How to Start an LLC in Illinois
How to Start an LLC in Illinois
Forming a limited liability company (LLC) in the State of Illinois is both easy and affordable. However, just as in any other state, there are some specific steps and details to keep in mind when forming an Illinois LLC.
All forms and fees must be filed with the Secretary of State Department of Business Services. Filing entities must meet all naming and formation requirements.
Here are the specific requirements for forming an LLC in Illinois:
Registration. LLCs are required to file, in duplicate, the Articles of Organization form with the Secretary of State Department of Business Services. The articles must include the following information:
- LLC’s name and principal office address
- Registered agent’s name and address
- Effective date
- Purpose for forming the LLC
- Duration, if not perpetual
- Type of management, i.e., member-managed or manager-managed
- Liability of members
- Name, address and signature of organizer
All forms must be submitted with the necessary filing fee.
Forms and fees. LLC registrants are required to complete and submit Articles of Organization with the Secretary of State Department of Business Services. Should you decide to submit the articles online, there is a filing fee that is about $600, which includes 24-hour expedited service. Should you choose to submit on paper, the filing fee is less, about $500. Fees can change, check with the Department of Business Services for the most current fees.
Timeline. Processing time for online submissions is between one to two business days. Paper submissions may take six to eight weeks.
Naming requirements. Although LLC naming requirements can be confusing, the simple rules to remember are to choose a name that is distinguishable from other LLCs and to include specific required words. If your name meets those requirements, it is likely to be approved. You may opt to have a preferred name checked for availability before filing your LLC formation documents with the Secretary of State.
Formation requirements. To form an LLC, a registrant must first file their Articles of Organization with the Secretary of State Department of Business Services. All submissions must be accompanied by the appropriate filing fee, which varies depending on how you choose to submit.
Next, an LLC with more than one member is strongly advised to have a limited liability operating agreement among its members. This operating agreement contains the terms entered into by the members of the LLC and governs such critical items as the roles of each member, voting rights, who manages the LLC, how members are admitted or removed, dissolution of the LLC and procedures for amending the LLC operating agreement itself.
Please take note that LLCs offering a specific professional service are obligated to contact the necessary licensing boards as mandated by state law.
Starting an LLC in Illinois
Before deciding to form an LLC in Illinois, you must understand what an LLC is and if it is a viable business structure for your company. To begin, an LLC is a business structure that has flexible organization, is privy to tax efficiencies and provides limited liability for its members. Members may include individuals, corporations, other LLCs and foreign entities. One benefit of an LLC is that there is no maximum number of members. An LLC is also known as a ”hybrid” business structure in the sense that it brings together elements of a corporation and limited liability partnerships.
The following is a checklist you can use to begin the registration process with the Illinois Secretary of State:
1. Decide on a name for your business. You’re free to choose just about any name as long as it ends with “Limited Liability Company” or any variation of its abbreviation—e.g., LLC or L.L.C.
A name may be reserved by filing form LLC-1.15. You must submit, in duplicate, a completed application to the Secretary of State Department of Business Services, along with the required filing fee, which is about $300. Be sure to include in the application the name to be reserved and the applicant’s name, title, address and signature. A preferred name may be checked for availability by accessing the Secretary of State’s website or by submitting a paper form by mail.
2. Assign an agent for service of process (also referred to as the resident agent). Registered agents are individuals or corporations authorized to do business in the state and that have permanent addresses in Illinois. Registered agents accept legal documents on behalf of the LLC and make sure its members are notified.
3. Get an Employer Identification Number (EIN) from the IRS. If there are two or more members in your LLC, your company will need to obtain an EIN from the IRS, for tax purposes.
4. Register with the Illinois Department of Revenue. This is a requirement of LLCs in Illinois. You must complete the online form or, if registering by mail, submit Form REG-1, Illinois Business Registration Application.
5. Create an operating agreement. Although LLCs in Illinois are not required to have a limited liability company operating agreement, it is wise to have one in place with other members should your LLC have more than one member. The State of Illinois recognizes limited liability company operating agreements as governing documents.
6. Familiarize yourself with the LLC’s continuing legal obligations, specifically annual reports. These reports are submitted to the Secretary of State Department of Business Services every year before the anniversary date of your LLC. This may be done online or by mail and can be filed only by a manager or member. The annual report filing fee is about $250. There is a late filing fee penalty of about $300 if you fail to file within 60 days of your due date. Check with the Department of Business Services for the most recent fees.
Filing an LLC and Fees
Following are the forms and fees that are required when starting an LLC in Illinois:
1. Forms. Those looking to form an LLC in Illinois will have to file their Articles of Organization with the Secretary of State Department of Business Services. The Articles of Organization must be submitted with the required filing fee.
2. Fees. The filing fee for the Articles of Organization form is about $600 if done online and about $500 if submitted on paper.
3. Limited liability company operating agreement. Although the LLC operating agreement is not filed with the Secretary of State, it is a good idea to have one in place for LLCs with more than one member. This should be kept on file by the registered agent.
4. Taxes. LLCs in Illinois are treated as corporations, limited liability partnerships or single-member LLCs and are subject to federal income tax classifications. Depending on the type of taxation you opt to have for your LLC, the tax responsibilities are as follows:
a) An LLC treated as a limited liability partnership. These LLCs are required to file Form 1065 (U.S. Return of Partnership Income) and to show equal distribution of profits, losses and credit on a Schedule K-1 with the IRS.
b. An LLC treated as a C corporation for federal tax purposes. These LLCs are required to file Form 8832 (Entity Classification Election) and must opt to be taxed as a corporation. Next, they must file Form 1120 (U.S. Corporation Income Tax Return) with the IRS.
c. An LLC treated as an S corporation. These LLCs are required to file Form 1120S (U.S. Corporation Income Tax Return) accompanied by a report from each owner expressing the equal distribution of profits, losses and credit with the IRS.
d. An LLC treated as a sole proprietorship. These LLCs must report all business income and expenses via the sole proprietor’s personal income tax returns, Schedule C (Form 1040, Profit or Loss from Business) with the IRS.
You should always make sure to acquaint yourself with the state laws regarding taxation. Your LLC may be subject to other taxes depending on the kind of services your LLC may offer.
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