Illinois LLC Operating Agreement: Rules (2026)

Q: Does Illinois require an LLC operating agreement?

No. The Illinois Limited Liability Company Act (805 ILCS 180) does not require an LLC to adopt an operating agreement, and you never file one with the Illinois Secretary of State. But if you do not adopt one, the Act's default rules govern your LLC, and some of those defaults - such as equal-share distributions regardless of contribution - surprise many owners. An operating agreement lets members override the defaults.

Q: Do I file an Illinois operating agreement with the state?

No. The operating agreement is an internal contract among the members and is not filed with the Illinois Secretary of State. Only the Articles of Organization (Form LLC-5.5, $150) are filed to create the LLC. There is no state fee for having an operating agreement; you keep it in your company records.

Q: Does a single-member LLC in Illinois need an operating agreement?

It is not legally required, but it is strongly recommended. A single-member operating agreement documents that the LLC is a separate entity from its owner, which helps preserve limited-liability protection, and banks, lenders, and title companies often ask to see one before opening accounts or closing deals.

Q: What should an Illinois LLC operating agreement include?

Typical provisions cover ownership percentages, capital contributions, how profits and losses are allocated and distributed, whether the LLC is member-managed or manager-managed, voting rights, admission and withdrawal of members, transfer restrictions, and dissolution and buyout terms. It should be consistent with the Articles of Organization and the Illinois LLC Act's nonwaivable provisions.

Q: Is an Illinois LLC member-managed or manager-managed by default?

By default under the Illinois LLC Act, an LLC is member-managed, meaning every member participates in management. The LLC can instead be manager-managed if the Articles of Organization and operating agreement so provide, in which case designated managers run the business and non-manager members are more like passive investors.

Fact-checked by the LegalGlass editorial team against primary sources · Published Aug 6, 2026 · Last updated Aug 6, 2026

Illinois does not require an LLC to have an operating agreement, and you never file one with the state - there is no state fee for it. But if your LLC has no agreement, the Illinois Limited Liability Company Act (805 ILCS 180) governs by default, including a rule that distributions are shared in equal shares among members regardless of how much each contributed. An operating agreement is the internal contract that lets members override those defaults.

Quick Answer

Required?: No - Illinois does not mandate an operating agreement
Filed with state?: No - it is internal; only Form LLC-5.5 is filed to create the LLC
Governing law: Illinois Limited Liability Company Act, 805 ILCS 180
Default management: Member-managed unless the articles/agreement say manager-managed
Default distributions: Equal shares among members unless the agreement provides otherwise
Cost: $0 to the state; only the $150 Articles of Organization fee applies to form the LLC

Is an Operating Agreement Required in Illinois?

No. The Illinois Limited Liability Company Act, codified at 805 ILCS 180, permits but does not require an LLC to adopt an operating agreement. The Act defines the operating agreement broadly as the members' agreement - written, oral, or implied - concerning the affairs of the LLC and the conduct of its business. Nothing forces you to create one, and the Illinois Secretary of State will form your LLC when you file Articles of Organization (Form LLC-5.5) whether or not an operating agreement exists.

That said, "not required" is not the same as "not important." When an LLC has no operating agreement, or the agreement is silent on a point, the default rules of 805 ILCS 180 fill the gap - and those defaults may not match what the owners actually intend. The practical role of an operating agreement is to replace the statutory defaults with terms the members choose. For the national picture, see our LLC operating agreement overview and the definition of what an LLC is.

You Do Not File It With the State

An Illinois operating agreement is a private, internal contract among the members. You do not file it with the Illinois Secretary of State, and it is not part of the public record. The only document you file to create the LLC is the Articles of Organization (Form LLC-5.5), which carries a $150 filing fee; the operating agreement itself costs nothing to the state. You keep the signed agreement with your company records, alongside your EIN confirmation and annual report filings.

Even though it is never filed, third parties frequently ask to see it. Banks often require an operating agreement to open a business account, and lenders, investors, title companies, and potential buyers may request it during due diligence. Having a current, signed agreement on hand keeps those transactions moving. Compare the true cost of setting up on our Illinois LLC cost page.

Why an Operating Agreement Matters

The strongest reason to adopt an operating agreement is control. A well-drafted agreement lets the members decide ownership percentages, how profits are split, who manages the business, how disputes are resolved, and what happens when a member leaves or dies. Without it, Illinois answers all of those questions for you through statutory defaults that treat members mechanically and often equally.

A second reason is liability protection. A core benefit of an LLC is that it shields members' personal assets from business debts. Documenting the LLC as a genuine, separate entity - with its own governance rules and formalities in an operating agreement - helps rebut arguments that the LLC is merely the owner's alter ego. This matters even for a single-member LLC, where the risk of the entity being disregarded is higher precisely because there is only one owner.

Illinois LLC Act Default Rules

Where your operating agreement is silent, these default rules from 805 ILCS 180 apply. Knowing them shows why customizing an agreement matters:

Distributions. Under the Illinois LLC Act, distributions made before dissolution are shared in equal shares among the members, not in proportion to capital contributed. A member who put in 90% of the money would, by default, share profits equally with a member who put in 10% - a result most owners want to override.
Management. An LLC is member-managed by default, so every member has authority to participate in running the business.
Voting. The Act supplies default rules on which decisions require member approval and by what margin; an agreement can set custom voting thresholds and reserve certain major decisions for a supermajority.
Fiduciary duties. Members and managers owe statutory duties of loyalty and care; an operating agreement can define and, within limits, tailor how those duties apply.
Transfers and admission. By default a member can assign the economic right to distributions but cannot make the assignee a full member without the other members' consent.

Some provisions are nonwaivable: 805 ILCS 180 lists terms an operating agreement may not eliminate, such as the power to access records or the core of the fiduciary duties. Your agreement can customize much, but it cannot contradict these mandatory rules or the Articles of Organization.

Member-Managed vs Manager-Managed

One of the most consequential choices in the operating agreement is the management structure, and it must be consistent with what you state on the Articles of Organization. In a member-managed LLC - the Illinois default - all members share authority to bind the company and run day-to-day operations. This suits small businesses where every owner is active.

In a manager-managed LLC, the members appoint one or more managers (who may or may not be members) to run the business, while non-manager members act more like passive investors with voting rights on major matters only. This structure fits LLCs with silent investors or many owners. Because a manager's authority to bind the LLC depends on this designation, the operating agreement should spell out managers' powers, appointment and removal, and any limits. Note the choice is about governance, not taxes - see how the entity is taxed in Illinois LLC tax filing.

Single-Member vs Multi-Member Agreements

A single-member operating agreement is shorter but still valuable. It records that the LLC is separate from its owner, names the member and manager, states that the member holds 100% of the interests, and sets out what happens on the member's death or incapacity. Keeping this documentation strengthens the liability shield and satisfies banks that ask for it.

A multi-member agreement does much more work because it governs the relationship among owners. It should fix each member's ownership percentage and capital contribution, the profit and loss allocation, voting rights, how new members are admitted, restrictions on transferring interests, buy-sell terms if a member wants out, and a process for resolving deadlocks. Skipping these terms leaves the equal-share and consent defaults in charge, which is a common source of disputes among Illinois co-owners.

What to Include in the Agreement

A thorough Illinois operating agreement typically covers the elements below. Tailor them to your business rather than adopting a generic form, and keep the terms consistent with your Articles of Organization and the Illinois LLC Act.

Section	What it sets
Company details	LLC name, principal office, registered agent, purpose, term
Members & ownership	Each member's name, capital contribution, and percentage interest
Management	Member-managed or manager-managed; managers' powers and appointment
Voting	Which decisions need approval and by what threshold
Profits & distributions	How income, losses, and cash are allocated and paid out
Transfers	Restrictions on selling or assigning membership interests
Buy-sell / exit	Withdrawal, buyout price, death, and dispute resolution
Dissolution	Events that trigger winding up and how assets are distributed

Because Illinois does not review or approve the document, the burden of getting it right sits with the members. For high-stakes ownership splits or investor arrangements, have an Illinois attorney draft or review the agreement.

Adopting, Signing, and Updating It

To put the agreement in force, the members sign it - ideally before or right after the LLC is formed - and keep the signed original with the company records. There is no filing step and no fee. When circumstances change (a new member joins, ownership shifts, or you switch to manager-managed), amend the agreement in writing under the amendment procedure it specifies, and update the Articles of Organization only if a filed detail such as the management type or registered agent changes.

The operating agreement also connects to closing the business: it usually states the events that trigger dissolution and how remaining assets are divided among members. When the time comes, follow the statutory wind-up and termination steps in how to dissolve an LLC in Illinois. For the broader lifecycle, start at the how to form an LLC hub and get your EIN.

Frequently Asked Questions

Does Illinois require an LLC operating agreement?

No. The Illinois LLC Act (805 ILCS 180) does not require one, and you never file it. But if you skip it, the Act's default rules govern - including equal-share distributions regardless of contribution. An agreement lets members override the defaults. See our operating agreement guide.

Do I file an Illinois operating agreement with the state?

No. It is an internal contract kept in your records. Only the Articles of Organization (Form LLC-5.5, $150) are filed with the Illinois Secretary of State to create the LLC. There is no state fee for the operating agreement.

Does a single-member LLC in Illinois need an operating agreement?

It is not required but strongly recommended. It documents the LLC as separate from its owner, which helps preserve limited liability, and banks and lenders routinely ask for one. See single-member LLCs.

What should an Illinois LLC operating agreement include?

Ownership percentages, capital contributions, profit and loss allocation, management structure, voting rights, transfer restrictions, buy-sell terms, and dissolution rules - consistent with the Articles of Organization and the Act's nonwaivable provisions.

Is an Illinois LLC member-managed or manager-managed by default?

Member-managed by default, so every member can participate in management. You can choose manager-managed in the Articles of Organization and operating agreement, putting designated managers in charge.

Sources

Illinois LLC Act - 805 ILCS 180/15-5, Operating agreement (scope and nonwaivable provisions).
Illinois LLC Act - 805 ILCS 180/1-5, Definitions (definition of "operating agreement").
Illinois LLC Act - 805 ILCS 180/15-1, Management (member-managed default; agents of the company).
Illinois LLC Act - 805 ILCS 180/25-1, Sharing of and right to distributions (equal-shares default).
Illinois LLC Act - 805 ILCS 180/35-1, Events causing dissolution.
Illinois LLC Act - 805 ILCS 180/5-5, Articles of organization.
Illinois LLC Act - 805 ILCS 180/50-10, Fees ($150 Articles of Organization).
Illinois Secretary of State - Limited Liability Companies (Department of Business Services).
IRS - Limited Liability Company (LLC) (federal classification).
IRS - Single-Member Limited Liability Companies.
IRS - Get an Employer Identification Number (free EIN).
Legal Information Institute - Limited liability company (LLC) (overview of LLC governance).

LegalGlass provides general information for educational purposes and is not a law firm or a substitute for advice from a licensed attorney or tax professional. Laws and fees change; verify current requirements with the Illinois Secretary of State and consult an Illinois attorney before finalizing an operating agreement.