically be created for a real estate business that owns a number of rental properties. Within the LLC, a separate series could be established for each property, which would provide for a separation of liabilities and obligations from each property, as well as differing members.
Illinois is only the fifth state authorizing the formation of low-profit LLCs, also referred to as an L3Cs. A low-profit LLC is designed to combine certain aspects of a for-profit and nonprofit business. It can only operate for charitable or educational purposes and is designed to use both philanthropic and private investment.