How to start an LLC in Illinois?

LLC in Illinois

A Limited Liability Company (LLC) is ideal for business owners who want an easy and efficient way to start a new company. This entity structure is actually quite favorable due to the several advantages it offers right from tax flexibility to heightened credibility, personal liability protection, and even flexible management structure. When you file an Illinois LLC application, you can also enjoy advantages offered by the state including small business incentives and tax credit programs. One of the foremost requirements is hiring an Illinois LLC registered agent and this can also be advantageous as they will be the liaison between the state and the company.

What is Illinois LLC?

An Illinois limited liability company is considered to be a hybrid business structure or entity. This is because it constitutes features of several other structures including partnerships and corporation. The structure of an LLC has been created in a way that will be beneficial once you opt for Illinois LLC filing online. This type of private limited company exists legally as an entity separate from its owners also known as members. Once you file an LLC in Illinois, it can even opt for S Corporation tax status. You can even operate this type of entity as a single-member LLC or a multi-member LLC.

The benefits of forming an LLC in Illinois

A limited liability company is quite a preferred entity amongst first-time business owners in the USA. The Illinois LLC search for name and registration is governed by the Illinois Compiled Statutes. If you want to register an LLC in this state then it is important to identify the salient features of this type of structure. Let’s look at some of the top features:

• Management structure – One of the top features of a limited liability company is its flexible management structure. If you file an LLC in Illinois then you as the owners or members can manage the company or elect a managerial committee. This is unlike corporations that are managed by a board of directors only and not the shareholders. Hence, you will often come across the term “member-managed LLC” where you and other owners will be responsible for overseeing daily operations. If you have appointed managers, then it will be known as a “manager-managed LLC”.
• Pass-through entity – An important feature of a limited-liability company is that it is not subjected to federal income tax due to it being a pass-through entity. This refers to the fact that the company’s profits will pass through to you or the owner(s). Hence, you and other owners will be taxed at the individual tax rate applicable in this state. When you file an Illinois LLC application, you will need to file an individual income tax return hence an LLC is also known as a flow-through entity.
• Limited liability protection – This is definitely the most outstanding feature of a limited liability company. Illinois LLC filing requirements state that you will need to provide the name and other information of members in the forming documents. Yet, this type of entity has a separate legal identity. Hence, the owner or members enjoy limited liability. Thus, your personal assets or assets of any LLC member can never be used to satisfy the debts and obligations of the limited liability company.

Start an LLC in Illinois

If you want to start an Illinois LLC then it is important to focus on several areas of the business. This may vary from choosing a business name to choosing the right location. You will also need to ensure compliance with Illinois LLC filing requirements according to state laws. Let’s take a look at some of the important aspects of starting your LLC in this state.

1. Choose an Illinois LLC name

One of the most important steps towards forming an Illinois LLC is to choose a business name. The name of your company is essentially also the identity. Hence, it will be used for several purposes, including LLC formation, business license application, and opening LLC bank accounts. You will need to choose a business name while being compliant with 2023 Illinois Compiled Statutes, Chapter 805 – Business Organizations, Limited Liability Company Act. After you have chosen a name, you need to conduct an Illinois LLC search.

2. Choose an Illinois LLC registered agent

If you have decided to start an Illinois LLC then it’s important that you adhere to certain state laws. One of the mandatory state requirements is to hire and continuously maintain an Illinois LLC registered agent in the state. This is governed by 805 ILCS 180/Article 1-General Provisions. The primary role of a registered agent in the state is to provide service of process.

3. File Article of Organization

The most important step towards new business formation is registering your company with the state. You will need to submit the Articles of Organization according to the Illinois Limited Liability Company Act, 805 ILCS 180/5-5. You have to submit this with the office of the Secretary of State – Department of Business Services, Limited Liability Division, along with a filing fee of $150. You can file it by mail or in person. There is also an option available for Illinois LLC filing online. The processing time takes around 10 days and you can always expedite it by paying an additional cost.

Form an Illinois LLC Today!

4. Prepare Illinois LLC operating agreement

After you file an Illinois LLC application, one of the basic legal documents required by your company is an operating agreement. The importance of this document lies in the fact that it helps in setting forth the structure of the LLC, the management, and operating procedures, and governs the decision-making process. This is an internal document and is not required to be submitted to the state. Essentially, an operating agreement can be considered as a contract where all members of the said LLC will be bound by its terms after it has been signed.

• Statement of intent
• Members’ ownership expressed in percentages
• Distribution of profit and loss
• Duty of members and their benefits
• Powers of managers and members
• Admission of new members
• How to hold board member meetings
• Ownership transitions
• Tax considerations
• Transfer provisions

5. Obtain EIN for Illinois LLC

An Employer Identification Number (EIN) is a unique nine-digit number that is assigned to an LLC by the Internal Revenue Service (IRS). It is also known as the Federal Employer Identification Number (FEIN). If you form a single-member LLC without any employees then you may not be required to apply for an EIN. The purpose of the EIN is to allow the IRS in identifying businesses for the purpose of tax reporting. There are several benefits of having an EIN like it helps in obtaining credit and filing business taxes.

Do you want to obtain an EIN in Illinois?

6. Check local licenses and permits

Once you file an LLC in Illinois, you will need to make it operational. This is possible by applying for and obtaining the relevant business licenses and permits. Many states have general licenses but Illinois doesn’t have a state-wide general license. The licenses required by a limited liability company may fall under these categories –

• According to Business Sector – The issuing of licenses in certain business sectors is governed by regulatory bodies or government agencies. If you were to start an Illinois LLC focusing on wholesale food operations or manufactured food then the licensing authority will be the Illinois Department of Public Health (IDPH). There are different agencies that regulate different aspects of the overall food supply. You may even need a single or multiple licenses depending on the business sector.
• According to City/County – The Illinois LLC filing requirements make it necessary for businesses to apply for local licenses. The type of license and fee may vary according to the county you are operating from as well as business activity. The City of Des Plaines, IL requires you to apply for licenses and permits for establishments selling liquor like restaurants or bars. The Building and Code Division of Community & Economic Development of this city is responsible for issuing licenses. It is important to maintain compliance with the city code. You may also need zonal permits in certain areas of the city.
• Professional license – Lastly, certain businesses in Illinois may even require professional or occupational licenses. These licenses are issued by the Illinois Department of Financial and Professional Regulation (IDFPR). The form and fee will be different for each category of professional license.

7. Open Illinois LLC bank account

Once you have submitted documents for Illinois LLC filing online, the immediate requirement would be to create a separate bank account. This separate account known as a business bank account will help manage your expenses and gains from the business. Managing LLC finances properly is key to the overall sustenance of the company, especially from a long-term perspective. There are several benefits of a business banking account like making your tax reporting more simplified while enhancing overall credibility.

8. Comply with taxes and other regulations

One of the Illinois LLC filing requirements is that of fulfilling all annual requirements as specified by the state and governed by the Illinois Limited Liability Company Act. One such requirement is that of filing an annual report pursuant to 805 ILCS 180/50-1. This report has to be filed annually by the end of the month prior to the LLC registration anniversary month. So, if you start an Illinois LLC on April 17, then your annual report will be due on March 31. The annual report has to be filed with the Illinois Secretary of State – Business Services Department along with a fee of $75 plus a $1.69 transaction fee.

Learn more about starting an LLC in Illinois!

An Illinois LLC registered agent can provide assistance with a wide variety of business processes including new business and foreign entity registration. In spite of that, you may have several queries regarding domestic and foreign LLC formation and operations. Hence, we have created a special “Frequently Asked Questions” section to address some of these queries.

Is Illinois a good state to form an LLC?

If you want to start an Illinois LLC, it is one of the best business decisions. The state is home to more than 1.2 million companies. The state is preferred by entrepreneurs because of its excellent business climate. You can take advantage of several state resources and business incentive programs. Here are some reasons Illinois will be a good state for your company.

• The state has low corporate taxes and personal property is tax-free
• The state is home to more than 30 Fortune 500 companies
• Chicago, IL offers the perfect environment for start-ups in different industries like retail, tech, food, and construction among others
• Illinois offers competitive range of business incentives for expanding and moving your company here
• The state ranks #2 in the nation where corporate relocation is concerned
• Illinois LLC filing requirements are minimal and relatively easy

How do I know if my Illinois LLC name is available?

Once you have identified or chosen a business name in compliance with the state naming guidelines, you need to conduct an Illinois LLC search. This is also known as a name availability search. If your chosen name is available then you can go ahead and reserve the same.

How much does an LLC cost in Illinois?

If you are thinking of starting a limited liability company in Illinois then you will be required to submit Articles of Organization for a domestic entity. The initial cost for Illinois LLC filing online is $150. If you want to expedite the process then there will be an additional fee. Apart from the initial registration cost, there will be costs associated with name reservation, submission of annual reports, and application for business licenses and permits.

Do I need a business license for my Illinois LLC?

Yes. A business license is required for making your LLC operational. You may have to incur a penalty if you conduct business without proper licenses or permits.

Can I set up a single-member LLC in Illinois?

Yes. You can set up a single-member LLC (SMLLC). Considering the purpose of formation a single-member LLC is regarded as the same as a multi-member LLC. Hence, the process to register this type of LLC will be the same i.e., you will be required to file the articles of organization.

What taxes does an LLC pay in Illinois?

Once you file an LLC in Illinois, your company will be subjected to different forms of taxes. Primary among them is the personal income tax. This is because an LLC is known as a pass-through entity. You may be required to file other taxes applicable in the state depending on your business activity.

Can I register a foreign LLC in Illinois?

Yes. You can register and operate a foreign LLC in the state of LLC. The registration of a foreign LLC will be governed by 2023 Illinois Compiled Statutes, Chapter 805 – Business Organizations, 805 ILCS 180/ – Limited Liability Company Act, Article 45 – Foreign Limited Liability Companies. You will have to file an Application for Admission to Transact Business along with a fee of $500.

How do I dissolve my Illinois LLC?

Once you have filed your Illinois LLC application, the company will be registered with the state. If you want to dissolve your limited liability company at any given point in time then you will need to file the Statement of Termination with the Illinois Secretary of State pursuant to 805 ILCS 180/Article 35 (2023). There is a fee of $5.

Ready to form an Illinois LLC?

One of the most flexible structures, you will be able to enjoy several advantages for registering an LLC in this state. You can form a domestic entity or move your existing LLC to this state as a foreign entity. However, you have to fulfill all Illinois LLC filing requirements. If you want to file an Illinois LLC application then IncParadise can assist you with the entire process of registration of your company in the state.