Illinois LLC Operating Agreement
The Illinois LLC Operating Agreement is the core document that is referred to when issues concerning an Illinois limited liability company (“LLC”) need to be resolved.
The LLC Operating Agreement is the most important document for your Illinois LLC.
In the case of a single member LLC, without the formality of an LLC Operating Agreement, the LLC can closely resemble a sole proprietorship, which does not limit your personal liability for business debts of the LLC.
With respect to a multi-member LLC, the LLC Operating Agreement reflects the agreement among the members with respect to the affairs and management of the LLC and governs the relationship amongst the members of the LLC. By having an LLC Operating Agreement, the members will be provided with a clear set of rules that all members have agreed upon greatly reducing the likelihood of disagreement between them in the future. A LLC Operating Agreement will also greatly reduce financial and management misunderstandings, and make sure your business is governed by your own rules -- not default rules created by the state of Illinois.
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The LLC operating agreement does not have to be filed with any state agency. All states, including the state of Illinois will enforce valid operating agreements entered into among LLC members. The operating agreement will only be enforced against the persons who are parties to the agreement. Therefore, it is extremely important that all members of an LLC sign the operating agreement.
Your Illinois Limited Liability Company
LLC Filing Office
Secretary of State
Department of Business Services
Limited Liability Company Division
Room 359, Howlett Building
Springfield, IL 62756
Entity or Franchise Level Tax
Illinois imposes its personal property tax replacement income tax on partnerships and LLCs taxable as partnerships. The tax is equal to 1.5 percent of the partnerships net income for the taxable year. Illinois does not impose its personal property tax replacement tax on LLCs that are disregarded for federal income tax purposes. Neither a partnership nor an LLC is subject to Illinois franchise tax.
State LLC Act
The Illinois LLC Act is contained in Chapter 805 of the Illinois Statutes
Important Statutory Rules
An LLC is managed by its members unless the Operating Agreement states that the LLC is to be managed by one or more managers.
Admission of Members
Unless the Operating Agreement states otherwise, new membership must be issued with the written consent of all the members.
Amending the Operating Agreement
Except as otherwise provided in the LLC’s Articles of Organization or Operating Agreement, managers may, by a majority vote, amend the Articles of Organization to remove the name of an initial manager who is no longer a manager, remove the name of the initial registered agent of the LLC, or change the LLC name. Other amendments to the Operating Agreement require the approval of all members.
Unless otherwise provided in the Operating Agreement, the approval of all members is required to approve distributions to members prior to dissolution of the LLC, to sell all LLC assets, or to voluntarily dissolve the LLC.
Transfers of Property
If the LLC is member-managed, transfers of LLC property may be transferred by a document signed a member on behalf of the LLC; if managed-managed, any manager can execute such a transfer document on behalf of the LLC.
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