How to Start an LLC in Illinois
13 mins read

How to Start an LLC in Illinois

You might already know that many small businesses use a limited liability company (LLC) when setting up shop. Most small businesses are set up this way. Illinois makes registering your company and ready-to-roll easy, quick, and cheap. Whether you're up for tackling it solo or want extra support, this guide covers you. It'll walk you through everything you need to know about starting an LLC in Illinois, including specific details for the state and what you'll need to keep your business going strong.

Here's the rundown of what you'll need to do to start your LLC in Illinois:

  1. Pick a Name for Your Illinois LLC
  2. Choose Who Will Be Your Registered Agent
  3. Get Your Articles of Organization Filed
  4. Put Together an LLC Operating Agreement
  5. Get Your Employer Identification Number (EIN)

How to Start an LLC In 5 Steps

If you want to boost your small business's credibility and set it up for success, diving into how to create an LLC in Illinois is a smart move. Ready to dive in? Just follow these five easy steps.

Step 1: Pick a Name for Your Illinois LLC

Picking out the perfect name for your business is one of the most exciting parts of starting an LLC in Illinois. The state has some rules, though – your name needs to be unique and not already taken by another company registered in Illinois.

So, how do you ensure your chosen name is all good to go?

  1. Check availability by doing an LLC lookup on the Illinois name database.
  2. Do a quick internet search to see if anyone else is using the name informally.
  3. Examine the federal patent and trademark database to ensure that someone else hasn't trademarked the name.

Illinois has several rules about what you can and can't name your LLC. For instance, your name has to include “limited liability company” or an abbreviation of it. And there are some words you can't use, like “Ltd.” or “Incorporated.”

Once you've selected a few name options, you can submit a corporate name availability form to the secretary of state. They'll check if your names are available and email you a response. You can ask about up to three names at once.

Step 2: Choose Who Will Be Your Registered Agent

Now, you must pick someone to be your official point of contact for legal matters related to your LLC. In Illinois, the law says this person has to be either a resident or a corporation authorized to do business in the state. Just having a P.O. Box won't cut it—they need an actual street address where they can be reached during regular business hours to receive important documents on your behalf.

This designated agent, also known as your registered agent, will receive legal papers, tax documents, court summonses, and other legal documents if your LLC is sued.

You could handle this yourself or opt for a professional registered agent service. The company receives all those legal and tax papers for your LLC. It's a good option if you're running your business from out of state or on the road a lot.

Even if you're the only member of your LLC, having a registered agent service can free you up to focus more on running your business without worrying about missing important mail.

Step 3: File Your Articles of Organization

Filling out Form LLC-5.5, also known as the articles of organization, is a biggie when setting up your LLC. This is where you officially register your business with the Illinois Secretary of State. It's like laying down the groundwork and making things official.

Organizational articles are crucial because they document all the essential details of your new business. Once you've filled it out and it's accepted, your LLC is good to go and can start operating.

For an LLC in Illinois, your articles of organization need to include:

  • The name of your Illinois Limited Liability Company
  • Where your LLC is located (the address of your main office)
  • When you want the articles to kick in (if not right away)
  • Who your registered agent is and their address
  • The purpose of your LLC (you can keep this pretty general)
  • How long your LLC will last (if it's not going to last forever)
  • The names and addresses of the initial members (if you're running it with others) or managers (if someone else is managing it)
  • The name, address, and signature of the person filling out the form (that's you or whoever's taking care of this for your business).

Step 4: Put Together an LLC Operating Agreement

In Illinois, unlike other states, you're not required to create an operating agreement when starting an LLC. It's wise to consider one after you've gone through the whole LLC setup process.

An operating agreement spells out all the important stuff about how your company runs and who's in charge of what. It's like a roadmap for your LLC, laying down rules about management, member rights, and other vital details.

Creating an operating agreement is a great way to ensure everyone knows what's what. It covers who owns what, how profits are divided, day-to-day operations, selling shares, shutting down the business, and making decisions.

Even if you're flying solo with a single-member LLC, it's still a good idea to think about having an operating agreement in place. It can be helpful if your LLC ever gets accused of mixing business money with personal cash.

An operating agreement can also help prove that your business and personal finances are separate entities, especially if it outlines how your LLC handles its finances. Concerning finances, setting up a separate bank account just for your LLC is also important.

Step 5: Get Your Employer Identification Number (EIN)

Think of an EIN as your business's version of a Social Security number. It's a unique nine-digit code that the IRS uses to keep tabs on your taxes. And hey, getting one is a breeze – it's free, and you can do it all online. Once you hit that submit button, your number immediately pops up.

Technically, you only need an EIN if your business has employees or multiple members. But even if you're flying solo with a single-member LLC in Illinois, it's wise to consider snagging one. Why? Because you'll likely need it for some essential business stuff like dealing with banks, hiring folks, filing your federal taxes, and working with suppliers. It just makes things easier down the road.

The Cost of Forming an LLC in Illinois

Starting your LLC journey in Illinois comes with some financial considerations. First, there's the initial filing fee of $150, which gets the ball rolling.

The expenses don't stop there. Like many states, Illinois requires you to file an annual report, which will cost $75 each time. It might seem like a bummer, but consider it a way to keep your LLC compliant with the state's rules and regulations.

Illinois is an excellent place to start an LLC, but it's essential to factor in these costs as you embark on your business adventure.

State and Federal LLC Taxes

The forms you'll need to fill out when dealing with Uncle Sam and his tax buddies depend on your company's setup.

Regular LLCs are what they call pass-through entities. That means the LLC doesn't pay taxes on its income—instead, it just reports the cash flow to the IRS.

If you're rolling solo with a single-member LLC, it's kind of like being a one-person show. You'll report your LLC's income on your tax return using Form 1040.

Now, things get slightly more complex if you've got a multi-member LLC. Your LLC will report its income to the IRS with Form 1065, and then each member will grab their slice of the pie using a Schedule K-1.

But wait, there's more. If you're going for the S-Corp setup, you must file Form 2553 first. Your LLC informs the IRS of its choice to be taxed as a small business corporation. After that, you'll report your company's income using Form 1120-S, and each member or employee will handle taxes on their salary.

Now, if you're gunning for the C-corporation treatment, buckle up. To start, submit Form 8832, informing the IRS of your intention to be treated as a corporation for tax purposes. Unlike other arrangements, this approach can cause double taxation, impacting both the corporate and shareholder levels.

And hey, don't forget about state taxes. In Illinois, there's this thing called the personal property replacement tax, which is about 1.5% of your LLC's net income. Plus, depending on what your LLC does, you might face some extra state taxes from your local county, so keep an eye out for those, too.

Employees

If you're thinking about bringing on some employees for your LLC in Illinois, there are a few extra hoops to jump through to keep things legit with the state:

  • First, you must snag workers' compensation insurance as soon as you hire your first employee.
  • You must send the Illinois Department of Employment Security their information within 20 days of bringing someone new on board.
  • And don't forget about paying those unemployment taxes – it's part of the deal when you're running a business with employees.

LLC Business Licenses and Registration

If you plan to do business in Illinois with your LLC, you must register with the Illinois Department of Revenue first. Depending on what you're selling, such as booze, tobacco, or gas, you might need to complete some extra paperwork.

But hold up, that's not all. Depending on what your LLC does, you might need to snag a business license from the State of Illinois Business Services Department or your local government. If you're in a professional field like real estate, dentistry, or law, each member of your LLC might need their own permit or license from the state licensing department before you can start doing business.

And don't forget about the local scene—many cities and towns in Illinois, including Chicago, have their own business rules and requirements. If you're selling alcohol or cannabis, you'll need to jump through some extra hoops and get specific sales licenses and certifications before you can dive in.

Illinois Options To Create an LLC

Before setting up your Illinois Limited Liability Company, it's wise to figure out which approach works best for you.

DIY

If you're the hands-on type and like to save some cash, going the DIY route might be your best bet. With plenty of info in guides like this one and on the Illinois Secretary of State website, you can handle the process yourself, especially if your LLC is pretty straightforward.

LLC Formation Companies

Hiring an LLC formation service could be a game-changer if you're running a small business and don't have the time or patience to handle all the paperwork. These online services specialize in handling all the necessary documents to get your LLC up and running. They usually offer features like guaranteed approval by the state, help with getting your EIN, registered agent service, and even drafting your operating agreement. Many of them let you customize your package to fit your needs.

Attorney

Although it might not suit every startup, hiring an attorney could be a solid move for some. This is particularly true for businesses with investors or tricky financial setups.


Setting up an LLC in Illinois is pretty simple and can be done in just a few steps. The state offers many helpful resources like step-by-step guides and ready-to-use forms to simplify the paperwork. Plus, checking out popular LLC formation services (aff) can make things even easier.

Keep reading about the Best Business Formation Companies here.

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