Are you a business owner based in Illinois? Are you considering forming an LLC? You’re in the right place. This article explains in simple terms – how to form an LLC in Illinois. Check out our 10-step guide below. We’ll walk you through the process and cover everything you need to know.
10 STEPS TO FORMING AN ILLINOIS LLC
- Choose a Name
- Appoint a Registered Agent
- Get a Business License
- File Articles of Organization
- Create an Operating Agreement
- Get an EIN
- Open a Business Bank Account
- Additional Employer Obligations
- Annual Reports & Tax
- Federal Regulations
1: CHOOSE A NAME FOR YOUR LLC
The first step in forming an LLC in Illinois is to choose a name for your company. Several rules govern the name you can use for an Illinois LLC, see below.
NAME MUST BE UNIQUE
You must choose a name that is unique and is not already in use in Illinois. Additionally, the name you choose cannot be easily confused with another company. To check if a company name is available – head over to the Illinois Secretary of State’s website and perform a search.
MUST CONTAIN LLC IDENTIFIER
Your company name must include the identifier that distinguishes the company as an LLC. You must include the terms limited liability company, L.L.C., or LLC as its last words.
There are several words and identifiers an Illinois LLC cannot use. You cannot include the words Corporation, Incorporated, Corp, Inc, Ltd, Co, or Limited Partnership. And, you cannot use any term that would lead to the company being mistakenly recognized as a government agency. This rules out words such as Treasury, State Department, Bank, Agency, and University.
HOW TO SECURE A NAME
To secure an available company name you can reserve it for 90 days by paying a $25 fee. This allows you the time needed to complete and submit your paperwork and have your LLC officially formed by the state.
USING AN ASSUMED BUSINESS NAMES
If you wish to use an assumed business name instead of your officially registered LLC business name you will have to complete Form LLC-1.20 Application to Adopt, Change, Cancel, or Renew an Assumed Name and file it with the Illinois secretary of state. This allows you to use a DBA (Doing Business As) trade name out in the real world when conducting business.
2: APPOINT A REGISTERED AGENT
All Illinois LLC companies must appoint a registered agent. This is an individual or approved business entity that accepts official documents on behalf of the company. Your registered agent is the first point of contact between the state and your LLC. They agree to accept all important legal and tax documents and pass them on to the company owners.
A registered agent is sometimes referred to as an agent for service of process and a resident agent. It is possible to appoint yourself or another company member to act as a registered agent. However, appointing a professional is the preferred option.
You can change your agent at any time by completing form LLC-1.36/1.37 and filing with the Illinois Secretary of State. If you need some help choosing an agent for your company, check out our full guide on the Best Registered Agent Services.
3: BUSINESS LICENSE
Does your LLC need a business license? Depending on the nature of your business you may need to apply for a license at local and Illinois state level. Many industries are tightly regulated and require a valid business license or permit before you can begin operations.
For example, if your LLC is a medical or legal firm you will need to apply for a certificate of registration before conducting business. If you are a professional practice you should get in touch with the Illinois Department of Financial and Professional Regulations for more information.
What about federal business licenses? If your company falls into an industry that is controlled at a federal level you will have to apply for a federal business license. If your LLC operates in any of the industries listed below you’ll have to make a federal license application.
INDUSTRIES UNDER FEDERAL REGULATION
- Alcoholic Beverages
- Firearms, Ammunition, & Explosives
- Fish & Wildlife
- Commercial Fisheries
- Maritime Transportation
- Mining & Drilling
- Nuclear Energy
- Radio & Television Broadcasting
- Transportation & Logistics
For more information check out our full guide to LLC Business Licenses.
4: FILE YOUR ARTICLES OF ORGANIZATION
The most important step in forming an Illinois LLC is completing and filing your articles of organization. This document captures all the details needed to get your LLC officially registered with the state of Illinois. In Illinois form LLC-5.5 is used to file your articles of organization.
You must complete this form and file it with the Illinois Secretary of State’s office. The application can be made online or by standard mail. And, you will have to pay a $150 fee to file your application. Applications are typically processed in 2-10 days. See below for the information you’ll be required to provide in your submission.
Illinois LLC Articles of Organization
- Company Name
- Address of Primary Place of Business
- Purpose of Business
- Registered Agent Name & Address
- Duration of Business Operation
- Management Structure
- Names & Addresses of Managers if Manager Managed
- Names & Addresses of Members if Member Managed
- Organizer’s Name, Address & Signature
- Submission Fee ($150)
SERIES LLC APPLICATIONS
The state of Illinois allows companies to register as a series LLC if they choose to do so. Series LLCs allow companies to separate their business assets and income streams. This company structure is a good fit for LLCs that generate multiple income streams and allows members to divide ownership stakes in line with their interests. To form a series LLC in Illinois you will have to complete form LLC-5.5(S) and pay a registration fee of $400.
5: CREATE AN OPERATING AGREEMENT
An Operating Agreement is an internal company document that clarifies how a company is owned and how it will be managed. Although they are not a legal requirement in Illinois – we highly recommend all LLC companies create one from the outset.
Operating agreements are vital for providing clarification on individual roles, responsibilities, and ownership stakes. They make sure everyone is on the same page and can be used to resolve internal conflict should it arise. All LLC members should review the sign the document – at which point it becomes a legally binding contract. See below for details recorded in an Illinois LLC operating agreement.
Operating Agreement Details
- Purpose of Business
- Names & Addresses of LLC Members
- Management Structure
- Names & Addresses of Managers (if applicable)
- Details of Individual Member’s Investments
- Details of Individual Member’s Ownership Stakes
- Voting Structure & Voting Rights
- Company Meeting Structure
- Procedure For Admitting New Members
- Procedure For Exit of an Existing Member
- Procedure for Dissolution
6: GET AN EIN
Once your LLC has been formed by the Illinois secretary of state you can go ahead and get an EIN for the company. An EIN stands for Employer Identification Number is a nine-digit number used by the IRS for tax purposes. It is sometimes referred to as a FEIN or Federal Employer Identification Number.
Does your Illinois LLC need an EIN? Your LLC will need an EIN if it meets any of the conditions below.
- Elects to be taxed as a corporation
- Has more than one member
- Will hire employees
- Wants to open a bank account
To secure an EIN you must apply to the IRS (Internal Revenue Service). EINs are issued free of charge and you can apply online, by mail, or by fax. The quickest way of getting an EIN is to apply online. For more information check out EIN for LLC.
7: OPEN A BUSINESS BANK ACCOUNT
Opening a business bank account is a wise move for any business owner. It allows you to keep your personal and business finances separate. It also helps uphold the limited liability protection offered by an LLC. And, it simplifies the process of financial reporting and processing tax returns.
Our advice is to do some shopping around and see which bank is offering the best package. Make a list of your requirements and weigh these up against the services on offer. Services you should consider include access to a physical bank in your area, overdraft protection, and a business credit card. For more see How to Open an LLC Bank Account.
8: EMPLOYER OBLIGATIONS
Now that we’ve covered how to form an LLC in Illinois, let’s take a look at additional obligations that may apply to you as an employer. If your company hires employees you must comply with state legislation governing employee reporting, insurance, and tax – see below.
If you operate an LLC in Illinois and hire employees you must report details of new employees within 20 days of their hire date. This requirement is mandatory under state law.
EMPLOYEE’S COMPENSATION INSURANCE
You must purchase workers’ compensation insurance once you hire your first employee. This is also a mandatory requirement.
You must begin paying unemployment taxes if the company any of the following requirements:
1: Pays $1,500 or more in wages in a single quarter.
2: Employees any individual for more than 20 weeks in a given year.
The company is responsible for withholding payroll taxes from its employees’ wages. Additionally, the company must pay its share of payroll taxes to the state and federal governments.
9: ILLINOIS LLC TAXATION & ANNUAL REPORTING
Now you’ve got your Illinois LLC formed and taken care of your employer responsibilities, let’s tax a closer look at your taxation and annual reporting responsibilities.
Illinois LLCs, just like all LLC companies, are regarded as pass-through entities. This means the company itself does not pay any tax. Instead, the profits are passed through in full to company members that then pay tax on these earnings as part of their personal tax return.
PERSONAL PROPERTY REPLACEMENT TAX
Illinois places a personal property replacement tax on companies registered in the state. The tax is used to replace money that was lost by local governments when their powers to implement personal property taxes on companies were taken away. The tax is charged at a rate of 1.5% of net income.
As outlined above the company must ensure employees payroll taxes are withheld from wage payments and complete payment of all applicable payroll taxes.
In addition to paying taxes, Illinois LLC companies must file an annual report with the Illinois secretary of state. This report captures information similar to your articles of organization. You can file your annual report by completing form LLC-50 and paying a fee of $75.
The report is due the day before the first day of the month on which your LLC was officially formed. For example, if your company was formed on the 12th of September, the report is due annually on the 31st of August. There is a $100 penalty for filing a late report.
10: FEDERAL REGULATIONS
Finally, you should take time to ensure you have addressed and complied with all federal regulations your company may be subjected to. Having spent all this time getting your LLC filed and approved at Illinois state level it can be easy to overlook your federal obligations.
Points to consider include federal self-employment and unemployment taxes, social security, and medicare payments. Additionally, as discussed above, if your company operates in an industry regulated at federal level, you’ll need to apply for a federal business license.
HOW TO FORM AN LLC IN ILLINOIS FAQ
Here’s the questions we get asked when discussing how to form an LLC in Illinois.
HOW MUCH DOES IT COST TO FORM AN LLC IN ILLINOIS?
It costs $150 to form an LLC in Illinois. This is the fee you must pay when submitting your company’s Articles of Organisation to have your LLC officially registered by the state. Additionally, you will have to pay an annual fee of $75 when you file your annual report.
WHY SHOULD YOU FORM AN LLC IN ILLINOIS?
Forming an LLC in Illinois comes with a range of benefits including liability protection, a flexible management structure, and some tax advantages.
DO YOU NEED AN OPERATING AGREEMENT FOR AN ILLINOIS LLC?
No, an operating agreement is not a legal requirement for forming an LLC in the state of Illinois. However, it is highly recommended that you create one when forming your company.
An operating agreement details how a company is owned and how it will be run. It is a legally binding document once signed by company members and can be used to resolve internal conflict should it arise.
HOW DO YOU REGISTER AS A FOREIGN LLC IN ILLINOIS?
To conduct business as a foreign LLC in Illinois a company must register as a foreign LLC with the Illinois Secretary of State. You must also appoint an Illinois-based registered agent and pay a fee of $150. You must also provide a Certificate of Good Standing from your local state authority.
HOW DO I CHECK IF MY COMPANY NAME IS AVAILABLE IN ILLINOIS?
You can run a check on the Illinois Secretary of State’s website to see if a company name is available. You must use a name that is distinguishable from an existing company.
About the Author
Jason Roth: Editor in Chief
Jason is editor in chief at My LLC Guide. He holds a wealth of business management experience and has been advising companies on business formation issues for many years. Jason specializes in resource planning management, staff utilization, and productivity consulting.
He has worked predominantly in the west coast area where he graduated from the Marshall Business School at the University of South California. When he’s not working in his business advisory role, Jason likes to climb on his Indian Scout motorbike and enjoy the open road.