Illinois entrepreneurs probably spend a significant amount of time determining the best legal structure for their small businesses. Many of them will decide to form limited liability companies because of the benefits they offer. One of those benefits is bypassing the formal structure of a corporation while avoiding the personal liability issues of sole proprietorships and partnerships. However, even the more relaxed regulations of LLCs do not discount the importance of operating agreements.
These agreements address issues such as what percentage of the business each member owns, what amount of loss and profit each member takes on and what responsibilities each member has to the business. In addition, operating agreements address the effects that the exit of one or more members (through sale, death or some other circumstance) will have on the company. The management and operation of the business may also be included in such an agreement.
The provisions of a particular operating agreement can be tailored to the needs of a certain business. Even so, each needs to contain certain information. Without clearly outlining the above information and other factors pertaining to the LLC and its members, the state of Illinois may get to make critical decisions that directly affect the members and the business.
Operating agreements may also be viewed as blueprints for a business in the coming years. Ensuring that a particular Illinois business’s agreement conforms to all legal requirements and contains all necessary information may require assistance. An attorney who routinely helps potential small business owners form their companies could prove invaluable.
Source: FindLaw, “Making LLC Operating Agreements“, Accessed on July 15, 2017