What this form is for
This operating agreement governs how your Illinois member-managed LLC will run day-to-day, defines each member's ownership percentage and voting rights, and establishes rules for profit distribution and decision-making. Banks require this document to verify who has authority to sign loan agreements and pledge company assets as collateral.
Before you start
- Legal LLC name exactly as filed with the Illinois Secretary of State and your file number from the Articles of Organization
- Complete list of all members with their full legal names, addresses, and exact ownership percentages (must total 100%)
- Federal Employer Identification Number (EIN) issued by the IRS
- Each member's initial capital contribution amount and whether contributed as cash, property, or services
- Illinois registered agent name and registered office street address (P.O. boxes not allowed)
Step-by-step
1. Fill in the LLC's legal name, formation date, and principal business address in the opening paragraph. Include the Illinois county where your registered office is located.
2. List each member in the membership section with full legal name, percentage interest, and initial contribution. Double-check that all percentages add up to exactly 100%.
3. Specify the management structure by confirming member-managed status, then detail voting rights. Illinois law defaults to voting proportional to ownership percentage unless you specify otherwise here.
4. Complete the capital contributions section showing what each member contributed at formation and the process for additional contributions if the LLC needs more funding later.
5. Define profit and loss allocation. Most member-managed LLCs distribute according to ownership percentage, but you can customize if all members agree in writing.
6. Fill out the meeting and voting provisions including how often members meet, notice requirements, and what percentage vote is needed for major decisions like taking loans or admitting new members.
7. Complete the transfer restrictions section, which controls whether members can sell their interest to outsiders. Illinois has no statutory buyout requirements, so specify your own process here.
8. Add the dissolution clause stating what events trigger winding down the business and how assets will be distributed. Illinois requires paying creditors before distributing anything to members.
9. Have every member sign and date the signature page. Illinois does not require notarization for operating agreements, but some banks prefer it for loan files.
What lenders look for
- Banks scrutinize the signature authority section to confirm who can legally bind the LLC to loan documents. If borrowing limits exist (like requiring unanimous consent for loans over a certain amount), expect lenders to ask for a members' resolution waiving that restriction for their specific loan.
- Missing or mismatched ownership percentages between this agreement and your Illinois Articles of Organization raise red flags and delay underwriting. Ensure consistency across all formation documents.
- Lenders reject operating agreements that lack transfer restrictions or dissolution procedures because these create uncertainty about loan repayment if the business breaks up.