How to Form an LLC in Illinois

Are you ready to launch your limited liability business (LLC)? Illinois is an ideal place to launch your business as a limited liability company (LLC). This state is home to many opportunities for ambitious entrepreneurs, including a large population, top-caliber universities and vibrant culture.

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You will need to follow these steps to establish an Illinois limited liability company. You’ll need to follow these steps carefully and correctly if you want to obtain the liability protection for an LLC without incurring costly fines or delays.

How to start an LLC in Illinois


Forming an LLC in Illinois

To create an LLC, you must register your company with Illinois Secretary of State. This is done by filing the Articles of Organization. Before you can file these documents, you will need to register an agent .

After you have filed your Articles of Organization, you will need to create an LLC Operating Agreement . You will then be registered with the Internal Revenue Service by obtaining a EIN.


Illinois LLC in 5 Steps

We’ll be showing you how to start an Illinois LLC using five key steps. You’ll also find lots of useful information to help position your new business for success.

These guidelines apply to a domestic LLC that was established in the state where you live. A foreign LLC was one that originated from another state. You will need to fill out an Application for Admission To Transact Business in Illinois to register a foreign LLC.

Step 1: Name your Illinois LLC

 

First, you need to name your Illinois LLC. Potential customers and investors will first see your business name when they visit your website. You want your name to reflect the image you wish to project and be something you will want to keep.

 

Name Search Illinois Secretary of state – Business Services Department

Name searching

Name Reservation Optional
Suffix: Shall contain terms “limited liability company”, L.L.C. “, or “LLC,” and, if formed as a low profit limited liability company pursuant to Section 1-26 of the Act, the term “L3C”. Should consist of alphabetic letters, Arabic or Roman numerals, and symbols that are easily reproduced or readable by the Office Secretary of State. It is the name under, which the limited- liability company transacts in this State, unless the company chooses to adopt an assumed names or names as required by this Act.

805 ILCS SS180/1-10


Naming Requirements for Illinois LLCs

You must choose a name that is memorable and fits your brand.

An LLC named in Illinois must have one of these designators (separately and apart from any words or abbreviations).

  • L.L.C.
  • LLC
  • Limited Liability Company

It is important to note that Illinois doesn’t allow LLC names to include abbreviations like “Ltd” or “Co.”

Your LLC name cannot sound like a corporation, limited partnership, or corporation. This means that the words “Corporation”, “Co.,”” “Corp.,” and “Incorporated,” as well as “Limited Partnership,” and “LP,” are not allowed to be used in your business name.

Your business name must be distinct from any other company name in Illinois.  (Note: An Illinois administratively dissolved LLC’s name cannot be used by another company until three years after the date of the notice of dissolution was issued.

The name of an Illinois LLC cannot contain any phrase or word that suggests that it is a government agency, or was organized for:

  • Banking
  • Insurance
  • Assurance

Finally, offensive words cannot be used in the name of an Illinois LLC. Check with the Department of State for more information about naming guidelines.


Reserve Your Business Name

You’ve found the perfect business name but you aren’t ready to set up your LLC. You can reserve the name for as long as 90 days. This way, nobody else will be able to take your name before you are ready to officially form.

You will need to file LLC-1.15 in order to reserve your Illinois business name.


Register a domain name

Online presence is a key component of running a successful business today. It’s a smart idea to ensure that your desired name is available online as a URL.

If your first choice business name is not available for a domain, but your second choice is, this could influence your decision. You need some ideas? Want to see if domain names are available?

Notable: Make sure to search for social media addresses that match your business name.


Illinois Assumed Name of Business

You will need an Illinois assumed company name if you wish to operate your business under a different name than your company name. You must also register assumed business names with the Secretary of state.

A assumed business name can be used by LLCs to sell/launch new products or open stores without the need to create a new entity.

Here are some examples of DBAs that could be used:

  • An online puzzle seller wants to be known as ABC Puzzles, LLC by a company called “ABC Toys, LLC”.
  • An official company called “ABC Toys, LLC” would like to be sold on Amazon under the name “ABC Toys, LLC”.
  • A company called “XYZ Computers, LLC” would like to sell MacBooks through eBay under the name “XYZ MacBooks.”

Notice: Assumed business name are also known by “doing business at” (DBA), fictitious business names or trade names in other states.


Trademarks

The Secretary of State database may not show that the desired LLC name is available. However, this doesn’t mean that you can’t use it. Trademarks can be made on business names at the federal and state levels.

It’s a good idea also to check with the U.S. Patent and Trademark Office. You can use the search engine to check if your name is already federally trademarked.

You can contact the Illinois Secretary Of State to obtain state-level service marks and trademarks.

 

Step 2: Appoint a registered agent in Illinois

 

All Illinois LLCs must have a registered agent. A registered agent is an individual, or business entity, who receives important legal notices for your business.

The Illinois registered agent must be:

  • You can reside in Illinois, or you can be an authorized entity to do business in Illinois
  • A physical address is required in Illinois. A P.O. Box will not suffice

The responsibilities of a registered agent include:

  • To receive notices (services of process), you must be available during regular hours
  • Acceptance of legal notices and important mail from the government


Can I be my own registered agent?

Although you legally have the right to act as your LLC’s registered agent (although there are many reasons why this might not be the best option), Two of the traps are:

  • It can be difficult to be available for work during business hours.
  • It can be embarrassing for your brand to receive a notice from your LLC that it is being sued or has been subject to legal action in front of investors or clients.


What happens if my Illinois statutory agent isn’t found?

You could be subject to the wrathful state if your registered agent office address is not accessible. You could be forced to dissolve your LLC if you fail to register an agent.

You may not receive notices that your business has been sued or is facing legal action if you don’t have a reliable registered agent address.

It is risky to act as your own registered agent, or ask a family member or friend to do it.


Use a registered agent service

Many LLC owners choose to use a professional registered agent service .

  • You don’t have to change the registered agent address if your business moves
  • Avoid embarrassment when you are served with legal notices or documents in front of others
  • Respecting the Illinois Secretary Of State’s registration agent requirement
  • All service of process notices are sent promptly and will be acknowledged.

Professional assistance can help you feel more relaxed and able to concentrate on your business.

Step 3: File Illinois Articles of Organization

 

Next, you will need to file Articles of Organization. The Illinois Articles of Organization are the documents you use to register your LLC. These documents will be filed with the Illinois Secretary of State Department of Business Services Limited Liability Division and you will need to pay the filing fee ($150). You can either file your Articles of Organization by mail, in person or online.

 

Agency: Illinois Secretary of state – Business Services Department
Form:
Form LLC. 5.5: Articles of Organization
Instructions:
Public c334 – A Guide for Organizing Domestic Limited Liability Companies
Filing Method Mail, Fax (only if your prepaid account is active), or on-line
Agency Fee $150 + $100 expedite fees. If you file online, an expedite charge is required.
Turnaround: 2 weeks for mail or fax. 1 business day with $100 expedite cost
Law:
805 ILCS180
Notes:
  • Send the original documents by mail.
  • Illinois offers two types of LLCs: the Series LLC and L3C. Each have their own specific formation requirements.
  • Online filing allows you to return to the Secretary for State’s website within 24 hours of filing and obtain a copy at no extra cost for a period 30 days.


Information Required for Your Illinois LLC Articles of Organization

These should be included in your Articles of Organization:

  • Name of your LLC in Illinois (including LLC designationator).
  • Your business address (the address at which your LLC is headquartered)
  • Your Articles of Organization’s effective date
    • Notice: An LLC’s existence is generally established when the Department of Business Services files the Articles of Organization. You can specify a later date, but not more than 60 days.
  • Your registered agent’s name and address
  • Your Illinois LLC’s purpose
  • The term of your LLC’s existence
    • Notice: An LLC’s duration is “perpetual”, unless specified otherwise.
  • Names and addresses of initial managers, or members with authority to manage,
  • Optional provisions (such management structure and other provisions that would be included within an operating agreement)
  • Signature(s), of the organizer(s).

Illinois requires that all Articles of Organization must be submitted in duplicate and all responses must be typed in black ink.


Member-Managed vs. Manager-Managed

The most important decision for LLC owners is whether they want to be manager-managed or member-managed. Your situation and personal preferences will determine which option is best for you.

Many LLCs are member-managed. This means that the owners or members of the LLC manage the day to day activities of your business.

If your members aren’t able to manage the company on a daily basis, or you don’t want them to, it is possible to adopt a manager-managed structure. You can appoint one to three members, or hire an external manager to manage your LLC.

Note: When you hire an external manager, it is important to carefully vet your candidates and ensure that they can run your business efficiently and honestly. In your operating agreement, make sure you clearly state how much power they have.


Organizers

One or more organizers can form an LLC. An organizer could be a person over 18 years old or a business entity. The Articles of Organization must be signed by each organizer. Each organizer’s name must be printed or typed in the appropriate section.

A business entity acting as an organizer must provide the exact business name, typed or printed name, and signature of the person who is representing the entity.


Editing Your Filing

It generally takes the Secretary of State approximately 10 days for Illinois Articles of Organization to be processed and approved by him. You can expedite your filing for an additional fee to receive 24-hour service (except weekends and holidays).

Why would I want to delay my Illinois LLC filing?

Sometimes entrepreneurs will choose to delay filing their LLC’s formation date. If the filing date is near the end, the business does not need to begin for several months. Many business owners delay filing their tax returns to avoid paying taxes in the following calendar year.

Your LLC’s effective date in Illinois is the date that the Secretary of State Department of Business Services “files your Articles of Organization.” You can specify a later date up to 60 days into the future.

We can also help with this. We offer the option to delay your LLC’s effective dates by charging an additional fee when you create your Illinois LLC. (Note: This service can only be used from October through January.


Amendment Articles of Organization

Only one Articles of Organization must be filed. You will need to file LLC Articles of Amendment if you have to make any changes (such as changing the registered agent’s address).

We also offer amendment filing services that will help you file any amendments. The Worry-Free Compliance Service includes two amendment filings each year.


Limited Liability Companies (PLLCs),

Current state law requires that any LLC providing professional services in Illinois must be registered as a limited liability company or PLLC. Lawyers, accountants, architects, and doctors are all common professions that require professional licensure. To determine if you are required to create a PLLC, check with the state licensing agency in your industry.

Series LLCs

Illinois is one of few states that allows Series LLCs. When you register both a primary LLC and one or more offshoot LLCs, you are called a Series LLC. An example of when Series LLCs may be useful is when an entrepreneur has multiple rental properties and wants to seperate the liability for each.

Please note: At this time, we do not offer the formation of Series LLCs.


Low-Profit LLCs

The low profit limited liability company or L3C is another type of business entity that Illinois allows. This designation is similar to a nonprofit and is reserved for LLCs that “at all times significantly advance the accomplishments of one ou more charitable or educational purposes …””.

In your Articles of Organization, you must indicate that you intend to become an L3C. The Secretary of State has more information about L3C requirements.

Step 4: Create an operating agreement

 

Next, you need to create an Illinois operating contract. An operating agreement, even though it is not required by Illinois law, outlines how your LLC will operate.


Illinois Operating Agreement Benefits

The benefits that an LLC operating agreement provides are numerous. These include:

  • We can help you avoid disputes over assets and responsibilities
  • You can customize the company’s rules and procedures. Without an operating agreement, for instance, your LLC management structure defaults to member-managed.
  • Describe how you want your business to be managed and operated.
  • In the event that a member leaves or dies, create a succession plan
  • Make your business appear more legitimate to the courts


Even if I am the sole owner, do I still need to sign an operating agreement?

Single-member LLC owners often wonder if an operating agreement is necessary since they are the sole owner.

Operating agreements still have value. Operating agreements are useful for potential investors and future business partners.

An operating agreement can also help you if someone takes your LLC to court to claim you and your LLC are one entity. They could then pursue your personal assets. Operating agreements are essential for single-member LLCs to be able to appear more like sole proprietorships. By creating an operating agreement, however, you can show the court that your company has taken the time to create official documents. This will help to separate your business entity and you as an individual.


What should I include with my LLC operating agreement

The operating agreement should contain all relevant details regarding how your business will run.

  • Your Illinois LLC’s management structure (member-managed, manager-managed).
  • In the event that your family members die or are incapacitated, a succession plan is necessary.
  • Allocation of ownership (who gets which share of the profits)
  • The admission process
  • Who is authorized to act for the business?
  • Plans for dissolution or winding up


Use an operating contract template

It can be overwhelming to try to think of everything you should include in an operating agreement, especially if it’s your first time. To help you get started, we have an operating contract template.

Step 5: Apply for an EIN

 

You will need an Employer ID Number (EIN). This number is also known by the Federal Tax Identification Number, (FTIN), or Federal Employer Identification Number. Your EIN is similar to a Social Security Number for individuals or sole proprietors. It identifies your company to the Internal Revenue Service. This number is needed by small business owners to pay business taxes open business bank accounts or hire employees.

 

Agency: Internal Revenue Service
Form:
IRS SS-4
Filing Method Mail, phone or fax
IRS fee $0
Turnaround: Instantly online or by phone 4 business day by fax. 4-5 weeks via post
Notes: The IRS website can only be accessed during specific hours. Before closing your session you should print your EIN. For additional guidance, refer to IRS Publi 1635: Understanding Your.


Is it possible to lower my taxes by filing as an S corporation?

The flexibility of an LLC’s business structure is one of the greatest benefits. LLCs can have flexibility in the way they run their business, from management structure to day-today operations.

This flexibility can also be seen in the tax treatment of a business structure. For single-member LLCs, LLCs will be taxed either as a sole proprietorship or a general partnership. However, LLC owners have the option to choose to be taxed either as a C corporation or an S corp.

Double taxation is a possibility if you are taxed as C corp. This option can save some LLC owners money, as they are eligible for a wide variety of tax deductions. When filing as a corporation, you can write off insurance premiums as a tax deduction.

Filing as an Scorp (short for Subchapter S Corp) allows you to both avoid paying taxes and save money on self employment taxes. This allows you to become an “employee owner” and split your income between your salary and your share in the company’s profits. You’ll then be subject to self-employment tax on your salary but not your profits. You’ll still need to pay the remainder of your taxes for your profits.

Despite this, the IRS closely examines S corp files and it is more difficult to qualify for filing as one. An S corp is more likely to be audited.

It’s possible for one of these scenarios to work for you. However, taxes can be complicated. Before making any business decisions, it is a good idea to consult a tax professional.


Open a bank account for your business

The separation of personal and business assets is one of the main benefits of an LLC. It is important to avoid commingling funds in order to reap the benefits of an LLC. To manage the finances of your LLC in Illinois, you will need a bank account.

Note: To form an LLC in your state, you can do the filing paperwork yourself or hire an LLC formation service.
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