Illinois Court Finds No Personal Liability for LLC Members if Operating Agreement Doesn't Include Personal Liability Provisions

By Eric Geringswald | CSC

Illinois LLC Personal Liability

An Illinois appellate court affirmed a circuit court's finding that members of an Illinois LLC could not be held personally liable for a money judgment owed by their company because the LLC's operating agreement didn't include a provision for the personal liability of members for the company’s debts, and nor had the members agreed in writing to the adoption of such a provision or to be bound by it.

In the case, a civil engineering firm sought to pierce the veil of an Illinois LLC to hold the members of the LLC personally liable for a money judgment that the engineering firm had won against the company.

A Chicago circuit court ruled to keep the veil intact, granting motions for summary judgment in the defendants’ favor. Upon appeal by the plaintiff, the appellate court affirmed the circuit court's summary judgments in June 2022, finding that there was no evidence the statutory conditions for holding the members liable had been met.

The court relied on subsections (a) and (d) of 805 ILCS 180/10-10 for its ruling: "All or specified members of a limited liability company are liable in their capacity as members for all or specified debts, obligations, or liabilities of the company if: (1) a provision to that effect is contained in the articles of organization; and (2) a member so liable has consented in writing to the adoption of the provision or to be bound by the provision.

Interestingly, the appellate court noted that the circuit court had not used the same statute to grant motions for summary judgment: "Admittedly, in granting the motions for summary judgment on count I of the second amended complaint, the circuit court did not rely on section 10-10. Even so, '[t]he appellate court reviews the judgment of the circuit court and not the reasons given for that judgment.'"

Illinois Laws Governing Business Entities Annotated

The full text of this case is included in the 2023 Edition of Illinois Laws Governing Business Entities Annotated. Published by CSC in collaboration with legal publisher LexisNexis^®, This resource is a comprehensive collection of annotated Illinois business entity statutes legal practitioners rely on to effectively conduct research, counsel clients, and complete transactions.

The 2023 Edition is current through the end of the 2022 Regular Session and annotated with more than a dozen new case notes since the 2022 edition. Including the case discussed above, there are five full-text cases exploring recent legal developments relating to service of process on an LLC, defamation, personal liability of LLC members, shareholder remedies, and dissolved corporations.

An up-to-date Fee Schedule lists the Secretary of State’s required fees for business filings. The book also includes online access to more than 100 Illinois business forms for incorporation/formation, qualification, mergers, dissolution, and name reservation for all entity types. A list of forms and contact information for the Illinois Secretary of State are included in the forms appendix.

Illinois Laws Governing Business Entities is available as a softbound book or as an eBook, compatible with dedicated eReader devices, computers, tablets, and smartphones that use eReader software or applications. It's also available on the LexisNexis Digital Library.