Illinois, home of Walt Disney, the most famous dreamer of them all, gladly welcomes dreamers seeking to realize their dreams. No matter how large or tiny your goal may be, forming an LLC in Illinois is a terrific way to get your business adventure started.
As you may be aware, one common business form used by small firms is the limited liability corporation (LLC). The majority of small firms are really organized as LLCs. Illinois makes registering and preparing your firm for business simple, quick, and reasonably priced.
This comprehensive guide will offer you an overview of how to create an Illinois LLC, state-specific specifics, and all you need to know for keeping your firm up and operating for years to come, regardless of whether you decide to do the work yourself or you want some additional support.
In Illinois, forming an LLC entails the following actions:
1: Choose a Name for Your Illinois LLC
2: Choose Your Registered Agent
3: File Your Articles of Organization
4: Draft an LLC Operating Agreement
5: Obtain Your Employer Identification Number (EIN)
Pros and Cons of Forming an LLC in Illinois
Pros
- Limited liability protection is available in Illinois via LLC formation, protecting personal assets from corporate debts and liabilities.
- LLCs in Illinois have the option of manager-managed or member-managed arrangements.
- Illinois LLCs gain from taxes that is passed through
Cons
- Illinois charges a hefty first registration cost when forming an LLC.
- Illinois LLCs must submit an annual report and pay a related charge.
How to Start an LLC: Illinois 5-Step Guide
Learning more about Illinois LLC creation is a great way to help establish credibility for your small business and open doors for its future success. Ready to get started? Follow this 5-step guide.
Step 1: Choose a Name for Your Illinois LLC
Choosing the ideal company name is among the most thrilling (and enjoyable) aspects of forming an LLC in the state of Illinois. Your business name must be unique and clearly recognizable from those of other corporate organizations (corporations, partnerships, and other LLCs) that are registered with the state. You may use the IL name database to do an LLC search to find out whether the Illinois LLC name you have previously decided on is available.
How do you make sure your choice isn’t already used?
- Check availability
- Check whether your name is being used informally by anybody by doing a quick online search. Even if it is technically accessible, this might lead to misunderstanding.
- Verify that the name isn’t being trademarked by another firm by checking the federal patent and trademark database.
Illinois has many naming requirements and restrictions for acceptable LLC names. First, your LLC’s name must include:
The phrase “limited liability company” or any of its acronyms, such as “LLC” or “L.L.C.”
Only the English alphabet’s letters, Arabic or Roman numbers, and symbols that the Department of Business Services can duplicate
Second, your Illinois LLC’s name may not include:
- The terms Ltd., Incorporated (or Inc.), Corporation (or Corp.), Limited Partnership (or L.P.)
- Words like “treasury” or “FBI” that might lead someone to mistake your company for a government agency
- Word or phrases that convey a “derogatory connotation against good taste and decency”
- See the Illinois naming standards for a full list of regulations. These specify precisely what name guidelines your company must adhere to.
Selecting a good name is a crucial stage in the formation of an Illinois LLC. After you’ve selected a few finalists, you may contact the secretary of state by submitting a corporate name availability inquiry form. In order to determine if your prospective business name is available, it will do an internal LLC search and provide an email response. Each form may ask questions about a maximum of three names.
Inside Scoop: You may reserve your possible name for ninety days by completing this form if your ideal name is available but you’re not quite ready to register your LLC in Illinois. Submissions may only be made by mail. Simply mail the original form, one copy, and a $25 check made payable to the Illinois Secretary of State (an extra $25 will expedite the filing).
Step 2: Choose Your Registered Agent
The next step is to appoint an agent to serve as your LLC’s official point of contact in the event of legal issues. According to Illinois law, the agent must be a resident of the state or a company with permission to do business there. In Illinois, a P.O. Box is insufficient. Important papers must be received on your behalf by them, and they must be accessible on-site during regular business hours with an actual street address in Illinois. Document delivery to you is the responsibility of your registered agent. The following documents will be sent to the agent:
- Process serving law (in the event that your LLC is sued)
- Tax records
- summons to court
Another option is to use a reputable registered agent service. This company will accept legal and tax paperwork on behalf of your LLC. Businesses in Illinois may feel secure knowing that a business with expertise in the field is handling the registration process when they choose a professional registered agent service. If you travel regularly or do business from another state, this is a very smart decision.
Using a registered agent service instead of listing yourself may let you concentrate more on routine company operations and less on whether you unintentionally threw away a crucial piece of mail, even if your LLC has only one member.
Step 3: File Your Articles of Organization
Probably the most crucial step in forming an LLC is completing Form LLC-5.5, the articles of organization. In order to maintain records of your firm and capture the crucial details of your recently formed corporation, you must submit articles of organization to the Illinois Secretary of State. Its acceptance grants your firm the right to start operations.
For an LLC, Illinois articles of organization must include:
- The name of your Illinois Limited Liability Company
- Your LLC’s business address (i.e., the address of the LLC’s principal place of business)
- The date when you want the articles to take effect (if not immediately)
- The name and address of your registered agent
- The purpose of your LLC (Illinois allows a general statement of purpose)
- A statement on your LLC’s duration (if not perpetual)
- The names and addresses of the initial members (if your LLC is member-managed) and any managers (if your LLC is manager-managed)
- The organizer’s name, address and signature
Inside Scoop: You may utilize a virtual address for your LLC’s primary place of business if you operate from home. In doing so, your home address will remain confidential.
A professional limited liability company (PLLC) registration form and a specific purpose clause describing the nature of the professional services to be rendered must also be included for any LLC that plans to provide professional services licensed by the Illinois Department of Financial and Professional Regulation (IDFPR). “PLLC” or “Professional Limited Liability Company” must appear in their names.
Inside Scoop: You may apply for a foreign LLC by completing an application for admission to transact business if you already have an LLC in another state and want to utilize it to do business in Illinois. It will set you back $150. A certificate of good standing from the state where your LLC was created, no older than sixty days, must be included.
Step 4: Draft an LLC Operating Agreement
Illinois does not require you to draft an operating agreement, in contrast to several jurisdictions where you may incorporate an LLC. However, when you’ve completed the Illinois LLC establishment procedure, it’s a good idea to think about one. An operational agreement outlines the fundamental components of your company’s structure and commercial operations. It describes the management structure of the LLC and makes clear the rights and obligations of managers and members.
Making sure that relevant stakeholders are in agreement on crucial topics is a great method to draft an operating agreement. The majority of operating agreements include the following crucial details:
- ownership rights
- profit sharing
- daily operations
- transferring ownership
- dissolution
- voting procedures
- financial accounting information
Law in action: Illinois company owners should think about having an operating agreement in place even if they are a single-member LLC. For instance, in the event that your LLC is charged with profit-sharing.
It may be shown that your LLC assets are distinct from any personal interests by having an operating agreement in place that outlines the accounting processes and explains the accounting process. For this reason, setting up an LLC banking account is also crucial (more on that later).
Step 5: Obtain Your Employer Identification Number (EIN)
For your company, an EIN functions similarly to a Social Security number. The Internal Revenue Service (IRS) uses this special nine-digit number for tax reasons. The whole application procedure takes place online and is free. You will instantly get your number after clicking submit.
Although an EIN is only necessary if your company employs people or is a multi-member LLC, Illinois single-member LLCs want to think about obtaining one as well, since they are often needed for several crucial operations. Among these roles are:
- working with banks
- hiring employees
- filing federal taxes
- working with vendors
The Cost of Forming an LLC in Illinois
In the Land of Lincoln, there are many of advantages to forming an LLC, but it’s important to take the company’s costs into account. The first filing cost in Illinois is $150 at this time, and that is where your adventure starts.
Like many other jurisdictions, Illinois mandates that LLCs submit an annual report and pay a $75 charge. This ongoing cost guarantees that your LLC stays in good standing and complies with state laws. Even though the Prairie State is among the greatest places to form an LLC, you should be mindful of these expenses before you set out on your LLC adventure.
Maintain Your LLC: Illinois Ongoing Requirements
Establishing your LLC is just the beginning of a successful company. To keep your LLC alive and prepared to do business, you must fulfill certain licensing requirements, pay business taxes, and submit yearly reports by the first day of the LLC’s anniversary month.
Opening a Business Bank Account
The primary advantage of creating an LLC is the opportunity to insulate oneself from responsibility by keeping personal and corporate assets separate. However, the limited liability provision of an LLC may be nullified if there is any co-mingling of a member’s personal assets with the LLC’s assets. As soon as their company is incorporated, Illinois firms should establish a bank account and get a business credit card for their LLC in order to safeguard their personal assets in the event that the LLC is sued.
Paying State and Federal LLC Taxes
The papers that you must submit for federal income tax reasons will change depending on how your business is set up.
Conventional LLCs are pass-through tax companies, which means that they just report their revenue to the IRS and do not pay taxes on it.
The revenue of a single-member LLC is reported on the member’s personal income tax return (Form 1040), and the LLC is handled as a sole proprietorship.
Multi-member LLCs are regarded as general partnerships; as such, the LLC will use Form 1065 to report its revenue, and each member will use Schedule K-1 to claim their respective income share from the LLC.
LLCs wishing to opt S-Corp classification must first submit a Form 2553 to the IRS indicating their desire to be subject to small business company taxes. An S-Corp is a pass-through corporation, just like a regular LLC, therefore it only has to use Form 1120-S to record its revenue. The tax on each member’s or employee’s wage that the LLC has paid them will then be due.
LLCs who want to opt C-Corp status must first submit a Form 8832 to the IRS indicating their desire to have their LLC regarded as a corporation for tax reasons. In contrast to the other entities, this option will result in two separate taxation structures: one for the corporation and another for the shareholders.
1.5% of the LLC’s net revenue, or personal property replacement tax, must be paid to the state. The extra taxes you pay will vary according to the kind of company your LLC conducts. Additionally, counties in Illinois may impose deeper state taxes on the activities you participate in.
Hiring Employees
In Illinois, there are other criteria that you must fulfill in order to maintain your good standing with the state if you are thinking about recruiting staff for your LLC. These requirements include:
- Purchase workers’ compensation insurance as soon as possible after hiring your first employee.
- Report any new hires to the Illinois Department of Employment Security within 20 days of the hiring.
- Pay your unemployment taxes.
Marketing Your LLC
Establishing a clientele of customers is crucial when attempting to launch a company. Consequently, it makes sense to spend money promoting your LLC. Illinois entrepreneurs might begin by setting up an internet presence for their firm.
Finding out whether a domain name that is comparable to the name of your LLC is available for usage is the first step. It’s advisable to choose a business-related address that is brief, memorable, simple to type, and user-friendly (particularly for mobile users).
For instance, the domain “skadden.com” is used by the legal practice “Skadden, Arps, Slate, Meagher & Flom LLP.” You may also think about using the initials of your firm (“sasmf.com”) or a term associated with your organization (“chicagobusinesslawyers.com”).
You could also want to choose a memorable nickname that differs from the name of your LLC that is on file. This is known as a “doing business as” (DBA) name, or “Assumed Name,” and it might be useful if the registered LLC name is very technical or hard for customers to remember. A paperwork has to be submitted to the Illinois Secretary of State in order to officially adopt this assumed name.
Inside Scoop: Reserve your ideal domain name right now, even if you’re not quite ready to develop your company website. It saves you a lot of trouble later on if you find out that you lost out. It’s also inexpensive and simple to do on your own.
You may always start out by making a free social media account (Facebook or Instagram) if you’re not quite ready to establish a website. Getting people to connect with your product or service and grow your fan base is becoming more and more common using this approach.
Applying for LLC Business Licenses and Registration
Your LLC must first register with the Illinois Department of Revenue in order to do business in Illinois. If you sell certain goods, such as alcohol, tobacco products, or fuel, you may have to submit extra documentation.
Depending on the industry in which your LLC operates, you could additionally be required to get a business license from the State of Illinois Business Services Department and certain municipal government departments. Before starting commercial activities, each member of an LLC must get a permission or LLC license from the relevant state licensing authority, for instance, if the LLC operates in a professional field like real estate, dentistry, or law.
The city of Chicago is only one of several towns and jurisdictions with extra business license regulations and LLC requirements. Before opening for business, companies in certain sectors, including those that sell cannabis and alcohol, must also have particular sales permits and certificates.
Local Resources
There are a lot of different factors to take into account while forming an LLC in Illinois, so the process might seem overwhelming. How are you aware of your ignorance? Locating a business mentor who can guide you in the right direction is a smart option. There are branches of the SCORE mentoring program all around Illinois, which might help you find a mentor in your field.
You may also join the U.S. Small Business Administration’s local organization in your area. When you’re figuring out what you need to do to maintain compliance with both state and federal rules, this may provide some further direction. It may also put you in touch with a wealth of additional resources, such as local small business initiatives, financing sources, and educational possibilities.
Ways to Create an LLC: Illinois Options
Choose the most appropriate formation technique for your Illinois Limited Liability Company before moving forward with the creation process.
DIY
Budget-conscious business owners may find that the DIY option is the best choice for forming an LLC since there is a wealth of information accessible via this guide and the website of the Illinois Secretary of State. For easy-to-understand LLCs, you may be able to finish the procedure by yourself.
Using an LLC Formation Service
Filing the necessary paperwork to create an LLC is the area of expertise for online LLC services. The minor cost of using an LLC service may prove to be well worth it for Illinois company owners who are already very busy running their small businesses. The majority of packages include things like operating agreement preparation, EIN registration, registered agent service, and state approval assured.
Numerous services are adaptable, and there are plenty to choose from if you like to compare prices. The most well-liked choices with the highest ratings include ZenBusiness, Incfile, Northwest Registered Agent, Swyft Filings, and LegalZoom LLC services.
Hiring an Attorney
Hiring an attorney could be a wise decision for certain startups, even if it might not be the ideal solution for every one. This is particularly true for companies that have investors or intricate financial arrangements.
ALSO READ:
The Bottom Line: Forming an LLC in Illinois
The procedure of forming an LLC in Illinois is simple and only requires a few steps to accomplish. To make paperwork easier, the state offers a wealth of materials, including template forms and step-by-step instructions. Examining top LLC formation services may also help to expedite the procedure.
Frequently Asked Questions LLC: Illinois
How much does an LLC cost in Illinois?
If you’re forming an LLC in Illinois, you must pay a $150 in state fees to file your articles of organization (whether you file online or via mail).
How do I make an LLC in Illinois?
The official step that “makes” your LLC is filing the articles of organization with the Illinois Secretary of State and paying the required filing fee.
Do LLCs pay taxes in Illinois?
Yes. LLCs pay a personal property replacement tax that is 1.5% of the LLC’s net income.
How long does it take for an LLC to be approved in Illinois?
If you file online the processing time is about 10 days, if you file through the mail, it is about 4 weeks. Depending on the number of LLC applications being processed, this wait could be much shorter. You can expedite the process (within 24 hours) by paying a $100 fee.
Is EIN the same as Tax ID?
For federal tax purposes, EIN and tax ID are synonymous. In Illinois, you’ll need to go through an additional step to register your business and pay state taxes. This can be done electronically through the MyTax Illinois system.
Can I create an Illinois series LLC?
Yes, Illinois is one of the few states that allows the formation of series LLCs. A series LLC is an entity that holds other smaller entities within itself. The smaller entities could be LLCs themselves or any other business structure. This can add an extra layer of liability protection making it a desirable structure for businesses that are especially high risk.
What is a registered agent for LLCs?
Think of a registered agent as the LLC’s important mail recipient. It is the agent’s sole responsibility to keep your important mail organized and delivered to you in a timely manner. Whether you choose to dole out the task to a registered agent service, or you appoint an LLC member to handle the job the individual or company you choose should be responsible and organized.
What does LLC stand for and why should I start one?
Just as “inc.” stands for incorporated, LLC stands for limited liability company. It is a flexible, easy to manage business entity that offers its owners (called members) liability protection. Although registering an LLC requires a few steps, it is a small price to pay for the advantages it has over operating as a sole proprietorship.
Illinois LLC creation allows members to keep their assets separate from those of the company. They can protect themselves from personal liability for debts incurred by the business. This means you can keep the lights on at home even if your Illinois LLC forgets to pay the electric bill. At the same time, LLC members have complete discretion in how the company is operated. There are few required corporate formalities, such as regular meetings or minute-keeping.
LLCs also have some flexibility in how they’re taxed. They can avoid double taxation since the Internal Revenue Service (IRS) classifies LLCs as “pass-through” entities for federal tax purposes. The members report gains and losses with their individual tax returns, which means the company isn’t required to pay additional federal or state corporate income taxes.
Not only does an LLC protect its members from liability, but it also helps segregate the financial transactions associated with an organization or event from members’ day-to-day finances. This can help encourage transparency (for example, to allow a club’s members to view its financials without disclosing members’ own accounts). It can also help you stick to a budget for large events by keeping available funds separate and accounted for.
Establishing an Illinois LLC is also a good first step for a small business; as your business needs change, you can easily convert it into a different corporate entity. This flexibility means that your business can continue to build goodwill, credit and longevity rather than starting over at square one when you outgrow the LLC structure.
What are the benefits of an LLC in Illinois?
Thinking through the pros and cons of LLC structure can be a good way to determine whether it is the best fit for your business. Illinois LLC creation can benefit many different types of businesses and financial enterprises. An LLC can help keep your personal assets separate, reduce your personal liability and protect your privacy in many types of financial endeavors, including:
- Buying real estate
- Investing in a business
- Donating to a charitable or political organization
- Making contributions to a campaign or social movement
- Hiring household employees
- Planning a large event, such as a wedding or reunion
- Organizing a fundraiser
- Managing a club or group
You can establish an Illinois LLC for an indefinite duration (to manage a running club, for example) or for a specific event (such as planning and organizing a weekend festival). The ease and affordability of setting up an LLC make it an excellent choice for many.
The only real drawback to the LLC structure is that you’ll need to pay to create and maintain the company. Other business types (like sole proprietorships or general partnerships) do not need to be registered with the state and do not pay an annual reporting fee.
