Guide to Forming an LLC in Illinois
Follow our free guide to form an LLC in Illinois
- Pros and Cons of Forming an LLC in Illinois
- Starting Your Illinois LLC
- Maintaining Your Illinois LLC
- Additional Illinois Resources
The LLC filing process in Illinois has multiple steps. Our informative guide will show you how to form and maintain your Illinois LLC and walk you through the process.
Pros and Cons of Forming an LLC in Illinois
Home to the Third Largest Metro Area in the Nation
Chicago is the third largest metro area in the nation with over 9.5 million residents and an impressive GDP of almost $680 million. As a whole, Illinois’s GDP increased by approximately $25 million from 2016 to 2017.
Largest Inland Port in North America
Chicago is famous for many reasons — the city is also home to the largest inland port in the nation and North America, according to a recent report by CBRE.
Low Tax for LLCs
Illinois LLC owners must pay a very low 1.5% personal property replacement (PPR) tax on net earnings. Additionally, the flat tax rate is much less confusing than other states that have a sliding scale tax rate.
Less Privacy for Owners
Illinois is among the states that require full disclosure of an LLC’s members in the Articles of Operation.
Phase One: Cost of Doing Business
- $150 filing fee / $75 annual report
- 1.5% PPR Tax
Starting Your Illinois LLC
Although it may seem complicated, the process to start an LLC in Illinois is much less difficult than you think. The first phase for Illinois LLC formation includes the following steps:
- Step 1: Name your LLC
- Step 2: Establish Ownership of your LLC
- Step 3: Decide on a Registered Agent
- Step 4: File the Articles of Organization
- Step 5: Create your Operating Agreement
- Step 6: Register for an EIN
Step 1: Name Your Illinois LLC
The first step for your Illinois LLC is to name your business. The state does have some regulations and restrictions concerning business names—see below:
Tip: Use a free business name search tool to ensure your company’s desired name is available.
Business Name Guidelines
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
There are some state and federal level restrictions concerning certain words that cannot be used for a business name.
A few examples include:
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted—it depends on the state. Additional paperwork may be required.
As you are deciding on a business name, you also need to choose a domain name for your company’s website. Especially in this culture, it is important that your Illinois LLC have an online presence.
Step 2: Establish Ownership
LLC owners are known as members and managers; the difference in title depends on the selected management structure of the LLC.
LLC Management Structures:
- Member-managed: All members share in the decisions and daily operations of the LLC
- Manager-managed: A manager runs the business; the members are not involved in most decisions for the LLC.
Illinois LLC Member Guidelines
Required Number of Members
There must be at least one member or manager to form an LLC in Illinois.
Member Disclosure Requirements
Illinois state law requires all LLC members/manager to be listed in the Articles of Organization.
LLC members in Illinois may be of any age.
There are no residency restrictions imposed on LLC members in Illinois.
Step 3: Find a Registered Agent in Illinois
In order to start an LLC in Illinois, you will need to appoint a registered agent. This position is required for any Illinois business to legally operate.
What is a registered agent?
A registered agent is an authorized party (person or business) that receives all official state and legal notices on behalf of the LLC.
Why do you need a registered agent?
The state of Illinois requires all business to have an appointed registered agent; this party serves as the consistent contact person between the LLC and the Secretary of State.
What are the main requirements for a registered agent?
- The registered agent must have a physical address — not a P.O. Box
- The registered agent must be available during business hours
Who can be a registered agent in Illinois?
- An Illinois resident with a physical address
- An LLC or corporation licensed to work in Illinois
Is the registered agent’s contact information publicly accessible?
The name and contact information of the LLC’s registered agent is a matter of public record.
Can I be my own registered agent for my business?
You can appoint yourself as your LLC’s registered agent as long as you fit the guidelines.
Is being my own registered agent discouraged?
LLC business owners who choose to be their own registered agent risk compromising their personal information since the registered agent’s name and address must be publicly listed.
Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in Illinois. Find more information here.
Step 4: File the Articles of Organization
Your Illinois LLC is not officially formed until you submit the Articles of Organization to the Secretary of State.
What is the Articles of Organization?
As a legally binding document, the Articles of Organization are filed with the state government to officially and legally form your LLC.
Why do I need the Articles of Organization?
Your Illinois LLC will not be legally recognized by the Secretary of State without filing this document as they are a part of your LLCs foundation.
What is the cost of filing the Articles of Organization?
The filing fee for Illinois is $150.
What information is included in the Articles of Organization?
- The name of the LLC
- The location of the business
- The contact information of all members/managers
- The name and location of the registered agent
- The effective date of the LLC
- The statement of purpose
Other Illinois Filing Requirements — Professional Service Business
The state of Illinois allows professional service businesses to form LLCs as long as the members are all licensed in their respective practices.
Professional service businesses can include:
- Professional Counselors and Psychologists
- Architects and Engineers
A few points to consider:
- All LLC members must be licensed in the profession of the business.
- The LLC must provide only the services for which the business is licensed.
- The members are still subject to whichever licensing boards govern the LLC’s profession.
Step 5: Create an LLC Operating Agreement
An LLC Operating Agreement may be not required by the state, but it is still necessary for the successful formation of your Illinois LLC.
What is an LLC Operating Agreement?
The LLC Operating Agreement is a legal document that lays out the details of how the business will function and explains the rights and responsibilities of the members.
Why do I need an LLC Operating Agreement?
The LLC Operating Agreement is necessary because it adds structure to the business by defining the roles of the members and explaining the purpose and function of the LLC. It also helps in reducing disputes among the members by ensuring a level of stability and transparency.
Do I need to file the LLC Operating Agreement?
You do not need to file the Operating Agreement with the state; it is for the benefit of your LLC and remains in-house.
What goes into an LLC Operating Agreement?
Every LLC Operating Agreement is unique to the business; however, most agreements include the following:
- Designation of the members/managers
- Initial capital contributions of the members
- Voting designations and percentages
- Member transfer/addition rules and restrictions
- Distribution of profits
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.
Step 6: Obtain an EIN
An EIN is necessary for any business that currently has or plans to have employees. Your LLC will not be able to legally function without it.
What is an EIN?
The EIN is a nine-digit number that your business receives from the IRS to identify your business with the federal government much like a personal Social Security number.
What does EIN stand for?
The acronym EIN, also known as a Federal Tax ID, stands for Employer Identification.
Are all businesses required to have an EIN?
According to Federal law certain types of business entities are required to register for an EIN:
- Any business with employees (even if owned by one person)
- Any business with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is not required to have an EIN, but it is still recommended.
Why does my LLC business need an EIN?
Some common reasons you might need an EIN:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
In short, if you make money through your business and it has employees, you must have an EIN.
Is the EIN publicly listen?
Your Illinois LLCs EIN will be a part of public record.
Can I use my Social Security as the EIN?
As a sole proprietor, you can elect to use your Social Security as the EIN for your business, however, your EIN is a part of public record.
Swyft Filings offers EIN services for small businesses in Illinois. Find more information here.
Phase Two: Maintaining Your Illinois LLC
The second phase of starting an Illinois LLC involves steps that will get you ready to do business while keeping your LLC compliant with state regulations:
- Step 1: Register for taxes in Illinois
- Step 2: Apply for permits and licenses
- Step 3: File the Annual Report for your LLC
- Step 4: Request a Certificate of Good Standing
Step 1: Register for Illinois State Taxes
Illinois LLC business owners are required to pay a 1.5% personal property replacement tax (PPR) on the company’s net income.
State Income Taxes
Illinois has a flat state income tax rate of 4.95%
Corporate Tax Information
You can also choose to have your LLC taxed as a corporation; if so, you will be responsible for paying corporate taxes on your business’s earnings
Corporations in Illinois are required to pay three types of taxes:
- Corporation Income Tax (7%)
- Personal Property Tax (2.5%)
- Franchise Tax (.15% — .1%)
Franchise Tax Fees
Corporations must pay .15% of paid-in capital during the first year and .1% of paid-in capital every subsequent year. The minimum fee is $25 and the maximum fee is $2 million.
Additional Tax Information
Other taxes your LLC may need to pay:
- 6.25% Sales/Use Tax
- Employee Withholding Tax
- Unemployment Tax
Step 2: Obtain Business Licenses and Permits
The licenses and permits required for an LLC in Illinois will vary depending on a number of variables:
- Location (city and county)
- Type of Business
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: File an Annual Report
All Illinois LLC businesses are required to file an annual report with the Department of State in order to keep your business information updated.
What is an annual report?
An annual report, which is also called a periodic report, is a legal form that is filed with the Secretary of State on a periodic basis that is designed to keep your business’s information current with the state.
What kind of information is in the annual report?
The information requested in the annual report is similar to what is in the Articles of Organization:
- The name and address of the business
- The name and address of the registered agent
- The names of the members
- The business’s EIN
Is the annual report part of public record?
The annual report filed on behalf of your LLC is a matter of public record.
Due Date: The anniversary month of your LLC’s formation
Frequency: Every year
Implications of Late Filings: $300 late fee and LLC dissolution of 180 days delinquent
Swyft Filings helps you stay compliant by providing stress-free solutions. File your annual report with us today.
Step 4: Obtain a Certificate of Good Standing
There is one last step before your Illinois LLC is officially ready for business — you need a Certificate of Good Standing.
What is a Certificate of Good Standing?
The Certificate of Good Standing is essential a “seal of approval” for your business and confirms your LLC’s compliance with all state regulations.
Who issues the Certificate of Good Standing?
The Certificate of Good Standing is generally issued by the Secretary of State.
When can I request a Certificate of Good Standing for my business?
A Certificate of Good Standing can be requested once your LLC is officially formed through the Secretary of State.
Why do I need a Certificate of Good Standing?
The Certificate of Good Standing proves to other businesses and financial institutions that you are legally compliant and in good standing with the Secretary of State.
Does the Certificate of Good Standing have an expiration date?
The Certificate of Good Standing does not expire/does not need to be renewed.
Swyft Filings can create a Certificate of Good Standing for your Illinois LLC. Click here for more information.