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Creating an LLC can feel daunting, but it is much easier when you have all the details you need from the start. That includes knowledge, support, and help, too, so you can get things moving in the right direction. Fortunately, Illinois can be a good place to start an LLC, so if you’re in that state or thinking about relocating there, you may be in luck. Illinois is a business-friendly state, with reasonable requirements and regulations for starting an LLC.
The Illinois Secretary of State website can help you get organized and file so you know which forms to use and feel confident that you’re following the right legal pathways. You’ll be able to look through the checklist and download the required form right from the site. You can also browse the guide for starting LLCs in the state to ensure you’re not overlooking something specific. That’s a great way to reduce your stress and make it easier for you to get your company up and running quickly.
The cost of filing your Articles of Organization in Illinois is $150. While that’s more expensive than some states, it’s also considerably less than what several other states charge. You’ll likely find most of the business fees in the state pretty reasonable, and the regulations aren’t overly restrictive or complex, either. It’s pretty straightforward to get started, and you can have your company created and operating in no time. Here’s what you need to know form an LLC in Illinois.
One of the best things about forming an Illinois LLC is that you only need 6 steps to get it done. If you follow these steps carefully, you’ll be ready to go with your LLC. You’ll also be more comfortable with the whole process, which helps you know what to do for your company’s future, too. You want to be clear on requirements, taxes, and anything else so you can enjoy the exciting step of forming your LLC instead of being anxious about the process.
Below, you’ll find a detailed explanation to walk you through each step.
What do you plan to call your company? Choosing a name for your Illinois LLC is the first step toward making it a reality. Keep in mind that you need to choose something that works for you and your customers, and something that hasn’t already been used. Take the time to consider the name as a URL, since running words together without spaces sometimes creates the suggestion of a word or name that won’t work for you.
When you reserve a business name for your LLC, you need to be sure you’re following Illinois requirements. Otherwise, the name likely won’t be approved, and you’ll have to start over with something else. The first thing to be aware of is that you can’t have something too similar to anything already registered. So, “Mister Jones Plumbing” won’t work if there’s a “Mr. Jones Plumbing” already registered in the state. You can search to see if your desired name is available, so you have a starting point.
Another important thing to note when naming an LLC in Illinois is that you have to use some form of Limited Liability Company, L.L.C., or LLC at the end of your name. Unlike what’s allowed in many states, though, you can’t use Ltd. or Co. as part of your name. You also can’t use LP, Limited Partnership, Incorporated, Corporation, or Corp. as part of your company’s name.
If your company requires professional certification, you need Professional Limited Liability Company, P.L.L.C. or PLLC at the end of your company’s name. Companies involved with banking or insurance can only have those terms or words associated with those industries in their name if the state approves it to reduce the risk of unlicensed people and companies claiming to be banks or selling insurance products.
If you’re not sure whether the industry you’re in is professional regulated, you can look up which industries are regulated by the state. Once you’ve done all that and see that the name you want is available, you can pay $25 to reserve it for up to 90 days. That way, no one else will come along and take it while you’re getting everything ready to file your LLC’s paperwork.
If you plan to use a Doing Business As (DBA), you need to file that, as well. You might want to name your main LLC something that has a broader reach and then operate smaller-sounding entities under the main company. You can create “Auto Conglomerates, LLC,” for example, but operate under “Honest Joe’s Used Cars” with a DBA. The main LLC main nor the DBA name can be something already registered, or something too similar to what’s already registered.
You don’t need to create a DBA if you don’t want to, and you certainly don’t have to call your LLC anything other than what you’ve actually named it. Just be sure you’re good with operating under its main name because you can’t just decide to use a DBA without registering it first. It’s not difficult to add a DBA later if you need to if you’re not sure about using one or if you haven’t yet settled on one you like.
One of the things you might want to do with the name of your LLC is to trademark it. Keep in mind that you can’t trademark some kinds of names. For a trademark, the name has to be made up or unique in some way. Kleenex, for example, was easier to trademark because it was a created word that could have meant anything. It’s just associated with tissues because that’s what the company makes. If the company made pianos, Kleenex would be associated with music.
You won’t be able to trademark something generic, and you can’t trademark your own name. “Jim’s Bank” isn’t an option for trademark, and neither is “Dahlia’s Daisies.” If you’re looking to trademark your Illinois LLC, think carefully about a name and look for something that gives you the best chance of getting a trademark. It’s not a guarantee, but it has the potential to make the process much easier. If you can create a new word, you’ll likely have a better chance at your trademark goals.
After you’ve secured the name of your Illinois LLC, you’ll want to file your Articles of Organization. These are the formal documents required to legally establish your LLC with the state. They detail the rights and responsibilities held by each member of the LLC and explain the duties, powers, and liabilities those members have to each other and the LLC’s customers. You can use templates to create the articles, and then you’ll pay your filing fee and submit the paperwork.
The filing fee for your LLC’s Articles of Organization in Illinois is $150. If you need a business license, that will cost extra, but not all business entities need them. Illinois’ fees are higher than some states but lower than others, making them pretty standard for creating an LLC. The cost of the state business license can vary depending on what industry you’re in. If you’re located in the city limits of Chicago, you may also have licensing requirements to comply with there.
There is specific information that has to be included in your Articles of Organization. These include the LLC’s name and physical address in Illinois, along with the effective date of the LLC. This date has to be within 60 days of filing. You’ll also need the name and address of the registered agent, and the LLC’s purpose. If the operating agreement has a dissolution date, you’ll want to include that, as well. If you’re filling out the form, you need to include your name and address.
Think of your Articles of Organization as a charter. They act as the overall agreement for your company, and they explain the purpose and the way the company plans to operate. The state also wants information on the people operating your LLC, so they can reach the right people if there are problems or concerns. You want to make sure everything in your Articles of Organization is filled out correctly so you have peace of mind and keep your LLC up and running efficiently.
It’s easy to file your Illinois LLC documents online, but you can also mail the forms in if that works better for you. You have two different options, so you can choose the one that meets your needs. While some states also accept your Articles of Organization by fax, email, or in person, Illinois requires either online or mail-in delivery. If you want to get started on opening up your business faster, you may want to choose the online option for filing with the state.
A registered agent is a requirement of LLC creation in all 50 US states. Sometimes this entity is also called a resident agent or something similar; Illinois uses the term registered agent. There are three specific features of a resident agent. These are:
If you choose, you can designate anyone who fits the above criteria to be your registered agent. What if that person is sick or on vacation when something important comes in? If you use our registered agent services, you don’t have any of those worries.
Depending on your role with the company and other factors, you may find it much easier to choose a registered agent service. That’s one thing off the list that you don’t need to worry about. You’ll still be kept in the loop if there are issues with your LLC, but you won’t have to be the initial point of contact for paperwork and legal forms.
Step four in creating an Illinois LLC is the development of your operating agreement. This is the agreement that provides an outline of the ownership of your LLC, along with the operating procedures. It’s a legal document, and it’s binding on the business and the people it relates to. In essence, it ensures that every one of the owners of the business is on the same page when it comes to the purpose and direction of the LLC.
While the operating agreement doesn’t guarantee that everything will always be harmonious, it can help to reduce disputes and limit future conflicts. Decreased risk of conflict and other potential issues means a stronger and healthier company for the long term, which is a big benefit for any business trying to get started and develop success.
If you’re trying to create a multi-member LLC or a series LLC (where different company divisions operate like separate entities), it’s extremely important to create a strong operating agreement where everything is thoroughly covered. That gives you and any business partners a lot more peace of mind, and it also helps you legally work through any concerns or discrepancies you might have in the future. It’s a way to protect your company, your business partners, and yourself from misunderstandings.
You don’t technically have to create an operating agreement when you have an Illinois-based LLC. If it’s not needed, why is it included as a step to create an LLC? That’s a fair question, and the reason is that it provides valuable legal protection. Even though the state doesn’t require you to file or even create it, it’s well worth creating it and keeping it updated. Put it with the other documents for your company, and you’ll have it if you need it in any kind of future dispute.
Since Illinois doesn’t have the requirement for an operating agreement for your LLC, there aren’t any specific requirements about what should be included in one. But there are some general areas of information you can consider that make logical sense in this type of agreement. For example, consider including basic information on the overall organization. Who owns it, when it was created, and the names of all the members are important information. So is the ownership structure since it may be unequal by design.
You can also address management issues, any capital contributions, and the voting rights and responsibilities of the members in your operating agreement. If there are multiple owners, they generally all have a vote if there will be changes made to a business. Being clear on who’s managing the LLC and how everyone’s votes are handled makes it easier for you and other members of your company to avoid frustration and confusion, as well as conflict. Not all voting powers may be equal.
Another area you want to add to your operating agreement is what will happen if you want to make changes to the membership structure in the future, as well as how the company would or could be dissolved. Distributions are important, too. When distributions are given out, who receives them, and how they are given all matter. Are there any specific factors that could affect distributions? Put those into the operating agreement, as well.
The natural goal of nearly all companies is to make a profit. If you’re going to be distributing part of that profit to the members of the LLC, it’s only fair that everyone involved understands how that’s going to work. Again, it’s mostly about legal clarity and avoidance of conflict, both important for the success of your LLC.
Using an EIN (employer identification number) is a requirement from the IRS, so it’s not something you want to ignore. When you develop an LLC, that entity must have an EIN to pay its employees properly. The IRS will assign your LLC this 9-digit number when you file for it, and it doesn’t cost you anything to request one. It’s very much like a Social Security number for a business—and it’s not just for paying employees.
There are other reasons you’ll need an EIN, such as when you open a bank account for your LLC or file your state or federal taxes. Unless they want to hire employees, individuals generally don’t need EINs, even if they’re in business. You’ll likely find that you can’t open a bank account or a line of credit for your LLC without this important number. It’s quick and easy to get one from the IRS, so it’s vital to take the few required minutes to make sure you get one.
Applying for an EIN is one of the services we provide, so you don’t have to handle it yourself if you don’t want to. It’s also something that you can file for on your own, if that’s how you’d prefer to get the number. Since it’s free and easy to get, some people who create an Illinois LLC file for it themselves in the course of doing other things to get their business off the ground.
The EIN doesn’t take long to get if you fill out the correct form with your company’s information. You can choose to get your EIN online or through the mail, whichever is most convenient for you and your company.
Taxes aren’t a subject most people love chatting about, but they’re a big part of the responsibility when you have an LLC in Illinois. You need to understand tax laws and make sure you’re complying with them. That way, you aren’t being subject to penalties and fines that could have been easily avoided. You want your LLC to have the best possible chance to do well, and following all the applicable tax laws can really reduce the risk of future issues.
Your LLC will be taxed in Illinois as a pass-through entity. That means the LLC itself doesn’t pay tax. The money passes through the LLC, and the people who profit from it (like you and other members) pay tax on those profits. There is also a personal property replacement tax in Illinois that applies to LLCs. It’s due once every year.
You’ll have to pay federal income tax on the income earned through your LLC, just as you would on income earned through other lines of work. You’ll be taxed on your share of the profits at your personal tax rate for both federal and state taxes.
For any LLC that sells goods or provides taxable services in Illinois, collecting sales tax is a requirement of doing business. Your LLC will need to register with the Illinois Department of Revenue and collect sales tax properly. Every month, you’ll need to report and pay that sales tax to the state. If you have more than one location in Illinois, make sure they’re all properly registered for correct sales tax reporting.
All the earnings from an LLC are subject to self-employment tax, so be aware that the amount of tax you have to pay could be higher due to that obligation. The rate of self-employment tax is around 15%, and it’s required because, as the owner of an LLC, you’re considered to be self-employed.
If you have employees who work for your LLC, you’ll also need to pay payroll taxes. Most of those taxes will go to the federal government, but you also have to withhold payroll tax for the state, as well. The Illinois Department of Labor can provide you with more information.
When you create an LLC in Illinois, you can benefit because it’s not a state that’s heavy on taxation. That means your LLC isn’t going to end up having to spend a lot for additional taxes. But you do want to make sure you’re clear on all the taxes you do need to pay, just so you don’t end up being fined for missing a deadline or payment. You’ll need to understand issues like employee reporting, workers’ compensation insurance requirements, and the payments you’ll need to make for unemployment taxes.
Once you’ve followed every step and filed all your forms, you can sit back and celebrate the formation of your Illinois LLC. It’s a good feeling to get your business up and running. But really, creating your LLC is only the start of what you’ll need to do for a strong and successful business. There are still plenty of other issues you’ll want or need to address after the paperwork has been filed and the state has approved your new company. To enjoy the most success, make sure you stay focused on what matters.
Some of the biggest and most problematic issues for new LLCs are employee-based. Other concerns are generally legal and financial. You won’t necessarily be able to stop every potential problem or control every risk factor, but there are some important ways you can lower the chances of ending up with issues. When you correctly set up the financial needs of your LLC and work with professionals who can help, you’ll lower your risks. That means more peace of mind and security, both of which are important.
Your LLC needs a business bank account that’s separate from your personal account. Even if you’re a single-member LLC and really don’t want to hassle with managing another account, you still need to take this step. It’s necessary when you have a business. With a separate account, you have more potential protection from personal liability for any problems that arise with the company. You may not create as much protection if your LLC’s money is simply mingled with your personal funds in a non-business account.
It’s not difficult to get a business account in most cases. You’ll file your LLC paperwork and get it approved, and then you can get your EIN. Take the company information and paperwork, along with your EIN, to the bank and open an account. You can get checks and debit cards for yourself and anyone else who’s authorized to use the account.
There are fees for owning and operating an LLC. If you have the type of entity that requires a business license from the state of Illinois, you’ll need to pay to renew that license. You also need to file an annual report every year with the Secretary of State. The current filing fee for that report is $75, which is subject to change. Make sure you’re prepared for these fees and put money from your LLC aside to cover ongoing financial requirements. Keeping up with state requirements is very important for your LLC.
You could also have other fees you need to pay, depending on the kind of business you’re operating. When you set up your LLC, you can get the exact information on the annual fees and taxes you’ll be expected to pay. You can also determine whether you need one or more business licenses, so you can prepare for that, as well. You don’t want to fall behind or forget to pay something because there can be fines and penalties for doing that. To keep your profits high, you want to keep fines and penalties low.
Your LLC’s finances and who handles those finances can make or break your company’s success. Carefully consider working with professionals, so you can help your business have the very best chances of success. Attorneys, accountants, and other professionals who can handle many of your LLC’s financial aspects should be properly and thoroughly vetted. While it can be tempting to handle everything on your own, turning much of the work over to trusted professionals can make things much easier.
Even if you’re someone with education or experience in finance or law, you’ll likely have a lot of other things to do when it comes to operating your LLC and keeping it running properly. Don’t take on more than you can handle, or everything you do could suffer. You could also get burned out quickly, and that doesn’t give your LLC the best chance of doing well for the long term. When you set up financial professionals to help you, you’ll have more time for other business aspects.
In addition to the potential of a business license with the state, you may need other permits or licenses, too. Chicago has its own system for businesses within the city, and other Illinois cities may have their own requirements. You also have to consider your field or industry. Some are very highly regulated (such as banking, law, medicine, and insurance), while others are not as strict.
Before taking on clients or customers, make sure you have all the necessary licensing and permits for your LLC. You’ll probably still end up with questions as you develop your business, and that’s okay. Working with professionals can help get those questions answered, so your Illinois LLC can thrive.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.