What is included in an Illinois LLC Operating Agreement?
Your Illinois operating agreement should address how your LLC will handle any events it’s likely to experience. Virtually anything can be included in your operating agreement, as long as it doesn’t contradict Illinois state law. But you should definitely cover at least these topics:
- Activities of your LLC
- Transfer of membership interest
- Voting rights and decision-making powers
- Initial contributions
- Profits, losses, and distributions
- Management
- Compensation
- Bookkeeping procedures
- Dissolution
What information do I need for Northwest’s free Illinois LLC operating agreement?
Want to focus on your business and leave the legal matters to us? Our lawyers have drafted a comprehensive operating agreement you can use for free. You can even fill it out on this page, save it in a free account for later, and download a completed draft to sign.
In order to fill out our free operating agreement template, you’ll need your:
This must be your business’ legal entity name, or the name you put on your LLC Articles of Organization.
Did an LLC member contribute $500? $5k? A storefront? Put that here.
You’ll just write in 16 here since our version has a set amount of pages.
Remember, this is an internal document, so you won’t have to submit these names to the state just because they’re on here. However, you might need to add these people to your BOI Report.
Include any initial contributions, even if it’s only a small percentage.
While we recommend having a business bank account, some banks like to actually see the operating agreement before you open the account. If that’s the case, you can leave this blank for now.
This is the place your business operates from.
You can add this in later if you aren’t sure when your meeting will be held.
There are a few spots in our template where you’ll need a signature from one or more members.
Why should an Illinois LLC have an operating agreement?
An Illinois LLC should have an operating agreement because a company cannot act for itself. In order to operate, LLCs require real humans (and other entities) to conduct company operations.
Illinois state law doesn’t require an operating agreement. Statute § 805 ILCS 180/15-5 states that LLC members may enter into an operating agreement but doesn’t require them to do so. But just because an operating agreement isn’t required by law doesn’t mean it’s not important. An operating agreement performs many essential functions for an Illinois LLC. Here are a few of them:
1. An operating agreement is required to open a business bank account.
Most banks require you to show your operating agreement to open a company bank account. Having a business bank account is crucial for keeping business and personal finances separate.
2. An operating agreement can help reinforce your limited liability status.
In order to qualify for limited liability status, an LLC must be able to show that it is a legally separate entity from its owners. Since your operating agreement outlines the rules and procedures your LLC follows, it can help you prove that your LLC is a distinct legal entity. If your LLC is ever taken to court, a strong operating agreement could make all the difference in your case.
3. An operating agreement can help your members resolve their differences.
Occasional conflict is a natural part of being in business with others, but you want to be able to resolve conflicts fast and fairly. Because your operating agreement has already been agreed upon by all members, it can help when members are in disagreement.
4. An operating agreement can override Illinois’s default laws.
Anything you don’t cover in your operating agreement will be governed by the Illinois Limited Liability Company Act, but the rules in this Act might not be the best fit for your company. A personalized operating agreement will give you more say in how your LLC functions.
Illinois Case Law
We asked our lawyers for an example of how an operating agreement can make or break your LLC. Here’s what they said.*
“Consider the case of Daniel v Ripoli where the intent of the LLC members was upheld and enforced by the courts, despite a third-party injecting themselves into the affairs of the LLC and demanding payment of funds to a deceased member’s estate. Because the members distilled their understanding into an updated and amended operating agreement, the courts preserved the amended LLC operations, despite outside parties asserting and demanding a conflicting result. For these reasons, inter alia, it is important to not only adopt a written operating agreement, but it is also important to maintain an operating agreement for your LLC.”
FAQs
There is no Illinois state law requiring an LLC to adopt an operating agreement. However, an operating agreement will help your LLC resolve disputes, open a bank account, and protect your limited liability status.
No. Because an Illinois operating agreement is an internal document, it does not need to be filed with the state. However, Illinois statute 805 ILCS 180/1-40 requires your LLC to keep any current operating agreement you have on file at your place of business or in another location specified in the operating agreement.
Yes. It may seem a little strange, but even a single-member LLC will need an operating agreement for things like opening a bank account and reinforcing limited liability. An operating agreement is also necessary for overriding Illinois’s default LLC laws.
*This is informational commentary, not advice. This information is intended strictly for informational purposes and does not constitute legal advice or a substitute for legal counsel. This information is not intended to create, nor does your receipt, viewing, or use of it constitute, an attorney-client relationship. More information is available in our Terms of Service.