As of July 1, 2017, there have been several statutory changes to the Limited Liability Act, 805 ILCS 180 et seq, which could affect your current LLC, or your venture to start one up in the future. The law aims to conform Illinois Law more closely with a law drafted by the National Conference of Commissioners on Uniform State Laws. 15 states and the District of Columbia have already adapted the law as the Conference wrote it, and Illinois has made changes modeled after it.
Default Member Management
Under the revised law, an LLC is now assumed to be member-managed by default. Unless there is explicit language in the operating agreement stating that the LLC is to be manager-managed, this default member-managed status will be the standard. Also, similar to Delaware, when filing Articles of Organization for an Illinois LLC, you will no longer be required to specify whether it will be member-managed or manager-managed, but instead will only be required to provide information regarding each manager and each member having such management authority.
Oral Operating Agreements
It is now permitted to make oral and implied operating agreements, and such agreements are also expressly exempted from the statute of frauds.
Note: Because the rule on oral operating agreements is rather new, it is advisable to consider continuing to draft operating agreements in written documents to be executed by members and managers; it will soon become clear how the oral operating agreements will play out. If you have an existing operating agreement, revisions may be warranted. Schedule a consultation with our office today to ensure your LLC's operating agreement is still up-to-date.
Designating Specific Authority of Members and Managers
By filing a "Statement of Authority," Illinois LLCs can now establish or limit the authority of a member or manager to enter into other transactions on behalf of the LLC, including real estate transactions. A Statement of Denial may be filed with the Illinois Secretary of State if the member or manager opts to deny the powers granted to him or her in the Statement of Authority.
Waiver of Fiduciary Duties
Fiduciary duties may now be eliminated or restricted through the operating agreement, with the exception of the duty of care. The relevant language in the document must be clear and unambiguous. Although the duty of care cannot be completely eliminated, the operating agreement can now alter the duty of care so long as it does not authorize intentional misconduct or a knowing violation of law.
Limitation of Member’s or Manager’s Liability
Under the new, revised law, a member or manager may now eliminate or restrict their liability to the LLC and other members, unless the liability relates to a breach of certain fiduciary duties not entitled to the member or manager, or an intentional infliction of harm on the LLC or another member or an intentional crime.
Elimination of Assumed Agency Status
A member of an LLC is no longer considered an agent of the LLC solely as a result of being a member.
Access to Books and Records
LLCs may now impose reasonable restrictions and conditions on access to books and records of the LLC. The new law also clarifies the rights of members, disassociated members and transferees.
Authorized Signatories for State Filings
Any document filed with the Secretary of State may now be signed by any person who is authorized by the LLC, both digitally and in paper form. The name and title of the person signing are required to be printed or typed where indicated on whichever form is applicable to the purpose intended by the LLC.
When an LLC is dissolved administratively, for three years after the dissolution no other entity may take on its name. If the LLC becomes reinstated within the three year period, it will resume the usage of its previous name.
The Act now permits a GP, LP, Business Trust or Corporation to be converted into an LLC, and vice versa, rather than only a GP and LP. Previous to the revised and updated law, only an entity other than a partnership could convert to an Illinois LLC through a complex process including a merger. Now, the entity may simply file "Articles of Conversion" with the Illinois Secretary of State, and the process is complete.
Through the filing of "Articles of Domestication" with the Secretary of State, a foreign LLC will be permitted to become an Illinois LLC.
Please let us know how we can help. Schedule a consultation today!