If you’re thinking of starting your own business, you might be at the stage of forming your business structure and wondering how to start an Illinois LLC. While forming your first LLC can be a little intimidating, this guide will walk you through the process step by step.
Related: Guide to starting a business in Illinois
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Steps To Form An Illinois LLC
Step 1: Choose an LLC Name
The first step in forming an Illinois Limited Liability Company is to make sure the name you want is available. In Illinois, LLC names have to be different from the other entities registered in the state. The Illinois Secretary of State has a handy online name database, so you can do an Illinois LLC name search to make sure your name is available.
The name of the LLC must include one of the following designators (words or abbreviations) at the end of the business name:
- Limited Liability Company
- LLC
- L.L.C.
- L3C
A comma may be used after the business name and before the designator. “Windy City Wares LLC” and “Windy City Wares, LLC” are both acceptable.
If there is a name you want but are not ready to register the LLC, you can file the Application to Reserve a Name with the Illinois Secretary of State to hold the name for up to 90 days.
Step 2: Appoint an Illinois Registered Agent
In Illinois, every LLC will need to designate a registered agent. A registered agent is simply an individual or company with a Illinois street address who will be responsible for any legal correspondence. This commonly includes the receipt of legal documents, such as lawsuit notifications, on behalf of the business.
While many LLC owners opt to fulfill this role themselves, some owners choose to hire registered agent services like Northwest Registered Agent. Utilizing a registered agent service ensures that your LLC adheres to state requirements while offering an added layer of convenience and confidentiality since the owner’s personal address isn’t disclosed in public records.
Related: What is an Illinois registered agent?
Step 3: File the Illinois LLC Articles of Organization
The paperwork to officially create an LLC in Illinois is called the Articles of Organization. To get started, you can either apply on the Illinois Secretary of State’s website or file Form LLC-5.5.
Related: How to fill out the Illinois Articles of Organization
What Do You Do After Starting An Illinois LLC?
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare an Illinois LLC Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, the process of adding new members, member responsibilities, how profits and losses are distributed, and more.
Illinois does not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Related: Illinois operating agreement template
Obtain an EIN
If the LLC will hire employees or is owned by more than one member, an EIN is required.
The EIN or Employer Identification Number (also referred to as a Federal Employer Identification Number, FEIN, or Federal Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes.
Related: How to apply for an EIN
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the bank account separates the business’s funds from the member’s personal funds. Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the creation of the LLC.
- Government ID of the members.
- Depending on the LLC’s age, an Illinois Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:
- Business license: Some states and several cities require businesses to obtain licensing before they can start.
- Professional license: The Illinois Department of Financial and Professional Regulation (IDFPR) licenses certain types of businesses, such as barbershops, accountants, salons, and others, and these need to be registered before beginning operations.
- Sales tax permit: To sell products and certain services in Illinois, registration for a sales tax permit is needed through the Illinois Department of Revenue through MyTaxIllinois.
Related: What business licenses are needed in Illinois?
File the Illinois LLC Annual Report
LLCs are required to file an annual report with the Illinois Secretary of State. The annual report is due each year before the first day of the month in which the LLC was created. For example, if the LLC were created on November 5th, 2023, the next annual report would be due November 1st, 2024. A penalty of $100 is assessed if the report is more than 60 days after the due date.
Related: How to File an Illinois LLC Annual Report
File the Beneficial Owner Information Report
Beginning in 2024, any individual who owns at least 25% or has “substantial control” of an LLC or corporation in Illinois or any other state must file the Beneficial Ownership Information (BOI) form with the Financial Crimes Enforcement Network (FinCEN). BOI reports are filed electronically through FinCEN’s website.
Illinois LLC FAQs
How much does it cost to file an LLC in Illinois?
The cost to form an LLC in Illinois is a state filing fee of $150, paid to the Illinois Secretary of State.
In addition to the filing fee, there may be other Illinois LLC fees that apply.
Do you have to register your LLC every year in Illinois?
An annual report will need to be filed each year, in addition to paying a $75 fee to the Secretary of State.
How long does it take for an LLC to be approved in Illinois?
It normally takes 7-10 business days for online filing or 3-4 weeks for paper filing to have an LLC approved in Illinois, though for an additional fee, one business day processing is available.
Is an LLC the best business structure?
When deciding on a business structure in Illinois, the common choices are the LLC, sole proprietorship, general partnership, and corporation.
An LLC stands out for blending personal asset protection with operational flexibility. It shields personal assets from business liabilities, offering peace of mind that personal finances are safer than those of a sole proprietorship or general partnership. Furthermore, LLCs in Illinois enjoy greater tax flexibility, allowing owners to choose the most advantageous tax treatment for their situation.
The downside to the LLC versus the sole proprietorship or partnership is they are more expensive to register with the state.
Can you use a PO Box for your LLC in Illinois?
A PO Box can only be used as a mailing address for the LLC. A physical street address in Illinois must be used for the Principal Place of Business and Registered Agent.
Related: Why can’t I use a PO Box for my LLC?
Do you automatically get an EIN with your LLC?
The EIN or Employer Identification Number is a unique number that is available through the IRS.
Single-member LLCs without employees can use the owner’s social security number, otherwise, they will need to apply for an EIN.
What should I put for purpose of LLC?
When filling out the Illinois Articles of Organization paper form, there is a section to fill out the Purpose(s) for which the Limited Liability Company is organized. This will show up when filing online, but you are not able to add to it.
There is the provided purpose statement that says The transaction of any or all lawful business for which Limited Liability Companies may be organized under this Act and/or exclusively for the purpose(s) stated below:. You are not required to add any additional information unless limiting the scope of the LLC is desired.
