Limited-Liability-CompanyThe llinois limited liability company is the most popular form or business entity in which to operate a business.  An Illinois limited liability company  (LLC’s) is a hybrid type of statutory legal entity, pursuant to the Illinois Limited Liability Company Act, that combines principles of the corporation (such as limited liability for all members (owners of the limited liability company are defined as members) with principles of the partnership (such as simple partnership management structures and informal decision-making procedures).  Further, an Illinois limited liability company offers business owners important legal and tax benefits unavailable through any other business organization form.  For example:

  • Most often the Illinois LLC is better suited to the needs of most start-up business and small business owners compared with the law governing corporations and other traditional Illinois business organizations such as the partnership or limited partnership business structures.
  • The LLC business form makes available for the first time to multi-owner or multi-member businesses the combination of limited liability for all plus the option to elect a partnership tax structure.
  • Especially important for single member business ownership, the Illinois LLC business form is the only business entity that simultaneously provides individual (only one owner/member – single member LLC) with limited liability and sole proprietorship taxation.
  • The Illinois LLC business form can be, and is, used by virtually every type of business, trade, and profession (except of medical practices), and the LLC business entity can be, and is, used by businesses of every size and level of complexity – even the NYSE, LLC.

Illinois Limited Liability Company Operating Agreement – Multi-Member

For the overwhelming majority of Illinois LLC’s where there are multiple business owners, the negotiation of a well-drafted, thoughtful operating agreement can bring major practical benefits to the business owners and the LLC itself.  Prospective business owners of an Illinois limited liability company generally have a reasonably sound understanding of the financial and management rights that they will have as business owners. However, these business owners are often unaware of the critical duties, rights, obligations and liability to which LLC business owners are normally subject.  The process of negotiating an operating agreement for the LLC can educate the business owners about such duties, rights, obligations and liabilities and it often: i) persuades prospective members who may be unsuitable not to join the LLC, and ii) enhances the effectiveness of those prospective members who do join.

Illinois LLC operating agreements themselves, once negotiated and adopted by the business owners, can provide a variety of legal and tax benefits, including the prevention of destructive member disputes and improved tax planning and business maintenance.  Operating Agreement can also serve as a comprehensive guide to business owners regarding how to operate the LLC, a sort of users manual.

Our Chicago corporate lawyers will help you weigh the pros and cons of organizing your business as a LLC to determine if the Illinois Limited Liability Company business entity best suits your business’ needs.

Limited Liability Company Under Illinois Law

Under Illinois Law, the name of a LLC must contain the words “limited liability company,” “L.L.C.,” or “LLC.” Illinois does not permit the abbreviations “Ltd.” and “Co.” to appear as the name of a LLC. The name of the LLC must also be distinct and recognizably different than the names of other business entities that have filed with the Illinois Secretary of State. Searching the Secretary of State Business Services database is advisable. Our Chicago corporate lawyers provide business owners with  comprehensive business organization which include a search state databases, as well as federal databases, to ensure the LLC names, along with the LLC’s offered products and services, are distinct, usable, and protectable.

A LLC is technically established by filing Articles of Organization (Form LLC-5.5) with the Secretary of State – note that filing the Articles only technically establishes the LLC, it does not ensure the business owners are taking full advantage of what the LLC business form offers. The Articles of Organization must include: the name and address of the LLC, the name and address of the LLC’s registered agent; the purpose of organizing the LLC; a statement addressing the duration of the LLC (whether it be a perpetual period of time or specified period of time); whether the LLC will be managed by manager(s) or by member(s) (if it is manager-managed, the Articles must include the the names and addresses of the initial managers); and the organizer(s)’ name and address.

Illinois requires that all LLCs have a registered agent for service of process. The agent is an individual or business entity that agrees to accept an LLC’s legal papers in case of a lawsuit and must reside in Illinois or authorized to do business in Illinois. Illinois also requires every LLC to file an annual report due on its anniversary date.