How to Form an Illinois LLC
By Bazal Razzaq
Updated: August 25, 2023, 12:30pm
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- Name your Illinois LLC
- Create a business plan for your LLC
- Assign a registered agent
- Apply for an EIN(Employer Identification Number) with the IRS
- Create an Operating Agreement
- Prepare and file Articles of Organization
- Follow the local employer rules and obligations
- Submit your periodic report
- Final Word
- How To Form An LLC In 50 States
- Frequently Asked Questions (FAQs)
Wondering how you can form an LLC in the Land of Lincoln? Illinois is home and headquarters to a lot of Fortune 500 companies, including Boeing, Caterpillar, and McDonald’s, and is famous for its fantastic startup ecosystem and legal and financial services. Possibly, there couldn’t be a better place to create your Limited Liability Company(LLC).
Our comprehensive guide provides in-depth, meaningful, and factual information so your Illinois LLC formation process becomes much easier!
#1 Name your Illinois LLC
Before you officially begin forming your Illinois LLC, you need to select a name for your company. Illinois requires LLC names to be different from every other registered business entity’s name. You can check if your desired name is available on the Department of Business Service’s search database. You can also dial 217-524-8008 to check for availability. There are many different naming requirements you need to follow, such as,
- Most importantly, your chosen LLC name should indicate its limited liability status. It should have appropriate abbreviations like,
- Limited Liability Company
- Limited Company
- LLC(Most entrepreneurs stick with this one)
- The name should have no vulgar, rude, or forbidden words as per the Illinois state regulations.
- It’s best to avoid using words like “board,” “trustee,” “insurance,” “State Department,” or any other term related to any government agency as they can restrict your LLC’s identity.
- Also, avoid using words that might confuse people and make them think your company is something it’s really not, like a bank, corporation, FBI, or CIA.
- Check that the name is not already used as a website domain to avoid trademark or legal issues.
- Some terms like “lawyer,” “bank,” “credit union,” or “attorney” have special restrictions given their professional nature. If you do use them, you would have to provide additional documentation licensing to the Illinois state government.
- If your LLC intends to provide any professional services licensed by the Illinois Department of Financial and Professional Regulation, you need to use abbreviations like “Professional Limited Liability Company,” “PLLC,” or “P.L.L.C.”
- Similarly, a worker cooperative should use terms like “Limited Worker Cooperative Association,” “LWCA,” or “L.W.C.A.”
Still confused? Here’s a list of Illinois complete naming rules. Before finally naming your LLC, you can go through it quickly to avoid any future rejections and lawsuits.
Finally, if you have a unique and legally compliant name in mind but aren’t prepared to launch your business just yet, you always have the option to reserve it. To hold a name, you can register online or submit Form LLC-1.15, which is the Application to Reserve a Name in Illinois. You can use the same form to cancel or transfer a name reservation. The filing fee to apply for a business name is $25 and $5 in case you decide to withdraw your application. It will reserve your chosen name for up to 90 days(3 months).
Note: Please remember that you’re under no obligation to use your registered business name(one that’s mentioned in your Articles of Organization document) when doing business in the real world. You have the option to use a Trade Name or Fictitious Name, more popularly known as a DBA (doing business as).
You can complete your DBA registration process online or by downloading the form and then submitting it by mail or in person. The filing fee is $50 and is effective on the date the Secretary of State records it. It expires the first day of the same month next year, but only if that year can be divided by five. After that, you can keep renewing the assumed name every five years.
#2 Create a business plan for your LLC
The next step in your Illinois LLC formation process should be creating a concise, clear, and detailed business plan. While it’s not mandatory in Illinois, we’d still recommend drafting one in case of future fights, confusion, or misunderstanding between the members/owners of your LLC.
Here’s what you can include in your business plan,
- A brief Introduction describing your business idea and its purpose.
- A Market Analysis explaining your target market and competitors.
- Your Products/Services and an in-depth summary of what you offer and how it solves customer needs.
- A proper Marketing Strategy outlining how you’ll attract and retain customers.
- Operations section describing how your LLC will run day-to-day.
- Introduce key Team Members and their roles.
- Your Financial Projections, including income, expenses, and projected profits.
- A Funding section explaining how you’ll finance your business.
- Your future Goals, which highlight clear short-term and long-term objectives.
- Add any additional relevant information.
The more your business plan is structured and tailored to your specific business and industry, the better it is for your Illinois LLC. Remember that a well-mapped-out business plan helps you secure funding from investors and serves as a strategic tool to guide your LLC toward financial success.
#3 Assign a registered agent
Like every other US state, even Illinois requires you to assign a registered agent to receive and accept official, financial, and legal documentation and notices for your LLC. These documents can include government correspondence, lawsuit notices, and tax notifications. Once the paperwork is received, they forward it to the appropriate owners/members or managers/employees of the company.
These agents are also known as Statutory agents, resident agents, or agents for service of process in other states.
For an Illinois LLC, you usually have these options for an agent,
- Be your own registered agent.
- Another business entity.
- Hire a registered agent service.
- An individual within the company(manager/employee/member)
- An Attorney, lawyer, or legal facility.
The list doesn’t end here; there are plenty of other legal requirements a registered agent or a registered agent service needs to take care of, like,
- Provide a valid street address in Illinois.
- Be present during regular business hours (9:00 AM to 5 PM) to receive legal documents
- Agree to be the LLC’s official point of contact.
- Be at least 18 years old.
- Reside in Illinois or have authorization to do business there.
- Be an individual or a business entity authorized to operate in Illinois.
#4 Apply for an EIN(Employer Identification Number) with the IRS
Your next step should be obtaining an EIN from the Internal Revenue Service(IRS) for your Illinois LLC. It’s a unique nine-digit number and is quite similar to the Social Security number(SSN). It’s used to identify a business for taxation purposes and keep track of your business’s tax reporting.
You need it if your LLC plans on,
- Hiring employees
- Opening professional business bank accounts
- Applying for business licenses and permits
- Meeting federal and state tax obligations
- And generally smoothly conducting day-to-day business operations
You can get one from the IRS website for free, or download the form and then mail it to the address below:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
The whole process is free of charge.
#5 Create an Operating Agreement
While it’s not mandatory in Illinois to have an agreement, you should still have one in place to avoid any future legal troubles or financial mess. An operating agreement is basically a legal document that outlines the internal structure, operations, and management of an LLC.
It explains how important decisions will be made, what ideally should be done in the face of a crisis, and how the daily operations of the business will go about. A well-drafted agreement also helps establish the roles, rights, responsibilities, and relationships between the members/owners, as well as the rules for the company’s governance.
You should consider creating one for your LLC’s better future and health.
Generally, you can include the following information in your LLC Operating Agreement:
- Organization: Outline how the LLC is formed, its name, and its purpose.
- Membership: Define who the members/owners are and their ownership percentages.
- Management: Explain how the LLC will be managed – member-managed or manager-managed.
- Roles and Responsibilities: Detail the duties and powers of members/owners, employees, and managers.
- Capital Contributions: Describe how much each member invests and the ownership structure.
- Profit and Loss Allocation: Specify how profits and losses are divided among the members/owners.
- Meetings and Voting: Outline procedures for decision-making and member meetings.
- Transfer of Ownership: State rules for transferring ownership interests.
- Dissolution: Describe the process if the LLC closes down or is dissolved.
- Dispute Resolution: Include mechanisms to resolve disputes among members.
- Amendments: Explain how the agreement can be changed in the future.
- Governing Law: Specify which state’s laws govern the agreement.
Remember that an amazing agreement can be a valuable resource in case of disputes or legal mess, and if there’s no agreement in place, the courts will base the judgment on the state regulations, which may not always align with what’s best for the LLC and its members/owners.
#6 Prepare and file Articles of Organization
To formally establish your LLC in Illinois, you need to file and submit your Articles of Organization document with the Secretary of State. Your article document is basically a legal document that lays out and registers all the basic information about your company.
Some details you can include in your Articles of Organization form are,
- Name of your LLC.
- Address of main office.
- Purpose of the LLC.
- Start date.
- Duration (ongoing or limited).
- Effective date of articles.
- Registered agent’s name and address.
- Duration type (perpetual or specific).
- Initial manager/member info.
- Management Structure: whether member-managed or manager-managed?
- Organizer’s details and signatures.
For Illinois, you need to submit the Form LLC-5.5: Articles of Organization with the Secretary of State. You have the option to either file them online with Cyberdrive Illinois or download the form and then send it by mail or in person to the address listed below:
Department of Business Services
Limited Liability Division
501 S. Second St., Rm. 351
Springfield, IL 62746
The State filing Cost is $150, which is payable to the Secretary of State and is nonrefundable.
#7 Follow the local employer rules and obligations
If you plan on hiring employees for your Illinois LLC, you need to stay compliant and focus on doing the following,
- Obtain your EIN (Employee Identification Number).
- Ask your employees to fill out the Employee Eligibility Form.
- Set up a process for the collection and payment of taxes.
- Make sure you have workers’ compensation insurance
Report the new hires within 20 calendar days of hiring them to the Illinois Department of Employment Security.
#8 Submit your periodic report
In Illinois, both domestic and foreign LLCs are required to submit their annual reports(statement of information/periodic report) by the first date of their anniversary month. You need to file the document within 60 days after the due date, or you’ll face a penalty of $100. The process can be completed online, or you can simply download the form and send it in by mail or in person.
In case you fail to submit your report within the next 120 days, your LLC will be permanently dissolved. The annual cost is $75.
If things go sour further, you could also end up paying an annual personal property tax.
Once you’re done forming your Illinois LLC, don’t relax and sit back just yet; instead, focus on maintaining and micro-managing your business. Once your Illinois LLC is up and running, you need to go ahead with the rest of the formalities, like,
- Opening a professional business bank account.
- Applying for necessary business licenses and permits
- Getting a business credit card.
- Buying business insurance.
- Safeguarding your name and logo with a trademark.
And that’s a wrap! That was all you needed to know before finally creating an LLC in the Prairie State!
Frequently Asked Questions
An LLC (Limited Liability Company) is a business structure that offers liability protection for its owners. Forming an LLC in Illinois can help safeguard your personal assets while enjoying flexibility in management and taxation.
Start by choosing a unique name for your LLC that complies with state guidelines. Then, file Articles of Organization with the Illinois Secretary of State and pay the necessary filing fee.
You’ll need to provide your LLC’s name, its purpose, the principal address, registered agent details, management structure (member-managed or manager-managed), and effective date.