Changes to the Illinois Limited Liability Company Act that took effect on July 1, 2017 may impact either your current Illinois LLCs or your future ventures. The changes generally conformed Illinois law more closely to a model law for limited liability companies drafted by the National Conference of Commissioners on Uniform State Laws that has already been adopted by 15 states and the District of Columbia.
Among the changes to the Illinois law are:
Default Member Management
An LLC will now be member-managed by default unless there is explicit language in the operating agreement stating that the LLC is to be manager-managed. Similar to Delaware, you are no longer required to specify in an LLC’s Articles of Organization whether it will be member-managed or manager-managed, but instead are only required to provide information regarding each manager and each member with management authority.
Oral Operating Agreements
Oral and implied operating agreements are now permitted and are also expressly exempted from the statute of frauds.
Designating Specific Authority of Members and Managers
Illinois LLCs can now establish or limit the authority of a member or manager to transfer real estate or enter into other transactions on behalf of the LLC by filing a document with the Illinois Secretary of State.
Waiver of Fiduciary Duties
With the exception of the duty of care, fiduciary duties may be restricted or eliminated by including clear and unambiguous language in the operating agreement. 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
An operating agreement can now eliminate or limit a member or manager’s liability to the LLC and the other members, unless such liability relates to a breach of certain specified fiduciary duties, a financial benefit to which such member or manager is not entitled, 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
The provision regarding rights of members to inspect the books and records of an LLC has been revised to clarify the distinct rights held by members, disassociated members and transferees, and to permit LLCs to impose reasonable conditions and restrictions on access to information.
Authorized Signatories for State Filings
Documents to be filed with the Illinois Secretary of State may now be signed by any person authorized by the LLC, not just a manager or member, provided that both the name and title of the person signing are typed or printed where indicated on the applicable form. In addition, digital signatures will now be accepted by the Illinois Secretary of State.
Conversion and Domestication
Illinois now allows the conversion of a general partnership, limited partnership, business trust or corporation into an Illinois LLC, and vice versa. Prior to the changes to Illinois law, an entity other than a partnership could only convert to an Illinois LLC through a multi-step process involving a merger. Now, the converting entity simply files Articles of Conversion with the Illinois Secretary of State. The revised Act will also permit a foreign LLC to become an Illinois LLC through the filing of Articles of Domestication with the Illinois Secretary of State.
Please note that the summary above is not comprehensive, and is only intended to provide an overview of some of the significant changes to Illinois LLC law. Accordingly, we recommend that you consult with legal counsel to determine how the changes to Illinois law may affect your current Illinois LLCs or any Illinois LLCs that you may wish to form in the future.