An Illinois LLC (Limited Liability Company) is a legal entity or business structure that you can adopt to protect your personal assets in the event your company faces a lawsuit. If your business is sued, your personal assets (such as your bank accounts, properties, and vehicles) are protected.
You can set up an Illinois LLC to run and operate a business, or use it to purchase assets such as real estate, aircraft, boats, and vehicles. If you’re looking to form your LLC in Illinois, then you’ve come to the right place. You can follow our guide below on how to start an LLC in Illinois.
Forming an LLC in Illinois is easy. To begin, you will need to file the Articles of Organization with the Illinois Secretary of State, which costs $150. You can apply this document online or by mail. The Article of Organization is a legal document that officially creates your Illinois limited liability company. Follow the step-by-step guide below to form an LLC in Illinois today and get your business up and running.
Easy Guide to Starting an LLC in Illinois in 2021
Step 1: Name your LLC (Limited Liability Company)
Choosing a company name is the first and also the most important step to starting an LLC in Illinois. But you can’t just decide on a name, you need to make sure that when you choose a name, it needs to comply with Illinois LLC naming requirements and is easily searchable by potential clients. Below are the naming guidelines set by the Secretary of State:
- Your name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).
- Your name cannot include words that could confuse your LLC with a government agency such as using the words FBI, Treasure, State of Department, etc.
- Restricted words such as Bank, Attorney, University may require additional paperwork and a licensed individual, such as a doctor or a lawyer, to be part of your LLC.
- Your business name must be distinguishable from any other Illinois limited liability company, corporation, limited liability partnership, or limited partnership.
For a complete list of the guidelines, you can read the Illinois naming guidelines.
Next, you need to check if the name is available in Illinois. Make sure the business name you want isn’t already taken up by another company by doing an Illinois LLC Search on the Secretary of State Cyberdrive Illinois website.
Another thing is to check if the URL is available. We recommend you run a check online to see if your business name is available as a web domain. You will need to have a web domain in order to create a website for your business.
Even if you don’t plan on creating a business website today, you may want to still buy or book the URL in order to prevent others from acquiring it. Otherwise, this may cause some confusion when potential clients search for your company on the internet and end up with a different site. After registering a domain name, you will also need to consider setting up a professional email account (@yourcompany.com).
FAQ [Naming an Illinois LLC]
What is an LLC?
LLC is short for Limited Liability Company. LLC is a simple business structure that offers business owners more flexibility compared to a traditional corporation while still providing many of the same benefits. An LLC is one of several different types of business structures, such as sole proprietorship, partnership, and corporation (C corp and S corp).
Do I need to get a DBA or Trade Name for my business?
Most LLCs do not need a DBA since the name of the LLC can already serve as your company’s brand name and you can even accept checks and other payments under that name as well. However, you may also wish to register a DBA if you would like to conduct business under another name.
Step 2: Choose an Illinois Registered Agent
To start an LLC, the Secretary of State requires you to nominate a registered agent for your LLC. A registered agent is also known as resident agents or agents for service of process in other states. A registered agent can be an individual or business entity that’s responsible for receiving important tax forms, legal documents, a notice of lawsuits, and official government correspondence on behalf of your business. You can think of them as a point of contact for your business with the state.
To nominate a registered agent, you need to make sure that they’re a resident of Illinois, or a corporation, such as a registered agent service, that’s authorized to transact business in Illinois. You may even elect an individual within the company, including yourself as your LLC’s registered agent.
FAQ [Nominating an Illinois Registered Agent]
Can I be my own Registered Agent in Illinois?
Yes, You or anyone else in your company can serve as the registered agent for your Illinois LLC. However, there are also other requirements that you will need to meet.
Is a registered agent service worth it?
Hiring a professional registered agent service is an affordable way for you to manage government filings for your Illinois LLC. The advantages of using a professional registered agent service often significantly outweigh the annual costs for hiring them.
Step 3: File the Illinois LLC Articles of Organization
As mentioned earlier, to register your Illinois LLC, you will need to file the Articles of Organization with the Secretary of State Department either online, by mail, or in person. Now is also a good time for you to determine whether your LLC will be member-managed or manager-managed.
The articles must include:
- Name and address of LLC’s organizer
- The LLC’s name and address
- The name, address, and signature of the LLC’s registered agent
- The name and address of at least one manager or member
- The LLC’s email address, and
- Signature of organizer
FILE THE ARTICLES OF ORGANIZATION
Option 1: File Online with the Cyberdrive Illinois
Option 2: File Form LLC-5.5 by Mail or in Person
State Filing Cost: $150 (non-refundable)
Department of Business Services
Limited Liability Division
501 S. Second St., RM. 351
Springfield, IL 62746
If you already have an existing LLC and are looking to expand to the state of Illinois, you will need to fill in the Foreign LLC form instead.
FAQ [Filing Illinois LLC Documents]
How long does it take to set up an LLC in Illinois?
Filing the Articles of Organization with the Illinois Secretary of State will take about 10 business days online or by mail, but this process can be expedited for an additional fee.
What is the difference between a domestic LLC and a foreign LLC?
An LLC that conducts business in the state where it was formed is referred to as a “domestic LLC”. Normally when we refer to an LLC, we are actually referring to a domestic LLC. A foreign LLC must be formed when an existing LLC wishes to expand its business to another state.
How much does it cost to start an Illinois LLC?
The cost to start an Illinois LLC is $150.
Step 4: Create an Illinois LLC Operating Agreement
An operating agreement is not required for you to start an LLC in Illinois, but it’s still a good practice to have one. An LLC operating agreement is a legal document that outlines the ownership and operating procedures of an Illinois LLC. This is important as a comprehensive operating agreement will help ensure that all business owners are on the same page and thus reduces the risk of future conflict.
This document establishes how your LLC will be run and sets out the rights and responsibilities of each member and manager, including how the LLC will be managed. This can help preserve your limited liability by showing that your LLC is truly a separate business entity.
FAQ [Creating an Illinois LLC Operating Agreement]
Do I need to file my operating agreement with the state of Illinois?
No, an operating agreement is not required to be filed with the Secretary of State in Illinois. This is an internal document that you should keep on file for future reference. However, many other states do legally require LLCs to have an operating agreement in place.
Step 5: Get an Illinois LLC EIN
EIN stands for Employer Identification Number and they’re a nine-digit number assigned by the Internal Revenue Service (IRS) to help identify businesses for tax purposes. You can treat the EIN like a Social Security number for your business.
An EIN is sometimes referred to as a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN). Your company will need an EIN to open a business bank account, file and manage Federal and State Taxes, as well as to hire employees.
Getting an EIN for your business is free and you can get it from the IRS online or by mail. If you already have an EIN for your sole proprietorship, the IRS will require your sole proprietorships to get a new EIN when converting to an LLC.
GET AN EIN
Option 1: Request an EIN from the IRS
Option 2: Apply for an EIN by Mail or Fax
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
FAQ [Getting an Illinois LLC EIN]
How do I get an EIN if I don’t have a Social Security number?
Luckily, a social security number is not required by the IRS to get an EIN for your Illinois LLC. You can simply fill out the IRS Form SS-4 and leave Section 7b blank then give the IRS a call at (267) 941-1099 to complete your application.
What tax structure should I choose for my Illinois LLC?
When you get an EIN, you will be informed of the different tax classification options available. However, most LLCs elect the default tax status. Some LLCs can even reduce their federal tax obligation by opting for the S corporation (S corp) status.
Do I need an EIN for my LLC?
All LLCs that hire employees or with more than one member must have an EIN and this is a requirement by the IRS.
Important Steps After Forming a Limited Liability Company (LLC)
Separate Your Personal and Business Assets
Your personal assets like your home, car, and other valuables are at risk in the event your Illinois LLC gets sued if your personal and business accounts are mixed. In business law, this is often referred to as piercing the corporate veil. Here are a few steps you can take to protect your Illinois LLC.
1. Opening a business bank account
This is a critical step as it will separate your personal assets from your company’s assets, which is necessary for personal asset protection. It will also make your business accounting and tax filing easier.
2. Getting a business credit card
Though it’s not a must, this is a good habit to practice to help business owners separate their personal and business expenses. This step can also be used to build your company’s credit history, which will prove useful when you want to raise capital or apply for small business loans later on.
3. Hiring a business accountant
Though you certainly can handle your business books yourself, it may often be a good idea to consider hiring a business accountant as they are experts in this field. Business accountants are equipped with the right experience and expertise to help prevent your business from overpaying taxes and to avoid penalties, fines, and other costly tax errors that you might miss out on.
Getting an accountant also makes bookkeeping and payroll much easier, leaving you with plenty more time to focus on plans and strategies that will grow and expand your business. Business accountants can also help you manage your business funding more effectively such as discovering areas of unforeseen loss or extra profit.
Get Business Insurance for your LLC
Getting business insurance is just as important as getting personal insurance. Business insurance helps you manage company risk and focus on growing your LLC in Illinois. The most common types of business insurance available include:
General Liability Insurance – This is a pretty broad insurance policy that protects your Illinois LLC from lawsuits. Most small businesses will get general liability insurance to protect their business.
Professional Liability Insurance – This is an insurance that’s catered for professional service providers such as consultants, accountants, etc. The insurance covers claims of malpractice and other business errors that they may be exposed to.
Workers’ Compensation Insurance – This is a type of insurance that provides coverage for employees’ job-related illnesses, injuries, or deaths. If your LLC has employees, then this is a good insurance to consider.
Create Your Website
In a world of digitalization, creating a website is a big step in legitimizing your LLC in Illinois. Almost every business today will have its own website. Even if you think that your Illinois LLC is too small or you’re focused on an offline industry, you could still be potentially missing out on a large percentage of customers and revenue simply because you don’t have a website or online presence.
Some business owners may fear that creating a business website is out of their reach since they do not have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that make the life of small business owners much simpler!
Here are a few main reasons why you should seriously consider building your own business website:
- All legitimate businesses have websites. The size or industry of your business does not matter when it comes to setting up your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are simply not enough and do not act as a replacement for a complete business website that you own and control.
- There are many website builder tools online like GoDaddy Website Builder that have made it their mission to create a website extremely simple. With this, you don’t even need to worry about hiring a web developer or designer just to create a website you can be proud of.
Send Out a Press Release
Though it’s not a requirement in the Illinois Secretary of State to form your LLC, press releases are among the easiest and best methods to promote your business. They’re also one of the most cost-effective strategies that provide plenty of great benefits like:
- Excellent publicity
- Establish your brand presence on the web
- Improves your website’s SEO to drive more customers to your website
- A one-time cost in terms of effort and money
- Have long-lasting benefits
Keep Your Company Compliant in Illinois
Illinois Business Permits & Licenses
Do I need business licenses and permits?
To operate your LLC in Illinois you must comply with federal, state, and local government regulations. For example, if you own a restaurant you will likely need to have health permits, building permits, signage permits, etc before opening up for business.
The details of business licenses and permits will vary from state to state. So you need to make sure to check with your Secretary of State Department and to read them carefully. Don’t be surprised if there are even some short classes for you to attend. Fees for various business licenses and permits will vary depending on what sort of license you are seeking to obtain.
Below are a few methods or easy ways you can obtain necessary Illinois business licenses and permits for your LLC. Alternatively, you can also hire a professional service to do them for you.
Federal: Use the U.S. Small Business Administration (SBA) guide to get federal business licenses and permits.
State: Apply for or learn more about licenses, permits, and registration with the Illinois Licenses & Permits website.
Local: Contact your local county clerk and ask about local business licenses and permits.
It is recommended for first-time entrepreneurs to consider having professional service research your business’s licensing requirements.
Illinois LLC Tax Filing Requirements
Depending on the nature of your business, you may be required to register for one or more forms of state tax. Here are the types of tax that you may encounter:
Illinois Sales Tax
If you’re selling a physical product, you’ll typically need to register for a seller’s permit through the MyTax Illinois website. This certificate will allow your business to collect sales tax on taxable sales.
Sales tax is also known as “Sales and Use Tax” is a tax levied by states, counties, and municipalities on business transactions that involve the exchange of certain taxable goods or services.
Illinois Employer Taxes
If your business involves hiring employees, you will need to register for Illinois Employer Taxes, which include Employee Withholding Tax and the Unemployment Insurance Tax through the MyTax Illinois portal.
Federal LLC Tax Filing Requirements
Most, if not all LLC in Illinois will need to report their income to the IRS each year using the following forms:
- Form 1065 Partnership Return (most multi-member LLCs use this form)
- Form 1040 Schedule C (most single-member LLCs use this form)
Just to note, how you decide to pay yourself as the company owner will also play an important role in your federal taxes.
File your Illinois LLC Annual Report
However, having an LLC in Illinois means that you are required to file an annual report with the Illinois Secretary of State. You can file your annual report online, by mail, or in-person.
ILLINOIS LLC ANNUAL REPORT
Option 1: File Online with the Secretary of State
Option 2: File by Mail or In-Person
Fee: $150 Online, $74 by Mail (Nonrefundable)
Department of Business Services
Limited Liability Division
501 S. Second St., Rm 251
Springfield, IL 62756
Due Date: Each year prior to the first day of the month in which your LLC was formed. Reports can be filed starting 60 days prior to the due date.
Late Filings: Illinois charges a late fee of $74 by mail and $125 online. In addition, your LLC in Illinois will be at risk of getting dissolved after 180 days of failure to file an annual report.
Avoid Automatic DIssolution
Illinois LLCs may face fines and even automatic dissolution if they miss one or more state filings. With this happening, Illinois LLC owners will risk the loss of their limited liability protection. This is where hiring a quality agent service can step in to prevent this outcome by notifying you of upcoming filing deadlines and even help submit the reports on your behalf.
Hiring Employees in Illinois
If you have an LLC in Illinois and plan on hiring employees, you need to stay compliant with the law by following these steps:
- Verify that new employees are able to work in the US with a valid working pass
- Report employees as “new hires” to the State
- Provide workers’ compensation insurance for employees
- Withhold employee taxes
- Print compliance posters and place them in visible areas of your workspace
FAQ [Hiring Employees]
What is the minimum wage in Illinois?
The statewide minimum wage in Illinois is $11.00 per hour. In Cook County, the minimum wage is $13.00 per hour while the minimum wage in Chicago is $13.50 per hour.
How often do I need to pay employees in Illinois?
In Illinois, employee wages are required to be paid at least twice per month, except for wages of executive, administrative, and professional employees as defined in the Federal Fair Labor Standards Act of 1939, which may be paid once a month according to the Employment Statutes of Illinois.
More Illinois LLC Information
Illinois Foreign LLCs
Forming a foreign LLC allows your company to operate as one single entity across multiple states. If you already have an existing LLC and want to conduct business in Illinois, you will need to register as a foreign LLC. This step can be done by mail or in person.
REGISTER AS A FOREIGN LLC IN ILLINOIS
File by Mail with the Secretary of State
Fee: $150 (Nonrefundable)
Department of Business Services
Limited Liability Division
501 S. Second St., Rm. 351
Springfield, IL 62756
You also need to take note that a request must be accompanied by a Certificate of Good Standing from the Secretary of State in which the LLC was formed.
How to Obtain a Certificate of Good Standing in Illinois
A Certificate of Good Standing verifies that your Illinois LLC was legally formed and has been properly maintained. There are several instances where you might need to get a Certificate of Good Standing, like when you’re:
- Seeking funding from banks or other lenders
- Forming your business as a foreign LLC in another state
- Obtaining or renewing specific business licenses or permits
You can order an Illinois LLC Certificate of Legal Existence online or by mail.
ORDER A CERTIFICATE OF LEGAL EXISTENCE
Option 1: Request a Certificate Online through the Illinois Secretary of the State Department
Fee: $25 (nonrefundable)
How to Dissolve an Illinois LLC?
If at any point in the future you no longer wish to conduct business with your Illinois LLC, it is important for you to officially dissolve it properly. Failure to do so in a timely fashion can result in tax liabilities and penalties, or even legal trouble. There are two broad steps to dissolve your Illinois LLC:
- Close your business tax accounts
- File the Illinois Articles of Dissolution
Other Frequently Asked Questions
Should I Start an LLC?
If you’re just started your business or have been operating as a sole proprietor, you should consider starting an LLC. LLCs limit an owner’s personal liability for business debts and lawsuits and offer a lot of flexibility when it comes to business ownership, management, and taxation.
How do I know if my LLC name is available?
LLCs in Illinois need to have a unique name that is distinguishable from the names of other existing businesses on file. You can conduct a name search for free on the Illinois Secretary of State website to make sure your proposed name is still available.
How much does LLC (Limited Liability Company) formation cost in Illinois?
The Secretary of State Department charges a $150 filing fee for the articles of organization. It will cost $10 to file a name reservation application by mail or in person. If you do submit the reservation form in person, you will also need to pay an additional $10 handling fee. The Secretary of State also requires that you file an annual report every year which will cost $150.
Filing these documents on your own is often the cheapest option, but completing all of the forms and filing them yourself can quickly get complicated. Hiring a lawyer is another option but that will cost you hundreds, if not thousands of dollars in the process. Another option is to hire a registered agent service to help you with all the paperwork and filings for you.
Do I need an operating agreement for Illinois LLCs?
Illinois State does not require LLCs to have an operating agreement, but it is highly advisable to have one as the operating agreement will help protect your limited liability status, prevent financial and managerial misunderstandings, and ensure that you decide on the rules governing your business instead of state law.
Can a foreign LLC do business in Illinois?
All LLCs organized outside of Illinois State must register with the Illinois Secretary of State Department to conduct business in Illinois.
Can I form a single-member LLC in Illinois?
For most formation purposes, an Illinois single-member LLC is considered the same as a multi-member LLC with the same steps required to start an LLC as those listed above.
How do I dissolve an LLC when I’m done?
If you reach a point where it is time to close your business and cease all operations, then you will want to properly dissolve your LLC to limit your liability for lawsuits and government fees.
Starting a business correctly doesn’t have to be difficult. With over 15 years of experience consulting new businesses and start ups, Matthew is probably the best person to help you set a strong foundation for your business.