Small businesses are thriving in Illinois. In 2023, businesses with fewer than 20 employees created 74% of jobs in the state. Creating an LLC in Illinois for your new business requires just a few steps and comes with a number of potential tax benefits. If this business structure sounds like the right fit for you, keep reading to learn how to set up an LLC in Illinois.
Key Points
• Ensure that your chosen LLC name is unique by conducting an online search; if desired, you can reserve it for up to 90 days.
• Assign a registered agent in Illinois to handle official correspondence.
• File your company’s articles of organization with the Illinois Secretary of State, detailing the LLC’s essential information and purpose.
• Write up an operating agreement to outline the LLC’s management structure and procedures.
• Apply for an employer identification number (EIN) from the IRS and acquire necessary state licenses or permits to operate legally in Illinois.
1) Select a Name for Your Illinois LLC
Start your LLC name designation by making sure another business doesn’t already use your idea. The state of Illinois makes it easy with an online name search of existing corporations and LLCs.
You can also submit a corporate name availability inquiry form for a preliminary check on existing company names. The form lets you include three potential names for your business. You should get a response by the end of the next business day.
Once you decide on an LLC name, you can submit a name reservation form to keep it on hold for you while you finish the process of forming an LLC in Illinois. Names will be reserved for up to 90 days at a cost of $25 per name. This step isn’t mandatory, but does help guard against someone else registering your ideal name before you do.
Recommended: What Are the Tax Benefits of a Limited Liability Company (LLC)?
2) Choose a Registered Agent
Prior to submitting your LLC application to the Illinois Secretary of State, you must assign a registered agent to your LLC. This person or corporation accepts correspondence from the secretary of state on behalf of your company. You can act as your own registered agent in Illinois as long as you’re in one of the following categories:
• A person residing in Illinois
• A corporation authorized to act as a registered agent in Illinois
The registered office must match the business office address of the registered agent and must have a street or road address or a rural route and box number. (Just having a P.O. box is not enough.) It’s important to keep this address up to date. If your LLC doesn’t maintain a registered agent and office on file, you risk having your company dissolved by the state.
3) File Articles of Organization
After finalizing your business name and designating your registered agent, setting up an LLC in Illinois requires filing articles of organization. The Illinois secretary of state outlines seven requirements:
1. LLC’s name
2. Address of the principal business location
3. Effective date of the LLC’s articles of organization
4. Registered agent’s name and registered office’s address
5. LLC’s purpose
6. LLC’s term of existence
7. Names and business addresses of initial managers or members
You’ll need to submit two copies: one signed original document and one copy. You must also pay a $150 filing fee via credit card, certified check, cashier’s check, money order, Illinois attorney check, or certified public accountant’s check. For expedited 24-hour service, the fee jumps to $250. Otherwise, the approval process should take 10 business days.
To avoid getting your articles of organization returned, make sure your documents are complete and signed legibly. Also, your LLC’s purpose clause should also be as specific as possible; if it’s too broad, the state may not accept your filing.
At this stage you may decide to loan money to your LLC to cover the costs of hiring a registered agent and filing (or refiling) your articles of organization.
Recommended: Top Small Business Grants in Illinois
4) Create an Operating Agreement
An operating agreement isn’t required when you’re creating an LLC in Illinois, but it can be helpful to have on hand, especially if the company has more than one owner or member. An operating agreement should create clear guidelines for running the company and managing the finances — servicing any startup loans, for example — in order to prevent potential conflict in the future.
Here are some common clauses you may want to include in your operating agreement to ensure all owners understand their rights and responsibilities:
• Each member’s ownership percentage
• Voting rights
• Duties and rights of management and members
• Profit distribution process
• Provisions for buying out members or transferring ownership
It can be helpful to consult a lawyer during the process, as the operating agreement is a legally binding contract. If your company later applies for additional small business loans, potential lenders may want to know these details.
Even if you’re a single-member LLC, an operating agreement is useful to prove that the business is separate from your personal affairs. This could be important if you ever apply for an LLC business loan.
5) Obtain an EIN and Required Licenses
A federal employer identification number (EIN) is required for any LLC that has employees. It’s not a must for single-member LLCs.
It’s easy and free to get an EIN from the IRS. You just need your business entity type; the Social Security number of the LLC’s responsible party; and signed authorization for a third-party designee, if you have one.
Illinois doesn’t require any general business license at the state level, but certain industries do require specialized licenses or permits in order to operate. Here are some examples; you can view the full roster online at Illinois.gov.
• Pilots
• Assisted living and shared housing companies
• Asbestos abatement services
• Emergency medical services
• Waste management services
• Kennel or pet shop
• Bar or restaurant serving liquor
• Wholesale aquatic life dealer
• Wholesale fur buyer
• Mussel dealer
• Breeding wild game/birds
• Animal imports
• Taxidermy
• Plumbers and outfitters
Getting and renewing the proper licenses is essential to get your business off the ground. If you later need a business line of credit to keep your LLC growing, lenders may want to see that your company’s licenses are in order to ensure it can generate revenue to repay the loan.
6) Review Illinois LLC Tax Obligations
Once you figure out how to set up an LLC in Illinois and begin operating your business, you must file taxes with the state revenue department. You can use your EIN to register your business with the Illinois Department of Revenue.
Taxation is different when you have an LLC vs. a sole proprietorship. There are different forms to fill out based on how you want your LLC to be treated by the IRS; the business structure for an LLC may be a partnership, C corporation, or S corporation.
In addition to paying state taxes, you must also file an annual report along with a $75 fee. This report verifies your LLC information and allows you to update ownership details and contact information.
The Takeaway
Setting up an LLC in Illinois involves several steps, and once it’s established, you’ll need to stay on top of your paperwork and deadlines in order to remain compliant each year. Starting with a strong foundation, including assigning a registered agent and maintaining an operating agreement, is a smart way to ensure long-term success for your LLC.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
FAQ
What are the filing requirements to start an LLC in Illinois?
In order to file for an LLC in Illinois, you need an available business name, a registered agent and registered office, and articles of organization. While an operating agreement is not required, creating one can help prevent future conflicts among LLC members.
How long does it take to form an LLC in Illinois?
Once you submit your LLC articles of organization, you should receive a response within 10 business days. You can, however, expedite the process by paying $250 for 24-hour service, rather than the standard $150 fee.
Do I need to register for an Illinois business tax ID after forming an LLC?
First, you must register with the IRS to obtain an Employer Identification Number (EIN). After that, you must register your business with the Illinois Department of Revenue (IDOR). You can do so electronically, by mail, or in person. With your registration, you will get an IDOR account ID number for tax purposes.
What is the process for reserving an LLC name in Illinois?
Illinois offers a name reservation form that safeguards your preferred LLC name for up to 90 days. The cost is $25 per name (up to three), payable upon submission.
Are there any specific legal requirements for LLC operating agreements in Illinois?
No, Illinois does not require LLCs to have operating agreements, so there are no legal requirements to include. But you may wish to consult a lawyer when creating an operating agreement to make sure all members or partners are fairly represented in the document.
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