How To Form an LLC in Illinois in 7 Steps
Creating a limited liability company (LLC) in Illinois requires several steps including naming the LLC, appointing a registered agent, filing articles of organization, applying for a federal EIN, and setting up business and tax accounts.
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A limited liability company (LLC) is a type of business entity that many entrepreneurs choose for their small businesses. An LLC has advantages such as personal liability protection and flexible tax structures. If you want to set up an Illinois LLC, follow our step-by-step guide.
7 Steps to Form an LLC in Illinois
Name Your LLC
Creating a legally proper LLC name and then protecting it is one of the first actions in LLC formation. This process can be complex and time-consuming, but it is essential for the LLC to operate legally in Illinois.
The first thing you have to do is create a great name. Illinois law 805 ILCS 180/1-10 requires that the name differs from any other company’s name to avoid confusion.
Additionally, the name must contain the words “limited liability company” or the abbreviation L.L.C.”; “LLC,”; or “L3C” if the entity organizes as a low-profit limited liability company. The name cannot contain any other business entity indication, like “Co.,” “Ltd.,” “Corp.”; etc.
Check Name Availability. Once you have settled on a name, search the Secretary of State Business Services name database to make sure your chosen name is available.
Search Domain Name. You will want to make sure that no one else can use your LLC’s name in business on the internet. You do this by searching the internet to ensure that the domain name is available. If it is available, consider registering it for your company website.
Check for Trademark Infringement. Finally, you will want to confirm your name is not infringing on a trademarked name. You can search for your business name with the United States Patent and Trademark Office (USPTO).
Protect Your Name with a Trademark. If your name is available, and you want to do business nationally, you should trademark your name to protect it. This process takes some time and money. The name is still protected as a common law trademark while that application is pending. Once you receive your federal trademark, apply to the Illinois Secretary of State to register it as an Illinois trademark or service mark. You may also trademark the name with just the state, without a federal trademark.
Reserve Your LLC Name. If you have settled on a name but aren’t ready to file the articles of organization, you can reserve the business name with the Illinois Secretary of State under 805 ILCS 180/1-15. Complete the Application to Reserve a Name (Form LLC-1.15) and submit it with a $25 filing fee.
Get a Registered Agent
Illinois law 805 ILCS 180/1-35 requires an LLC to appoint a registered agent for service of process before filing with the state. A registered agent is designated to receive process (legal documents) on behalf of the LLC. An Illinois registered agent can be an individual or a company (domestic or foreign), but it must have a physical Illinois street address. A P.O. Box is not sufficient. Even though a member can serve as a registered agent, a forming LLC will often choose a professional registered agent service.
File Your Articles of Organization
You are now ready to compose and file your LLC articles of organization (Form LLC-5.5) with the Illinois Secretary of State Department of Business Services.
Per 805 ILCS 180/5-5, your Illinois articles of organization must contain the following information:
- The name and the principal place of the business address of the LLC
- The name and address of the LLC’s registered agent
- The purpose of the LLC
- Statement regarding the duration of the LLC
- The structure of the LLC – manager-managed or member-managed
- Names and addresses of the initial managers or initial members
You must also submit a $150 filing fee. If you want the process to go faster, you may also pay a $100 fee for expediting the process.
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Draft an Operating Agreement
An LLC can be (and should be) governed by an operating agreement. This is similar to the bylaws of a corporate organization. Illinois does not require an operating agreement, but most LLCs will have one.
The LLC operating agreement is a private business formation contract among the members/business owners. You do not file it with the state, but it is an important part of forming an LLC. It should include the following points, according to the Small Business Administration:
- Percentage of members’ ownership
- Voting rights and responsibilities
- Powers and duties of members and managers
- Profit and loss distribution
- Meeting schedules and rules
- Buyout and buy-sell provisions
- Procedures for dissolution
The members may manage an LLC or hire an outside manager.
Get an EIN
Most LLCs will need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS), also called a Federal Employer Identification Number (FEIN). The EIN is an identifying number (similar to a Social Security number) that your business will use to file taxes and employee withholding. Your bank may also require you to have one to open a business bank account or obtain a business credit card. If your LLC has just one member and will not hire employees, an EIN is not required.
Set Up Business and Tax Accounts
When you start any new business in Illinois, you must register it with the Illinois Department of Revenue to pay business taxes. You can do this online by visiting MyTax Illinois or completing and mailing the Illinois Business Registration Application (Form REG-1). You can learn more about your federal tax requirements, especially if you have employees, by visiting the Internal Revenue Service (IRS) website.
Check for Additional Federal or State Requirements
Check state and federal websites to determine if there are any specific rules for your business. For example, some LLCs may have to file a Beneficial Ownership Information Report (BOIR) with FinCEN. Under current law, LLCs created in the United States are “domestic reporting companies” and are exempt from the BOIR requirement.
However, laws may change, so stay up to date with state and federal requirements.
Business and Tax Requirements in Illinois
Every Illinois business must complete an Illinois Business Registration Application with the Illinois Department of Revenue. If you have employees, you must register for withholding accounts, unemployment insurance, and workers’ compensation.
Follow licensing and tax rules to maintain your business operations. Your requirements vary depending on the LLC’s location and type of business.
State Business Tax
If you set up your LLC for pass-through taxation, the LLC does not pay corporate income tax. Instead, the profits go on the members’ individual tax returns. The individuals pay a state income tax on their income. If you set up the LLC for corporate tax treatment, however, the LLC pays a corporate state tax of 9.5% on the LLC’s income.
State Employer Tax
If you hire employees, even if they are also members of the LLC, you must register for an employer account at the Illinois Department of Revenue for withholding taxes.
Additionally, all Illinois employers must do the following:
- Report new hires within 20 days of employment date to the State of Illinois Department of Employment Security
- Register for unemployment insurance by completing the Report to Determine Liability Under the Unemployment Insurance Act (Form REG-UI-1 )
- Provide workers’ compensation insurance to employees
Sales and Use Tax
When you register your business with the Illinois Department of Revenue, you indicate if you will sell goods. As a seller, you will need to charge sales tax to your customers and remit the sales tax to the state. You must also submit the Illinois Business Site Location Information (Form REG-1-L) along with your new business registration. There is a general sales tax rate of 6.25% on general merchandise, but it varies depending on local sales tax and the type of goods sold. Check with the Illinois Department of Revenue for a sales and use tax guide.
Business Licenses and Permits
The Illinois Department of Financial & Professional Registration (IDFPR) has a directory of professions they regulate. You can register online for a business license on their portal.
Registration in Other States
If you want your Illinois LLC to do business in another state, you apply to do business as a foreign LLC. You may need to show a certificate of good standing as part of the application process. You can request a certificate of good standing online or mail form LLC-50.25 to the Illinois Secretary of State. The fee for the certificate is $25.
Annual Requirements in Illinois
Every Illinois LLC must file an annual report (Form LLC-50.1) with the Secretary of State. The due date for the annual report is any time before the first day of the anniversary month (the month you formed your LLC). There is a $75 filing fee. If you don’t file your annual report within 60 days of the due date, there is a $100 penalty.
Illinois LLC Formation FAQs
The fee for an LLC filing in Illinois is $150.
Single-member LLC. A single-member LLC is an LLC with one owner or member. A single-member LLC is similar to a sole proprietorship, where the profits of the LLC go on the owner’s individual income tax returns. The filing requirements are the same for a single-member LLC as a multi-member LLC.
Multi-member LLC. An LLC with more than one owner or member is a multi-member LLC. A multi-member LLC is similar to a limited partnership where the LLC profits go on the individual owners’ tax returns.
Professional LLC. A professional limited liability company, called a PLLC, is structured for professional services like lawyers, doctors, accountants, etc. If your business requires a separate license (doctor, lawyer, etc.), you must obtain a copy of that license from the Illinois Department of Financial and Professional Regulations and include that license in your articles of organization.
Low-Profit Limited Liability Company (L3C). Illinois recognizes the low-profit limited liability company (L3C), a variation on the LLC. This version is only available to for-profit entities whose primary purpose is to achieve a socially beneficial objective. The LLC is allowed to make a profit. However, the primary goal of the L3C should be charitable or educational.
Series LLC: An LLC that contains within it several individual LLCs that are subsets of the business, such as a property management company with multiple rental properties. You must complete a Certificate of Designation (Form LLC-37.40) for each series you want to set up. A certificate of designation may only be filed after the parent LLC has been created.
Articles of organization is the document establishing your Illinois LLC. A copy of the articles of organization proves that your LLC is authorized to do business in Illinois.
You may need to show the LLC articles of organization to your bank, lender, or state licensing board. You can request copies of your articles of organization from the Secretary of State.
Illinois issues a certificate of good standing, which verifies your company complies with registration and tax requirements. There are certain situations where you may need one, such as when applying for government funding, applying as a foreign LLC, or getting financing. A certificate of good standing is $25 and can be ordered online or requested by mail.
To set up an Illinois limited liability company, you will need the following:
- An acceptable LLC business name
- An Illinois registered agent
- An Illinois registered address
- Completed articles of organization
- Payment of the $150 filing fee
Small business owners recognize the many benefits an LLC business structure offers, which include:
- Limited personal liability for members’ personal assets for business debts and lawsuits
- Fewer reporting and recordkeeping requirements than other kinds of entities, including corporations
- Avoiding double taxation if taxed as a pass-through entity
- Special types of LLCs, such as low-profit LLCs, professional LLCs, and series LLCs
To keep your Illinois LLC in good standing, you must file an annual report and pay a yearly fee of $75 to the Secretary of State. Keep your business and tax filings up to date.
No. The articles of organization is the document establishing the LLC in Illinois. It is a public record. On the other hand, an operating agreement is a private company document. It sets forth the rules and provisions for managing the company’s operations. Although Illinois does not require an operating agreement, it is helpful to have one for running your business.
Yes. If your LLC would like to conduct business using another trade name, you can apply for an assumed name in Illinois. File an Application to Adopt, Change, Cancel or Renew an Assumed Name (Form LLC-1.20). There is also a filing fee which is determined as follows:
- $150 for each year or part thereof ending in 0 or 5
- $120 for each year or part thereof ending in 1 or 6
- $90 for each year or part thereof ending in 2 or 7
- $60 for each year or part thereof ending in 3 or 8
- $30 for each year or part thereof ending in 4 or 9
You must renew the assumed name every five years.
Certain kinds of businesses must have a license with the State of Illinois. The state has information on business license registration. Check with local government agencies about local business licensing. Chicago has its own business license regulations for companies operating within the city.
Yes. You can file your Illinois articles of organization online with the Illinois Secretary of State.
You can mail LLC applications to:
Secretary of State
Department of Business Services
Limited Liability Division
501 S. Second St., Rm. 351
Springfield, IL 62756
Or walk in your documents at two locations:
Springfield office:
501 S. Second St., Rm. 350
Springfield, IL 62756
Chicago office:
69 W. Washington St., Ste. 1240
Chicago, IL 60602
Yes. Many LLC owners use a registered agent service company to draft and file articles of organization, serve as a registered agent, and maintain your LLC’s good standing.
Even though you can be your own registered agent, there are many benefits to using a professional registered agent service company, such as the following:
- Keeping business disputes confidential. Your agent is the contact for your business operations. They accept service of process at their address, not yours. You keep any lawsuits away from your business and customers.
- Maintaining privacy. The articles of organization list your agent’s address and are part of the public record, so your home or business address is kept private.
- Assisting your business. Your agent forwards your mail and helps with LLC compliance. They remind you of important filing deadlines to avoid penalties and losing your corporate status. If you need a copy of your articles of organization or a certificate of good standing, they can help you.
- Availability. Your agent must be available to accept service of process during regular business hours. You may not have an office or employees available to accept service of process or legal documents.
If you form your LLC under state law in Illinois, it is a domestic LLC. If you form an LLC in another state and wish to do business in Illinois, you are a foreign LLC and must register with the Illinois Secretary of State.
If you want your Illinois LLC to do business in another state, you register as a foreign LLC. Contact the Secretary of State’s office for the registration requirements in that state. You must also do the following:
- Request a certificate of good standing for your LLC issued by the Illinois Secretary of State.
- Check if your Illinois business name is available in the new state by doing a name search. If your name is unavailable, you may need to file a trade name, fictitious name, or DBA ("doing business as").
- File an application to do business as a foreign LLC and pay the state fee.
A foreign LLC is an LLC registered in another state. If you are registered in another state and want to do business in Illinois, your LLC will need to file an Application for Admission to Transact Business (Form LLC-45.5) with the Secretary of State website and pay a $150 filing fee.
To dissolve your LLC, you must follow all dissolution procedures outlined in your LLC operating agreement, if you have one. Next, you close all business and tax accounts. Finally, you file a Statement of Termination (Form LLC-35.15) with the Secretary of State and pay a $5 filing fee.
You may have heard of an anonymous LLC, but Illinois state law does not permit them. An anonymous LLC does not disclose the LLC’s member names in the articles of organization which is a public record. Only Delaware, Nevada, New Mexico, and Wyoming have anonymous LLCs.
Disclaimer: The information presented here does not constitute legal advice or representation. It is general and educational in nature, may not reflect all recent legal developments, and may not apply to your unique facts and circumstances. Consider consulting with a qualified business attorney if you have legal questions.
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