Congratulations on deciding to start a new business in Illinois! While you’re likely eager to jump in, you’re probably not excited about working through the legal side of launching your new limited liability company (LLC). If this is your first business venture, the setup process can seem complicated at first glance.
Luckily, forming an LLC is actually straightforward and relatively inexpensive — you just have to know the right steps in the right order.
Every state has different requirements, so understanding what’s expected of your Illinois LLC is key. Once you know the guidelines, you can launch your LLC quickly and painlessly.
In this guide, we’ll walk you through each step of the LLC setup process, providing advice along the way. We’ll direct you to the online state resources and forms you’ll need to set up your LLC and maintain compliance. We’ll also explain how the right LLC partner can handle some of this tedious paperwork on your behalf, so you can get back to what’s really important — growing your business.
The 5 steps to form an LLC in Illinois:
To begin your new business in Illinois, you’ll need to register your LLC with the Secretary of State. Doing so creates a public record of your company, which allows the state to communicate with your business and keep you informed of regulations.
You’ll get started by making a few crucial decisions about your company, then formally file your paperwork to establish your company in Illinois. You’ll also need to create an Operating Agreement for your company and register your LLC with the IRS.
While the requirements can seem overwhelming, they’re fairly easy to complete if you know the right steps. We’ve broken this process into five easy-to-follow steps below, so your LLC will be up and running in no time.
Step 1: Name Your Illinois LLC
Your LLC’s name is extremely important, both for marketing purposes and legitimizing your company through the state of Illinois. You’ll also need to have this name chosen before you can form your LLC.
From a marketing standpoint, you’ll want to choose a name that’s memorable and quickly explains what your business sells or the service you provide. From a legal standpoint, you’ll need to choose a name that does not already exist, and you’ll need to follow a few guidelines for LLC companies.
Here are some quick tips for choosing a name for your LLC in Illinois:
- Your LLC’s business name must be unique. You might already have a name in mind, but you’ll need to research existing company names before settling on one. In Illinois, all LLC company names must be unique. To check to see if the name you’ve chosen is available, visit the Illinois Secretary of State LLC search and input the name of your company, then hit submit. This website also lists some invalid naming conventions to avoid to ensure your name will meet state standards. For instance, names may not be offensive to any religion, race, or other groups of people.
- Your official name must end with an LLC designation. Once you’ve settled on a name you like that’s available to register, you must decide how to designate your name. All LLCs in Illinois must have an LLC designator at the end of their official name. If you’ve named your company “Innovative Designs,” your official name must be some form of “Innovative Designs, LLC.” Here is a list of approved LLC designators:
- Limited Liability Company
Note that the abbreviation “Co” in your submitted entity name can be interpreted by the state as a corporate designator, causing your name to be rejected in Illinois.
Once you have your official name ready to go, you have the option of reserving it for 90 days through the Secretary of State’s website. To do this, you’ll fill out the Illinois LLC-1.15 form (Application to Reserve a Name) and mail the completed document to:
Secretary of State
Department of Business Services
Limited Liability Division
501 S. Second St., Rm. 351
Springfield, IL 62756
This will cost $25 to fill out and can be expedited for an additional $50. For expedited service, the state requires business owners to deliver their form in person to the department’s Springfield or Chicago office.
Once you have your LLC name, you might also decide to register your company name as a domain for your business website. To find out if your domain is available, you’ll want to run a quick domain search. After you find an available domain, be sure to reach out to ZenBusiness — we can work with your company to register your new web domain.
Finally, you should perform a trademark search and decide if you need to secure a DBA in Illinois. You can check the United States Patent and Trademark Office (USPTO) database to see if any federal trademarks exist on your desired business name. Trademarks also exist on the state level, so search Illinois’s trademark database to make sure your name isn’t trademarked within the state.
If you wish to pursue getting a trademark of your own, you can get instructions here for getting a federal trademark from the USPTO. Although it applies outside of your state, getting a federal trademark can be a long and costly process. A state trademark doesn’t apply outside Illinois but is quicker and less expensive. To do this, fill out the Illinois Trademark or Service Mark Application. The fee is $10. You will need to mail your registration to:
Secretary of State
Department of Business Services
501 S. Second St., Rm. 330
Springfield, IL 62756
If you believe you’ll sell goods or services under a name different from your official name, you’ll also want to obtain a DBA (“doing business as”) name or “assumed name.” This can be done online or by mail by filling out the Application to Adopt, Change, Cancel or Renew an Assumed Name. The filing fee varies according to the current year, so consult the price listing on the form to determine the cost.
Step 2: Appoint a Registered Agent in Illinois
The next step in the process is deciding who will act as your LLC’s registered agent. Illinois requires LLCs to designate a registered agent who will act on their behalf to receive legal business documents from the Secretary of State. This agent is who the state will reach out to if they need to get important paperwork to your company.
A registered agent can be a person or business entity, but they must have a registered address (not a P.O. box) located in the state of Illinois. Since legal papers are often served in person, the registered agent must keep regular business hours at this address.
Many LLCs, particularly small ones, consider acting as their own registered agent for their company. While this is allowed in Illinois, there are potential downsides to consider before making this decision.
For instance, if your company is sued, your paperwork will be served at your place of business, which means clients and customers might be present. Also, if you act as your own registered agent, some of your private information will be made public.
For these reasons, many LLCs decide to hire an outside registered agent service like ZenBusiness, which can receive and pass along important paperwork to their company. Doing so is extremely affordable and can save your LLC from the headache of managing this part of the process.
Hiring an outside registered agent service can also save you from needing to be on-site at your office location between normal operating hours (9 a.m. to 5 p.m.). Your registered agent must be available to receive paperwork between these time frames.
Step 3: File Illinois Articles of Organization
Now that you have decided on an official business name and have a registered agent designated, it’s time to officially file and register your LLC with the Illinois Secretary of State. This paperwork is fairly short and won’t take much time to complete or file. The form you’ll need to file is called the Limited Liability Company Act Articles of Organization. You can file this form online through the Illinois Secretary of State website for $150. If you need to have this form expedited, it will cost an additional $100. To file your Articles of Organization by mail, please send the completed paperwork to the Secretary of State Department of Business Services Limited Liability Division 501 S. Second St., Rm. 351 Springfield, IL 62756 You’ll need the below information to complete this form:
- Your LLC’s official name
- The principal place of business
- The effective date of your LLC (This is where you’ll check the filing date or put a later date that does not exceed 60 days after the filing date.)
- Your registered agent’s name and operating address
- The purpose of the LLC
- The duration of the company (leave this blank if the duration is perpetual)
- The names and business addresses of the manager(s) or any members with the authority of a manager
- Name, address, and signature of any organizers
Step 4: Create an Operating Agreement
The state of Illinois does not require LLCs to file an Operating Agreement to register. However, it’s a smart idea to have an Operating Agreement, whether you’re the sole member of your LLC, have employees, or work alongside other owners.
Your company’s Operating Agreement will outline the terms of your LLC’s ownership and management structure to protect everyone with a vested interest in the company. This is important for partnerships, but can also protect sole proprietors if they become injured or incapacitated. If you do not have an Operating Agreement, your LLC will be subject to the state’s default rules for managing LLCs, which may not reflect your company’s best interests.
Here are some additional reasons why you should consider drafting an Operating Agreement:
- Operating Agreements will help further separate your business and personal assets in the eyes of the courts, adding more liability protection to your personal assets.
- Operating Agreements can be used to prevent and resolve conflicts between members and other stakeholders by clearly laying out voting and power structures within the business.
All members of the LLC should review, agree to, and sign the Operating Agreement.
The good news is that with the right partner, you can create an Operating Agreement quickly and affordably. This step is important not to skip since it can protect yourself and the other members down the line. Do you need some help? You can partner with ZenBusiness to receive a professional Operating Agreement template.
Step 5: Apply for an EIN
Now that your business is fully registered and you’ve created an Operating Agreement, it’s time to get set up with the IRS. To do this, you’ll need to request an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).
You can think of your EIN as your company’s Social Security number. It allows you to handle your taxes, work with outside contractors, and hire and pay employees.
LLCs that only have a sole member with no employees may not need to apply for an EIN, although it can be helpful, as it can allow you to apply for business bank accounts, grants, or loans. If you have multiple LLC members or employees, you will be required to apply for an EIN.
You can apply for an EIN online and have one issued immediately via the IRS website. The process is simple, fast, and free.
How much does it cost to start an LLC in Illinois?
Understanding how much it will cost to register and set up your business is important before forming your LLC. We’ll walk you through the main costs below, so you have an accurate idea of how much you’ll need to spend upfront.
Summary of costs:
- Reserving your business name (optional): $25 to $50
- Filing your Articles of Organization: $150 to $250
Therefore, the total cost of state fees for forming your LLC runs from $150 (standard process) to $300 (expedited process).
Keep in mind that these fees don’t take into account the recurring cost of filing your annual report, which costs $75, or your time spent filing the registration paperwork or creating an Operating Agreement. The good news is that you don’t have to do this alone. ZenBusiness can walk you through these steps at an affordable price.
The business formation services provided by ZenBusiness start at just $49 per year. For this price, we’ll provide registered agent services, work with you to complete and submit business filing paperwork, and supply you with a customizable Operating Agreement template for your LLC. We can also provide more comprehensive business services that help you apply for an EIN and help your company meet all state regulations.
What are the benefits of an LLC Illinois?
Many new business owners opt to form LLCs because this type of company allows you to separate your personal assets and liabilities from your company’s. LLCs offer many protections to anyone starting a business, with fairly minimal requirements, making it easy for even first-time business owners to navigate through the process.
Let’s take a look at some of the main benefits you’ll enjoy by establishing your company as an LLC in Illinois:
- Separation of your personal liability and assets from your LLC’s liabilities and debts
- A flexible and adaptable management structure that allows you to tailor your business and ownership methods to better suit your company
- Exemption from double taxation since owners only pay personal taxes instead of paying taxes on both their company profits and individual earnings
- Fewer reporting requirements and regulations than corporations
Want more information on the LLC business structure? Check out our comprehensive guide on LLCs.
How is an Illinois LLC taxed?
As stated above, Illinois LLCs are exempt from double taxation, but there are a few more things to know about your LLC taxes. Managing your LLC’s taxes can seem overwhelming, but partnering with an experienced accountant or tax preparer can help ensure you’re compliant with all Illinois tax laws.
Let’s take a look at some of the federal and state tax laws for LLCs in Illinois:
- To start, all businesses in Illinois must register with the Illinois Department of Revenue.
- As an LLC member, you’ll be required to pay into Social Security and Medicare through a self-employment tax, which is paid directly to the IRS.
- If you have high earnings as an LLC and choose to be taxed as a corporation, you’ll need to fill out an 8832 tax form as a C corporation or Form 2553 as an S corporation. Your personal income will also be detailed on your individual tax return.
- You can avoid tax penalties at the end of the year by making estimated quarterly tax payments for your state and federal taxes. If your LLC has employees, you’ll also need to withhold state, federal, Social Security, and Medicare contributions from their paychecks. These withholdings must also be submitted to the IRS. You’ll need to set up a wage withholding account with the Illinois Revenue Department.
- If your company sells items and collects sales tax, you will have to apply for a sales tax license at MyTax Illinois.
Opening Business Accounts for Your Illinois LLC
Once your LLC is officially registered, you can begin moving money around. To do this, you’ll want to set up a business bank account. This account will be used to conduct business and manage your employees’ payroll.
You should do a quick search for local banks or credit unions who offer business accounts and may provide incentives that are appealing to your company.
In many cases, you’ll need a copy of your LLC’s Articles of Organization and your EIN to open a business bank account. Depending on the institution you’re filing with, you may also be required to provide a Certificate of Good Standing for your LLC from the Illinois Secretary of State (you can learn more about how to request this here), copies of any required business licenses for your LLC, or documents similar to a banking resolution for your business.
Once your bank account is set up, you can look into additional business financing options, such as small business loans or grants, if needed.
Secure Insurance for Your Illinois LLC
Another task you’ll want to complete is making sure your Illinois LLC has all of the business insurance needed to operate. Insurance for your LLC can help you mitigate or reduce your risk of liability in a variety of cases. Common forms of business insurance include:
- General liability insurance. This form of insurance is a general policy designed to protect your LLC in the instance of a lawsuit.
- Professional liability insurance. This type of insurance is typical for professional providers, such as consultants, lawyers, or accountants, who need extra protection. This policy will help protect your LLC when it comes to malpractice suits and other legal disputes.
- Workers’ compensation insurance. This type of insurance protects your LLC’s employees if they are injured, become ill, or die while at your place of business. While not mandatory in all states, workers’ compensation insurance is mandatory for most businesses in Illinois. However, LLCs are typically exempt from carrying workers’ compensation insurance for the LLC members themselves, although it’s required for your employees depending on your line of work.
- Unemployment insurance. This type of insurance is typically required by law in Illinois for LLCs. It requires LLCs to pay unemployment insurance contributions if they have employed one or more employees in each of 20 or more calendar weeks or paid at least $1,500 in wages to employees during the calendar quarter. These payments will be submitted to the Illinois Department of Employment Security. You can learn more here.
Additional insurance policies, such as property, commercial, life, auto, and umbrella insurance, can be purchased for LLCs.
Additional Setup Costs for Your LLC
Now that you know the primary setup and filing costs, you’ll also want to decide how to pay for the cost of running your business. From managing your books to record-keeping, you might want to hire a part-time or full-time administrative assistant to help keep your LLC running smoothly.
If you don’t have the need for another employee, you might consider partnering with an accountant or consultant to help manage your expenses, create and pay invoices, oversee the flow of your company’s funds, pay bills, and handle daily administrative and financial duties.
In addition, you might need to consider several other startup expenses when launching your LLC. This could include printed or digital marketing materials, business cards, office supplies, and furniture, office space, and a digital presence.
Annual Paperwork for LLCs in Illinois
Now that your LLC is fully set up and operational, you’ll want to understand a little more about the annual forms you’ll need to submit. All LLCs are required to submit an annual report to the state government to confirm they’re still active. In Illinois, you’ll need to file an annual report each year. This report can be filed online or through the mail and is used to confirm your LLC is still active and compliant with all government laws and regulations. You’ll need to fill out the below sections of this form each year:
- LLC name. This is your official company name as registered in step one of this guide.
- Registered agent name and address. This is your registered agent (or company’s) official name and operating address.
- State of organization. This is the state where your LLC was formed.
- Address of principal place of business. This is your LLC’s office address or official address (it might be your residential address if you do not have office space).
- Manager names and addresses. This is where you’ll list all managers and any member with the authority of manager in your LLC.
- Signature. This is where you’ll sign and date the form, indicating that all of the above information is current and true.
Your annual report is due each year by the first of the month when your LLC was formed. For instance, if your LLC was formed on June 8, 2020, your first annual report would be due on June 1, 2021. There’s a $75 filing fee to submit your annual report. Failure to submit this report on time will lead to a $100 late fee, in addition to the $75 filing fee.
Changing and Amending Paperwork for Your Illinois LLC
Your business structure and operations might change over time. You could bring in new members, have members leave, opt to change your registered agent, or even adopt a new LLC name. These changes are typical for LLCs but will require filling out forms to register these changes with the Illinois government. Here are the steps you’ll need to take to make the below changes:
Update Your Registered Agent’s Information
- If you need to update your registered agent’s name or mailing address, you’ll need to file a Statement of Change of Registered Agent and/or Registered Office.
- The cost of this service is $25 ($50 for expedited processing).
Change Your LLC Name
- You can update your LLC name by filling out LLC Articles of Amendment.
- You’ll need to list your current name and the name you plan to use instead (whether adopting or changing it).
- The cost of this service is $50 ($100 for expedited processing).
Add or Remove an LLC Member
- To add or remove a member or owner from/to your LLC, you’ll need to fill out an Articles of Amendment form.
- You’ll be able to list the names of the members you’re removing or adding with this document.
- The cost of this service is $50 ($100 for expedited processing).
To avoid paying multiple fees, try to limit the number of times you make changes to these documents throughout the year, submit your requests all at once, or wait and file the changes on your upcoming Annual Report.
Illinois LLC FAQs
- What is the processing time to form my Illinois LLC?
It can take up to 10 days to process your Articles of Organization, whether you file online, by mail, or in person. Many filings are approved much sooner, but you can speed the process up by paying for expedited processing.
- Do I need to file my Operating Agreement with the state of Illinois?
An Operating Agreement is not required in Illinois to operate an LLC. However, while not mandatory, your Operating Agreement is an important document that can save you from conflicts in the future.
- What’s the difference between a limited liability company and limited liability partnership in Illinois?
When forming your LLC, you may have heard the term “limited liability partnership” (LLP). You may think this refers to an LLC with partners, but it’s a bit different. LLPs provide some liability protection to the partners by shielding them from the malpractice or wrongful actions of the other partners, though this liability protection can vary by state.rnrnLLPs are typically formed by law firms and some types of health care practices.
- What tax structure should I choose for my Illinois LLC?
LLC owners usually decide to have their business taxed the default way, which is as a sole proprietorship (for single-member LLCs) or a partnership (for multi-member LLCs). This method only requires owners to pay taxes on their percentage of the profits on their personal tax returns. The LLC itself is not taxed. This avoids the “double taxation” that corporate shareholders pay, in which profits are taxed both at the business level and the personal level.rnrnIn some instances, it might be advantageous to have your LLC taxed as a corporation. You can find out more about filing as a corporation in this guide.rnrnIf you aren’t sure which tax filing structure works best for your LLC, reach out to a qualified accountant or tax specialist for help.
- What is the organizational structure of an LLC in Illinois?
LLCs are owned by the members of a company. Most LLCs are “member-managed,” meaning that the members share in the responsibilities and decision-making for the company. Some LLCs instead prefer to be “manager-managed.” In these cases, LLC members appoint or hire one or more managers to run the company. The manager(s) can be one or more members of the LLC or someone hired from outside the LLC.rnrnMany business owners enjoy forming LLCs because they can create an organizational structure that best fits their needs.
- Does Illinois allow a Series LLC?
Some states allow business owners to form what is known as a Series LLC. This term refers to a group of LLCs that are nested under one parent LLC. This type of structure can be appealing to many business owners, entrepreneurs, or investors. However, not all states allow series LLCs.rnrnIn Illinois, you can create a Series LLC. When establishing a Series LLC, you’ll need to file your Articles of Organization (from step three) specifically for a Series LLC. You can find this form here. There is a $400 filing fee associated with this form. You can find more details on creating a Series LLC in Illinois’s Guide for Organizing Domestic Limited Liability Companies.
- Which licenses and insurance are required for an LLC in Illinois?
In Illinois, there’s no statewide general business license, but some local governments require one. There are also federal, state, local, and industry-specific licenses and permits your business may need to legally operate, so you’ll need to do some research or hire a service to research them for you. You can find a list of state permit and license requirements by industry available on the Illinois government page.rnrnThe insurance your business will need depends on a variety of factors, such as whether you have employees or have company vehicles. Contact the Illinois Department of Insurance for more information.