How to File an LLC in Illinois

Are you thinking about forming an LLC in Illinois? Look no further than this comprehensive guide to Illinois LLC formation. Whether your small business is your full-time job or just a side hustle; we’re here to help entrepreneurs through the complicated filings process to get your business up and running in no time.

Key Takeaways:

• A limited liability company is a business entity that combines the personal liability protection of a corporation with the flexibility of a sole proprietorship or partnership. 

• The Illinois Secretary of State charges just $150 in state fees for registering your articles of organization, the document that officially forms your LLC.

• When forming an Illinois LLC, you must choose your business name, fill out your Articles of Organization, hire a registered agent, create an LLC Operating Agreement, and file for an EIN from the IRS. 

What Is LLC Formation?

A limited liability company (LLC) is a business entity that combines the personal liability protection of a corporation with the flexibility of a sole proprietorship or partnership. It’s a great business structure for small businesses because it’s easy to set up, requires lower taxes and fees than an S corp or C corp, and protects your personal assets.

The key benefits of LLC formation are:

1. Personal asset protection

2. Tax advantages

3. Flexible membership and structure

4. Flexible profit distribution

5. Less paperwork

6. Minimal state fees

Let’s go over these in more detail.

1. Personal Asset Protection

An LLC’s “limited liability” separates your personal and business assets. With an LLC, your house and all your personal property are protected in the event of any lawsuits. Instead, your business assets will take the hit.

While lawsuits are a huge hassle and should be avoided at all costs, sometimes they’re unavoidable. Because of this, it’s best to have your personal and business assets legally separated.

2. Tax Advantages

There are several key advantages when running an LLC for tax purposes. An LLC is considered a disregarded entity, meaning you can have your LLC taxed as a sole proprietorship, partnership, S corp, or C corp.

There are certain situations where you might want to tax your business as a corporation, such as when you’re a large company with high business profits. Still, most LLC owners elect to take advantage of pass-through taxation.

Pass-through taxation means that, instead of paying taxes on your business, taxes get passed through to your personal income tax. You’ll pay taxes according to your personal income tax bracket and avoid double taxation.

Pass-through taxation allows you to avoid costly corporate taxes, saving you a lot of money depending on your income tax bracket. Remember that, in addition to your LLC income taxes, you’ll also need to pay sales taxes if your business sells tangible goods or services.

3. Flexible Membership and Structure

While an S corp can also benefit from pass-through taxation, it’s limited when it comes to its ownership structure. Namely, there’s a cap of 100 shareholders per S Corp, and they can’t have foreign shareholders or corporations as shareholders.

An LLC, by contrast, has “members” and “owners,” terms that can be used interchangeably. An LLC allows unlimited members and the flexibility to choose either internal or external owners. While most small business LLCs will elect an owner within the organization, you can also choose to appoint a person or corporation outside your business as the owner.

4. Flexible Profit Distribution

An LLC also offers flexibility when it comes to profit distribution. Instead of equal shares of profits to all board of directors members, you can distribute your profits however you want.

You should explicitly state this decision within your LLC’s operating agreement, which we’ll cover in more detail later.

5. Less Paperwork

While S corps and C corps also offer the kind of liability protection an LLC does, there are many more formal hoops to jump through for these business structures. Corporations must hold annual shareholder meetings and have much more reporting and fees than an LLC.

This amount of structure and paperwork typically doesn’t make sense for a more informally run business, which is why an LLC is an excellent business entity for small businesses. Fewer hoops means more time to run your business how you want.

6. Minimal Fees

The cost of LLC formation in Illinois is relatively low compared to the price of forming a corporation. Currently, the Illinois Secretary of State charges just $150 in state fees for registering your articles of organization.

Step-By-Step Guide to Starting Your Illinois LLC

The filing process for LLC formation can vary a lot by state, so it’s essential to research each state where you’ll be operating. Filing fees, processing time, and required documentation for Illinois differ considerably from other states.

So let’s take you through a step-by-step breakdown of what it takes to start an LLC in Illinois. We’ll cover all the basics and get down to the nitty-gritty of each step so you can confidently form your LLC.

Remember, though, that the following guide applies only if your business is located in Illinois. If you’re currently doing business in another state but want to register your LLC in Illinois, you’ll have to register as a foreign LLC, which requires a different process.

Step 1: Choose a Business Name for Your Illinois LLC

Your business name is your brand. It’s how your customers will identify you, so selecting a strong, unique name for your LLC is crucial to convey your brand in its best light.

You’ll also need to ensure your business name accords with the guidelines for LLCs in Illinois:

• Cannot be registered with another business already in Illinois.

• Must contain the words “limited liability company” or abbreviations like “L.L.C.” or “LLC.”

• Cannot contain misleading or imprecise words about the type of business you’re doing, like “Co.,” “corporation,” “Ltd.,” etc.

Additionally, if your LLC is:

• A professional service licensed by the Illinois Department of Professional and Financial Regulation, you must include the words “professional limited liability company” or abbreviations like “P.L.L.C.” or “PLLC.”

• A worker cooperative, you must include the words “limited worker cooperative association” or abbreviations like “L.W.C.A.” or “LWCA.”

Once you’ve selected the perfect name for your business, you’ll need to ensure no one else is using it. You can search for a name with our free business name search or through the Illinois Secretary of State Business Services name database.

Because having an internet presence is essential to running a business these days, it’s also a good idea to make sure a domain name is available for your business. You want your customers and clients to be able to find you online easily.

There are many resources for searching for domain availability online. Here’s one we like.

When you’re confident that your LLC name is available, you can head to step two. However, if you need more time to file your articles of organization, you can reserve your Illinois LLC name for up to 90 days by filing Form LLC-1.15, Application to Reserve a Name, for a $25 filing fee. For expedited processing on this form, you’ll need to pay an additional $50.[1]

Assumed Business Names

In some situations, the official business name you register with the Illinois Secretary of State differs from the name you use in your day-to-day business dealings. 

In cases where your DBA name differs from your registered name, you’ll need to file Form LLC-1.20. The filing fee for assumed business names is $30-$150, depending on which digit the year you’re filing ends in. Expedited processing for this form costs $50.[2]

Step 2: Fill Out Illinois Articles of Organization

The next step in your Illinois LLC formation is filing your articles of organization. This document records all the information the Illinois Secretary of State requires to form an LLC.

You will need the following information to file your Illinois articles of organization:

• Your LLC business name

• The street address of your principal place of business

• The date upon which your articles go into effect, not to exceed 60 days after filing

• Your registered agent’s name and address

• The purpose of your business

• The duration of your LLC

• The names and addresses of initial managers or members

• The names, addresses, and signatures of the organizers

To file your articles of organization with the Illinois Secretary of State, you must fill out Form LLC-5.5. You can file online, by mail, or in person. The state filing fees for articles of organization registration in Illinois is $150.[3]

Typically, the processing time for your application is up to 10 days. However, you can get your articles approved in just 24 hours by paying an additional $100 for expedited processing.

Annual Reporting

After your application is approved and you’ve formed your Illinois LLC, you’ll need regular maintenance to ensure your LLC remains in good standing with the Illinois Secretary of State. Namely, you’re required to file yearly annual reports.

This form (LLC-5.25) restates the items on your articles of organization to ensure they’re up to date. However, keep in mind that if your registered agent’s name or address changes, you’ll need to file an additional Form LLC-1.36/1.37.

You must file your annual report before the first day of the anniversary month of your LLC’s formation. The final due date to file your LLC’s annual report is 60 days after. If you still haven’t filed, you’ll incur a penalty fee of $100. After 120 days without filing, your LLC will be administratively dissolved.[4]

The fee for filing your annual report is $75. You must pay this along with your report every year. For expedited processing, you can pay an additional $50.

Step 3: Hire an Illinois Registered Agent

You may remember that one of the items required on your articles of organization is the name and address of your registered agent. A registered agent is a person with regular business hours that you appoint to receive all official documents and service of process for your business.

Typically, you’d want to hire a registered agent service to appoint this person for you in each state you’ve registered in. Luckily, Swyft Filings offers just that in our registered agent service, starting at just $199 annually.

You can, of course, appoint yourself as your own registered agent. However, that’s an entire endeavor we recommend against taking on, and here’s why.

1. Privacy

Because the address of your Illinois registered agent gets published in the public domain, it’s not a good idea to use your home address. You want to keep your residence private and free from solicitors or worse.

There are still privacy concerns even if you have a public business address. Namely, it’s probably not a good look to be served legal papers in front of any customers or clients during your regular business hours. A registered agent service helps avoid this uncomfortable position.

2. Business Hours 

Because a registered agent must have regular business hours to receive legal documents and service of process, it probably doesn’t make sense to be your own registered agent. You don’t want the stigma of being sued in front of your clientele.

Additionally, if you’re appointed registered agent, you must be physically available during these business hours in the event of being served. A registered agent service ensures your registered agent will be available during business hours, so you can worry about one less thing.

3. One Registered Agent Per State 

Importantly, you need a registered agent in every state where you conduct business. Let’s say you started your business in Chicago and formed your LLC in Illinois, but you’re expanding to California and Pennsylvania and need to register your LLC in both. Each state will require a unique registered agent.

Using our registered agent service, you can easily appoint a registered agent in all 50 states.

4. More Mail to Process

You’re probably already getting tons of mail related to your business, so why take on the burden of processing even more? With all of the correspondence you’d be receiving as your own registered agent and daily business mail, it’s easy for official documents to get lost in the shuffle.

This can be dangerous and costly, as failure to respond promptly to legal documents or tax deadlines can incur huge penalties and even lead to the dissolution of your LLC. 

Hiring Swyft Filings’ registered agent service can significantly help your business. You won’t have to worry about taking on the burden of a registered agency yourself, and you can be confident that a designated professional is on the job. To get started using our registered agent service, click here.

Step 4: Create an LLC Operating Agreement

The next step in your process is to create an LLC operating agreement. This internal document settles all operating procedures for your Illinois business. While Illinois does not require you to register your agreement with the Secretary of State, without one, the state determines how you will run your LLC.

An operating agreement ensures that all managers or members are on the same page regarding how you conduct business, manage your business, split profits, and more. It can help you avoid disputes over the minutiae of business operations and ensure everyone agrees.

Operating agreements vary to some extent but generally include the following.

• General business information, such as business purpose and duration

• Management structure and crucial information like voting rights

• Tax designation, along with any procedure for changing designations in the future

• Member information, including roles, profit distributions, contributions, and ownership percentages

• Decision making rules

• Ownership transfer or distribution policies

• LLC dissolution guidelines

Certificate of Good Standing

After you’ve developed a solid operating agreement, it can be time to apply for a certificate of good standing. This certified document states that your LLC was lawfully founded and operates under state laws.

You’ll need to ensure you’re up to date with all annual reports and maintain your LLC’s compliance with local licensing and permits. While the state does not require a certificate of good standing, it’s helpful in situations like:

• Purchasing commercial insurance

• Applying for bank loans

• Opening a business bank account

• Opening a business credit card

• Applying for business licenses in other states

When ready, you can apply for a certificate of good standing with Form LLC-50.25. It costs $25 to request your Certificate of Good Standing. Processing times are up to 10 days, but you can expedite the process to a 24-hour turnover for $45.[5]

Step 5: File for an Employer Identification Number

Once you’ve registered your Illinois business, applying for an Employer Identification Number (EIN) is the final step. An EIN, also known as a Federal Employer Identification Number (FEIN) or Federal Tax ID number (FTID), acts very much like a social security number, but it identifies a business entity rather than an individual.

Single-member LLCs do not, strictly speaking, require an EIN if they’re not planning on hiring employees, but an EIN may be necessary for:

• Hiring employees

• Reporting employment taxes

• Filing business taxes (such as state taxes and LLC taxes)

• Opening a business bank account

• Applying for a business credit card

You apply for your business’s EIN for free through the Internal Revenue Service (IRS) with an application. Processing time can take up to two weeks.[6] If you want to skip the hassle, we can obtain your EIN for you with a small fee.

Let Us Handle Your LLC Paperwork

Starting your Illinois LLC can be complicated, but it doesn’t have to be. At Swyft Filings, we can take care of all your filing needs for your small business in one fell swoop.

Our LLC formation service starts at just $0 with state fees. It takes about 10 minutes to begin. Tell us about your business, and we’ll start filing your paperwork in the official channels. After your LLC formation is approved, we’ll mail you your official documents.

Swyft Filings is passionate about helping entrepreneurs get their dream projects off the ground and into business. With some of the fastest processing times in the industry, you’ll have your small business up and running in no time. To get started with your LLC formation today, click here.

FAQs:

How much does it cost to set up an LLC in Illinois?

Filing your Illinois LLC articles of organization costs $150, plus an additional $100 for expedited processing. The following optional services are available for the following prices:

• Name reservation: $25, plus $50 for expedited processing

• Assumed business name registration: $30-150, depending on the year, plus $50 for expedited processing

• Certified copy: $25, plus $50 for expedited processing

• Certificate of good standing: $25, plus $20 for expedited processing

How is an LLC taxed in Illinois?

As an LLC, you choose how you want to be taxed by the IRS. You can decide to take advantage of pass-through taxation and report your business earnings on your personal federal income tax returns, or you can choose to tax your LLC as a corporation.

If your LLC is taxed as:[7, 8]

• A disregarded entity and files using federal tax Form 1040, you’ll report your business earnings to Illinois on Form IL-1040.

• A partnership and files using federal tax Form 1065, you’ll report your business earnings to Illinois using Form IL-1065.

• A corporation and files using federal tax Form 1120, you’ll report your business earnings to Illinois using Form IL-1120.

• An S Corp and files using federal tax Form 1120S, you’ll report your business earnings to Illinois using Form IL-1120-ST.

Additionally, if your Illinois LLC sells tangible goods or services, you’ll need to collect and pay sales tax and submit sales tax returns regularly.

What are the benefits of an Illinois LLC?

From the bustling city of Chicago to the stately capitol of Springfield and everything in between, Illinois has a thriving economy, making it a great place to form an LLC.

Benefits of forming an LLC include:

• Personal asset protection

• Flexible ownership/membership structure

• Pass-through taxation

• Flexible profit distribution

• Less paperwork

• Minimal state fees

How do you dissolve an LLC in Illinois?

The dissolution of an Illinois limited liability company can be summed in five broad steps:

1. Follow the procedures for LLC dissolution detailed in your operating agreement

2. Close all tax accounts

3. Repay any debts incurred while doing business

4. Settle any outstanding legal disputes

5. File the Illinois Statement of Termination (Articles of Dissolution), Form LLC 35.15[9]

Bibliography:

1. Office of the Illinois Secretary of State. “Illinois Application to Reserve a Name, Renewal, Transfer of Reserved Name.” Accessed on January 16, 2023.

2. Office of the Illinois Secretary of State. “Illinois LLC Act Application to Adopt, Change, Cancel, or Renew an Assumed Name.” Accessed on January 16, 2023.

3. Office of the Illinois Secretary of State. “Illinois Secretary of State Articles of Organization.” Accessed on January 16, 2023.

4. Office of the Illinois Secretary of State. “Illinois Limited Liability Company Act Statement of Change of Registered Agent and/or Registered Office.” Accessed on January 16, 2023.

5. Office of the Illinois Secretary of State. “LLC Request Form for Certificates of Good Standing and/or Certified Copies of Documents.” Accessed on January 16, 2023.

6. Internal Revenue Service. “Apply for an Employer Identification Number (EIN) Online.” Accessed on January 16, 2023.

7. Internal Revenue Service. “Forms, Instructions, and Publications.” Accessed on January 16, 2023.

8. Illinois Department of Revenue. “Business Income Tax Forms.” Accessed on January 16, 2023.

9. Office of the Illinois Secretary of State. “Illinois LLC Act State of Termination.” Accessed on January 16, 2023.