Here’s our quick guide on how to form an LLC in Illinois. Forming a limited liability company enables you to start your business with some liability protection. Generally, business assets and personal assets can be treated separately when determining liability. It’s a way to separate your personal and business assets.
Doing business is the natural course of things when forming an LLC. However, it’s also possible to set up an LLC to hold assets like real estate, vehicles, and more.
Forming an LLC in Illinois needs a filing fee of $150. But there may be other costs involved depending on how you go about forming the LLC and what you need to do so. Let’s get started.
1. Choosing A Name For Your Illinois LLC
Step 1 for forming your LLC is choosing a name. This should be unique to existing companies in Illinois and available for use. The desired name for your LLC should consider the business and marketing perspective, as necessary. Although this marketing part isn’t a requirement to form your LLC, it’s good to think about that as well.
Illinois law requires that your LLC name be unique and distinguishable from other entities in the state’s record. So it makes sense to check for availability of the name before you file the Articles of Organization.
One simple way to do so is to check the state database for existing corporations. Since all it needs is a quick search, checking the availability of the name is simple. You might need to think of a few names so you have more options in case the desired name isn’t available.
Illinois LLC Designators
Your Illinois LLC name should end with a proper designator. The designator is the term ‘limited liability company’ and its accepted variations. These can be:
- LLC
- L.L.C.
- Limited Liability Company
Check Possible Trademark Violations In The Name
Even if the name is available, it’s a good idea to check it against the trademarks database. That way, your business won’t run foul of existing trademarks. You can search on the USPTO website for possibilities of infringement/violation.
Reserving A Name For Your Illinois LLC (Optional)
It is possible to reserve a name for your business without completely forming an LLC. To do this, you’ll have to file an application to reserve the name (Form LLC-1.15). This form has a $25 filing fee and reserves the name for 90 days.
Use An Assumed Name For Your Business (Optional)
This part is only relevant once your Articles of Organization are approved and the LLC has been formed. An LLC doesn’t necessarily have to operate under its registered legal name. You can use an ‘assumed business name’ or ‘fictitious business name’. Once you register this name, your LLC can be considered DBA (doing business as) the chosen assumed business name.
If you choose to use an assumed name for your Illinois LLC, you’ll have to file an application. This requires Form LLC-1.20. The assumed name is good for five years, with a $30 fee annually, going to a maximum of $150.
2. A Registered Agent For Your Illinois LLC
Illinois law requires that every LLC have a registered agent within the state. This agent can be a person or a company as long as they have a street address in Illinois. An LLC can’t be its own registered agent.
A registered agent is required for the ‘service of process’. Simply put, this agent should be able to receive communication on behalf of the LLC (and forward it as/if necessary). Service of process includes legal documents for your LLC, including lawsuits, subpoenas, summons, etc. The registered agent and their address is a part of the public record.
You can be a registered agent for your LLC, or a friend or family member can take that position. However, a person appointed as the registered agent must live in Illinois and have a street address. PO box addresses are not acceptable.
An Illinois LLC must continually maintain a registered agent and this agent should be available during normal business hours.
Many people choose to hire a commercial registered agent for their company. This provides some convenience in the form of a professional handling the part. Additionally, it has some privacy benefits as well, in case you don’t want your address (or that of a friend/family member) to be publicly available.
3. Filing The Articles Of Organization Illinois LLC
Filing the Articles of Organization Illinois LLC is the most important step in forming your company. Your LLC comes into existence after the state approves the Articles of Organization.
How Much Is An LLC In Illinois
The filing fee for the Articles of Organization is $150.
How you pay this fee depends on the method you choose to file the documents. Two methods are the most viable here, filing the Illinois LLC Articles of Organization online or sending them through the mail. If you choose to file them via mail, you’ll need to fill form LLC 5.5.
When filing through mail, the $150 payment can be made using a money order or a certified check made payable to the “Illinois Secretary of State”. The state doesn’t accept cash or personal checks.
If filing through the mail, remember to send two copies of the Articles of Organization. The mailing address is:
Secretary of State
Department of Business Services
Limited Liability Division
501 S 2nd Street, Room 351
Springfield, IL 62756
Several debit/credit cards can be used for payment if you choose to file the documents online. Please keep in mind, the $150 filing fee is a part of how much an LLC is in Illinois. There are other associated costs like the Annual Fee, which form a recurring cost of running your LLC.
How Long Does It Take To Form An Illinois LLC?
Once you’ve submitted the Articles of Organization, it can take 10-15 business days for the LLC to be approved. In case you want to go faster, you can choose ‘expedited filing’ for your Illinois LLC. This costs an extra $100, but your LLC is likely to be approved within 1-2 business days.
More often than not, an expedited filing will see the company approved within 24 hours.
Once the LLC is approved, you’ll receive a welcome letter as well as a stamped copy of the approved Articles of Organization. The welcome letter is an important document that includes the LLC’s Entity File Number used by the Illinois Secretary of State.
4. Form An Operating Agreement For The Illinois LLC
An Operating Agreement is an internal document for the LLC. You don’t need to file this agreement with any agency or organization. Yet, it’s important to have an operating agreement for your LLC. This is especially true for multi-member LLCs, though single-member LLCs too should have an operating agreement as good practice.
The Operating Agreement contains important information on the working of your Illinois LLC. This includes the distribution of profits and losses, responsibilities for members, approach to taxation, and more.
The agreement is a document that shows that the business is operating properly. It can form evidence of the proper functioning of the LLC as well as a method for dispute resolution.
You can also use this to define the management structure and responsibilities for the LLC. For example, deciding whether the LLC is member-managed or manager-managed and how to approach other management aspects.
5. Registering For Federal Tax ID (EIN)
While not mandatory, the smart move can be to get a Federal Tax ID for your Illinois LLC. Note, this should be done only after the LLC has been approved.
You can get an EIN (Employer Identification Number) for your LLC by filing an online form with the IRS. Getting an EIN is free and filing the form online is fairly convenient. In case filing online is not practical for your use, you can file Form SS-4. This form can be submitted via mail or fax and should work for most circumstances, including when the LLC is owned by another company.
Getting an EIN isn’t simply meant for taxation. You’ll need it for several other purposes as well to run your Illinois LLC smoothly. For example, opening a bank account or hiring employees for your LLC brings EIN into play. It’s also important for getting credit card(s) and establishing credit with vendors.
6. Filing Annual Reports For Your Illinois LLC
Filing annual reports is mandatory for Illinois LLCs. The report is due every year and must be filed with the Secretary of State. An LLC must file the report before the first day of its anniversary month. Reminders to file the annual report is sent to the Registered Agent of your LLC before 45 days when the report is due.
For example, an LLC formed on February 12, 2021, must file the report before February 1, 2022. Filing this report requires Form LLC-50.1. The filing fee is $75.
If you choose to file it via mail, the address is:
Secretary of State
Department of Business Services
Limited Liability Division
501 S 2nd Street, Room 351
Springfield, IL 62756
The same rules apply as those for filing the Articles of Organization via mail. You must send two copies of the form, and the payment should be made with either a money order or a certified check made payable to the “Illinois Secretary of State”. Also, include a self-addressed and stamped envelope.
A more convenient option is to file the annual report online. Once you’ve filed the report, the receipt and copy will be delivered by email.
A penalty of $100 is levied in case the report is submitted 60 days (or more) after the due date. In case you miss filing the report for more than 180 days, the state will administratively dissolve your LLC.
7. Permits, Licenses, And Taxes
Depending on the niche of your business and its specific location, you may need to get additional licenses and permits. The license and taxation requirements should be considered on three levels – local (city or county of operation), state, and federal.
For licenses and permits, it’s best to contact the local and state government for more information. The government department or regulatory agency for your business industry might have specific rules and requirements.
Additionally, LLCs in Illinois must register with the Department of Revenue. This should give you a better idea of taxation requirements.
Federal taxes have pass through taxation. This means the profits/losses from your Illinois LLC can be filed along with your personal income tax return. But it’s also possible to have your LLC taxed as a corporation for federal taxes. It might be useful to seek the advice of a professional and/or accountant for managing your taxes.