Do you want to expand an existing LLC into Illinois with a foreign qualification, but you’re not familiar with the process?
This guide will outline important details when expanding your business and explain how to foreign qualify an LLC in Illinois.
Your business is growing, and you’re planning an expansion to other states. It’s a good problem to have!
But it’s not quite as simple as choosing another location. Because each state has different rules and requirements for business operations, you may need a “foreign qualification” in each state where you plan to do business.
It’s a common misconception that foreign qualification is only for businesses operating outside the U.S. But in this case, “foreign” refers to any business operating in a state that isn’t the state where the LLC was originally formed.
For example, if your LLC is registered in Washington and you are looking to open a second location in Illinois, you may need to complete a foreign qualification in Illinois before you can expand there.
Important Note: If you’d like to save time and have the foreign qualification paperwork taken care of for you, many of the best LLC services can handle this task for you.
Foreign qualifying is essentially asking permission to do business in the state of Illinois. And the notion that “it’s easier to ask forgiveness than permission” doesn’t apply here. Failing to foreign qualify before starting a business in Illinois yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:
Let’s add up those penalties. Consider this: you started doing business in Illinois on June 1, 2017 and didn’t foreign quality until January 1, 2022. Your initial penalty is $2,000. Then, let’s add $100 for each of the following 55 months. That’s $7,500, and we haven’t even added all of the fees and taxes you missed paying. This would put a serious dent in your profits. Seeing as the fee to foreign qualify is only $150, it’s not worth the risk to go unregistered.
Despite the steep penalties involved, transacting business without qualification won’t invalidate your current contracts, nor will it prevent your LLC from defending an action in Illinois courts.
The Illinois LLC Act has more to say about this in Sec. 45-45.
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Illinois? The state’s LLC Act doesn’t provide specifics, but based on state tax laws, you are generally considered to be “doing business” in most states and required to foreign qualify if:
And, of course, there are always taxes to consider. Depending on how you’ve chosen to set up your LLC, you may very well be liable for specific business taxes in Illinois. If you don’t foreign qualify, the state won’t know to tax you, and you could be subject to additional tax-related fines later on. For more information on Illinois’ corporate taxation, visit the Illinois Department of Revenue website. It’s important to always stay on top of your LLC’s taxation requirements to avoid any unwelcome surprises.
If you’re unsure whether or not you need to file for a foreign qualification in Illinois, we suggest seeking legal counsel.
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Illinois. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
Cross-check this list with your LLC’s activities in Illinois. If you find your only business activities present, you’re likely exempt from foreign qualifying in the state. Still, it’s a good idea to look over the full list in the Illinois LLC Act Sec. 13.75 just to make sure. And if you have any questions, seek legal counsel.
Foreign qualification in Illinois is simple if you know where to find and send your forms. If you or your legal counsel has decided to foreign qualify your LLC in Illinois, go to the Secretary of State Forms page and find LLC-45.5: Application for Admission to Transact Business. Filing this form by mail or in person will get your LLC foreign qualified and ready to operate in Illinois.
Download and fill out the form. For the most ease in processing, complete it electronically using Adobe Acrobat before printing. Before you sit down with your application, make sure you have the following information on hand:
But you’re not done yet! You also need to obtain and submit a Certificate of Good Standing (or Certificate of Existence) – no more than 60 days old – from your LLC’s home state.
Got it all? Great. Then mail your form, certificate, and application fee to:
Department of Business Services
Limited Liability Division
501 S. Second St., Rm. 351
Springfield, IL 62756
*You can also drop it off in person if you live near Springfield
There is a $150 fee for foreign qualifying in Illinois, and you can pay it with a check or money order made out to the “Secretary of State.” The typical processing time is 7-10 days. If you’re submitting your form in person, you can request expedited processing for an additional fee.
After your form is in and your fee is paid, sit back, take a deep breath, and pat yourself on the back. Your LLC is foreign qualified and you’re embarking on another chapter in the life of your business.
We wouldn’t want your application returned for having a non-compliant LLC name, so remember to follow all of Illinois’ business name restrictions when submitting it. Your LLC name must:
You can also reserve your Illinois business name if you’re not quite ready to foreign qualify your LLC.
We think you should foreign qualify your LLC before you begin conducting business in a new state. If you don’t, your business could be subject to a broad range of fines and penalties for operating an LLC in a jurisdiction where you don’t have permission to do so.
You’ll typically need to wait roughly 7-10 business days for Illinois to process your foreign LLC application.
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Illinois state law. Unfortunately, Illinois does a poor job of explaining its business licensing requirements, as the state’s official Registrations, Licenses, and Permits webpage is almost entirely worthless. We recommend checking with any relevant state agencies, along with your municipal and county governments, to find out what licenses you might need.
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file an Illinois LLC Annual Report.
The overall costs of operating an Illinois LLC can vary considerably based on the specifics of your business. However, we created a helpful guide to help you identify and plan for every expense your LLC will face in this state.
The answer to this question lies in your personal preferences, but we can give some general pointers. An attorney will cost the most by a mile, but also provides expertise you won’t find with the other options. The DIY route is free of charge but can require quite a bit of legwork and provides no peace of mind that the process is being completed correctly.
Using an LLC service means your business will be foreign qualified by professionals who know what they’re doing, while also costing significantly less than a lawyer. This “best of both worlds” attribute is what makes LLC services our preferred option.
Using an online LLC service removes much of the hassle from the foreign qualification process. With these services, all you need to do is provide them with the name, location, and industry your business operates in, along with some info about yourself and your Illinois registered agent.
The service then registers your Application for Admission with the state to qualify your LLC to do business in Illinois.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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