Illinois LLC Operating Agreement
An operating agreement is an agreement between members of a limited liability company (LLC) which outlines how the LLC will be organized, managed and dissolved. An operating agreement also states how the LLC is funded and governs how profits and losses will be distributed to members.
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Operating Agreement Not Required
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The state of Illinois does not require an LLC to enter into an operating agreement, but it provides that an LLC "may" execute an operating agreement if the members wish to do so.
Absence of Operating Agreement
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If members of an Illinois LLC decide against establishing and executing an operating agreement, or if the operating agreement does not address a particular topic, Illinois' Limited Liability Act will govern the relationship between LLC members and/or how the LLC conducts business.
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Operating Agreement May Not Restrict a Member's Right to Records
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Every Illinois LLC member has the right, upon written request, to access the LLC's records, including but not limited to the LLC's articles of organization and income tax returns for the previous three years. An operating agreement may not unreasonably prevent an LLC member from gaining access to these records.
Tip
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While an operating agreement is not required in Illinois, it is helpful for LLC members to have such an agreement. An operating agreement reduces conflict among LLC members because the terms are negotiated up front and are spelled out. Having an operating agreement in effect also prevents the state default rules from applying---rules which may not be in alignment with the intention of LLC members.
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References
Resources
- Photo Credit signing a contract image by William Berry from Fotolia.com
