Illinois LLC Operating Agreement

By Phil M. Fowler

Illinois state statutes 805 ILCS 180 Limited Liability Company Act Sec. 15-5 defines the operating agreement as the agreement concerning the relations among the members, managers, and limited liability company. Illinois statute permits, but does not require, the members of an Illinois limited liability company to enter into an operating agreement. If created, the operating agreement can generally contain any terms and conditions that do not conflict with the Illinois Limited Liability Company Act.

Considerations

An operating agreement is always a good idea when the LLC involves more than one member. A good operating agreement should outline all expectations and understandings of the various members of the LLC, including provisions relating to the initial contributions of money, the payout of revenues and income, the growth, transfer, and termination of LLC membership, and the timing and procedure for dissolving the LLC. These agreement terms are critical for any LLC that involves more than one member.

Finances

One of the key functions of an LLC operating agreement is to define how money flows in and out of the LLC. The operating agreement should include, for example, provisions relating to capital contributions, or start-up seed money, provided by each member. It should also include any requirements for members to contribute additional funds, either by loan or equity investment, at any time in the future. Finally, the operating agreement ought to spell out how and when each member receives compensation, including whether any member will also be an employee; it should include how and when the LLC will distribute profits to the members.

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Management

The Illinois Limited Liability Company Act allows LLCs to be either member-managed or manager-managed. In other words, the owners, who are called members, can manage the company themselves, or hire a manager to run the company. Passive investors in an LLC, for example, may require the involvement of a professional manager. The structure of the operating agreement will depend on whether the LLC is member-managed or manager-managed. At the very least, the operating agreement needs to identify which management structure will govern, and if a manager is needed. The operating agreement should identify the manager and include any limitations on the manager's authority.

Membership Provisions

The operating agreement is where the members memorialize any agreements relating to the creation of new membership interests, the assignment or transfer of membership interests, and any buyout provisions relating to membership interests. The Illinois Limited Liability Company Act does not impose any specific requirements on the membership provisions in an operating agreement; this is negotiable among the various members of the LLC.

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References

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Maryland's LLC Dissolution Law

By properly dissolving your limited liability company, you can ensure that creditors and state agencies are notified and your finances and professional reputation are protected. An LLC is a common business structure that combines the management flexibility of a partnership with the limited liability of a corporation. The operating agreement or articles of organization may provide when and how the LLC may be dissolved and how you should distribute its assets. Maryland law regulates how LLCs are dissolved if not spelled out in the operating agreement.

Operating Agreement for Florida Limited Liability Company

Florida law does not require a limited liability company, or LLC, to have an operating agreement. The LLC owners, called members, are free to operate the business of the LLC as they see fit, subject to the limitations and requirements of Florida LLC law. However, operating an LLC in this manner can have its drawbacks if the default provisions of Florida LLC law do not meet the needs and expectations of the LLC owners. To avoid this situation, owners of an LLC should adopt an operating agreement tailored to their business needs.

Massachusetts LLC Vs. S Corp

An S corporation, or S corp, and a limited liability company, or LLC, are two business entities offering liability protection that people often consider when forming a business in Massachusetts. Both of these business structures restrict the owner's liability to the amount of his investment in the company. There are several differences between the two entities, including how they are formed, how they are taxed and how they must be managed.

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