How to start an LLC in Illinois

Limited Liability Company (LLC) allows business owners to enjoy tax benefits as sole proprietors. The business structure is manageable as investors easily fund it, allowing it to grow quickly. An LLC protects the owner's personal assets, is flexible to manage, and has tax advantages that encourage small business owners to start and operate a business. An LLC can have one or more business owners and gives pass-through taxation. The IRS provides the requirements for starting an LLC to ensure one follows the state laws that are different according to the state location of the business. LLC formation is fast and simple. The startup cost for LLC is minimal and therefore encourages entrepreneurs. 

To form an Illinois LLC, one must file the Articles of Organization with the Illinois Secretary of State. The filing of the Articles of Organization costs $150 and is applied either by mail or online. The Articles of Organization is a legal document allowing a business owner to create the Illinois LLC officially. As a business owner, you will also enjoy other benefits such as reducing paperwork and opening the business to more investors and creditors since the business will have an official background. Illinois is a state in the United States (US) and contributes majorly to the country's GDP. The major sectors of this economy are manufacturing, investment, and agriculture, among others. Therefore, an entrepreneur is encouraged to start an LLC in this state due to its economic benefits. Files such as Form LLC-5.5 are required when registering and forming an LLC in Illinois. 

Illinois LLC fee breakdown

The fee breakdown allows an entrepreneur to understand the costs of starting an LLC in Illinois. Some of the costs are paid to the Illinois Secretary of State, while the other fees are paid to the federal or state government entities. The state filing fee is $154, the filing time is three weeks, and the expedited filing time is one business day. If one applies through Incfile, the fee is collected and forwarded to the office of the Secretary of State with the paperwork. There are also license and permit fees that are either paid when one first forms the business or while the business is ongoing. 

Step-by-step procedure for starting an LLC in Illinois

Name your Illinois LLC

A business requires a name that will be used while differentiating it from other businesses. This is the first step of starting an LLC in Illinois. The name is important since it helps market the business and ensure it is legitimate throughout Illinois. One needs to choose the name before they can form the LLC. A memorable name that briefly describes the business acts as a marketing strategy since it will explain the services it provides to customers. The name, however, has to be unique and does not exist through ensuring that you follow the guidelines for LLCs. When choosing an LLC name, one must research to ensure that the suggested name does not exist. One can check if the name is available through the Illinois business page that provides the names of the businesses. There are also state standards that the State of Illinois, through the Illinois Secretary of State, ensures the name adheres to these standards. For example, the names may not be offensive to religion or race. 

Naming Guidelines

1. The name must also include Limited Liability Company or LLC and L.C.C. abbreviations. The name should not contain abbreviations such as ltd. 
2. The name cannot also include words that can confuse the LLC with a government agency such as the FBI or State Department of Treasury. 
3. The name must also be distinguishable from any other limited liability company, limited liability partnership, corporation, or limited partnership. 
4. Availability of the name in Illinois

As a business owner, you must ensure that the name is not taken through an Illinois LLC Search on the Secretary of State's Cyberdrive Illinois website. One, therefore, searches to ensure the uniqueness of the name. A business owner searches and selects a new business name if another business already takes the name. 

5. After searching for the business name, a business owner reserves the business name for the Illinois LLC. As an entrepreneur, you may consider registering your company name as a domain for the business website. Therefore, one conducts a quick domain search and, upon finding an available domain, continues registering a new web domain. Perform a trademark search to help decide if you need to secure a DBA in Illinois. 
6. Get an Illinois State Trademark where the instructions are available in the United States Patent and Trademark Office (USPTO). However, it is important to note that the federal trademark process is long and expensive. 
7. Lastly, you file a DBA in Illinois. Suppose you want to operate under a different name from the official business name as a business person. In that case, you will be required to obtain Doing Business As (DBA) or assumed name through mail or online by filling out the Application to Adopt. 

Choose a Registered Agent in Illinois

Illinois requires a business owner to have a registered agent available to receive important state correspondence and legal notices in person. The Illinois registered agent provides a link between the state and you as a business owner as they will be used to provide information about a company. A registered agent can be a business entity or individual with a registered address in the state of Illinois that cannot be a p.o. box. It must be a street address. The agent must be a resident of Illinois, such as a registered agent service authorized to transact business in the state. One can choose themselves as the registered agent. The registered agent must be from a registered office that provides professional services for LLC owners. However, one must consider a registered agent's advantages and disadvantages. Hiring a registered outside agent saves the need for you as an entrepreneur to be on-site at the office between the normal working hours. The registered agent must be available to provide the required paperwork during working hours. 

File Illinois LLC Articles of Organization

The next step is filing the Articles of Organization with the Secretary of State. The forms you need to file are the Limited Liability Company Act Articles of Organization. This is a legal document that creates the Illinois Limited Liability Company. There is online filing to make it easier for business owners. Ensure as an entrepreneur, you have updated the file articles of organization. A business owner files the form online through the Illinois Secretary of State website for free. The filing is done in the Illinois Department of Business Services, Limited Liability Division and pays a filing fee of $150. The following information is required to complete the form:

• The official business name of the LLC
• The principal place of business
• The effective date of the LLC
• The name of the registered agent and their operating address
• The services the LLC provides
• The duration of the company
• The name and operating business addresses of the manager
• The name, address, and signature of any organizers. 

Receive a Certificate of Formation from Illinois

After you successfully file the Articles of Organization, the Illinois state issues a certificate that confirms that the LLC exists after the Illinois department has approved the legal documents. The certificate allows business owners of small businesses to obtain an Employer Identification Number (EIN), a business bank account, and business licenses. 

Create a Illinois operating agreement

An operating agreement is a document outlining how an LLC conducts business activities. However, Illinois LLCs are not required to have an operating agreement, but it is good to have one as an entrepreneur. The agreement ensures that all business owners have an agreement to reduce future conflict risks. The operating agreement also separates the business owner's assets, providing liability protection. 

Get an EIN 

Entrepreneurs set up with the Internal Revenue Service (IRS) to apply for an EIN. They apply for the request from the IRS website. The EINs is a nine-digit number the IRS assigns to every official business used for tax purposes such as filing tax returns and federal tax. The business taxes are updated through the IRS website. The EIN is the official Social Security Number for a business. EIN is also referred to as the Federal Tax Identification Number (FTIN) or the Federal Employer Identification Number (FEIN). The EIN is important when opening a business bank account, filing and managing federal and state taxes, and hiring employees. 

Get Illinois Business Licenses and Permits 

Business owners must get permits and licenses to operate the business. The permits include zoning permits or health department permits. An Illinois LLC must comply with federal, state, and local government regulations. The permits and licenses vary from state to state. 

Open a business bank account for your Illinois LLC 

Business owners use an EIN to open a business bank account. The business bank account allows the small business owner to separate the business and personal assets that help sort finances at a tax time. Therefore, the business bank account makes accounting and tax filing easier. 

Frequently Asked Questions 

How much does it cost to start an LLC in Illinois? 

In Illinois, starting an LLC cost at least $150-$300. However, this depends on the method of filing and whether you choose to reserve the business name. The fees change from time to time, so business owners should check the Illinois Secretary of State's website for the fee schedule. However, these fees do not include filing the annual report filed every first anniversary month or creating an LLC operating agreement. 

How long does it take to form an LLC in Illinois? 

The LLC processing time refers to the period Illinois reviews LLC filing and enters it into their system. After the approval of your LLC, the state of Illinois sends the approved legal documents by mail or electronically. The approval of LLCs in Illinois when the filing is done by mail is 3-4 weeks, 10-15 business days. If the filing is done online, it takes 7-10 business days. The LLC business in Illinois is filed faster when a business owner pays for expedited processing, which is an extra $100. 

What are the benefits of an LLC in Illinois? 

Business owners opt to form LLCs because they allow separating personal assets and liabilities from a company. LLCs provide many protections when starting a business since it has fewer requirements. Other benefits include separating your personal liability and assets from the LLC's debts and liabilities. There is also a flexible management business structure that allows a business owner to manage it the way they find it reasonable. LLC also provides an exemption of double taxation since the business owners are only required to pay personal taxes instead of paying federal taxes at the personal and business levels. There are also minimal regulations hence allowing for proper management of the business. 

How is an Illinois LLC taxed? 

Illinois LLCs are exempted from double taxation. Business owners are responsible for tax compliance with all Illinois tax laws when employing accountants. Some federal and tax laws for an LLC in Illinois include registering the business in Illinois with the Illinois Department of Revenue. A business owner must also pay into Social Security and Medicare through a self-employment tax paid directly to the IRS. If the business has high earnings and is taxed as a corporation, one must fill out an 8832-tax form as a C corporation C- corp Form 2553 as an S corporation. The personal income of an entrepreneur is also included in the individual tax return. The business also ensures quarterly tax payments to avoid tax penalties for the state and federal income taxes. Also, if the business sells items and collects sales tax, the business owner has to apply for a sales tax license at My Tax Illinois for the business entity. Your LLC has to follow all the tax requirements. 

What are the types of LLCs in Illinois?

The members of the company own many LLCs. Most the LLCs are managed by the members meaning they share responsibilities of decision-making for the company. There are also manager-managed LLCs where the members appoint or hire one or more managers to manage and run the company. The manager or managers have to be from the outside of the LLC. Most business owners prefer to form LLCs since they can create the organizational structures that favor their needs in the business entity. 

What are the types of LLCs?

Single Member LLC

Single-member LLC or Sole proprietorship is where the LLC has a single owner responsible for the company transactions, taxes, and business liabilities. If the single-member LLC does not become a corporation, the business is classified as a disregarded entity and taxed as a sole proprietorship. This form of LLC requires less paperwork.

Manager-Managed LLC

In this form of LLC, one must have an operating agreement with the option of member-managed or manager-managed LLC. The business entity is run by the company's owners, where every owner has the authority to act on behalf of the business. This form of LLC is used when there are passive members of the LLC, like investors. 

General Partnership 

This form of LLC is formed by multiple members who take responsibility for any business transactions, taxes, and liabilities. Every member is also responsible for determining when the assets are sold and paying taxes according to their business income share. 

Where can I conduct a name search for my Illinois LLC?

The Illinois Secretary of State Department of Business Services provides a database where the name search is conducted. 

How do I obtain a certificate of good standing in Illinois?

A certificate of good standing verifies that the Illinois LLC was formed legally and is properly maintained. A business owner must get one when seeking funding from banks or other lenders, forming a business as a foreign LLC in another state, and obtaining or renewing specific business licenses or permits. The document is ordered online at a fee of $25. 

How do I dissolve an LLC in Illinois?

If one wishes to dissolve their business, one should do so to prevent the tax liabilities and penalties. Therefore, one should close the business tax accounts and file the Illinois Articles of Dissolution.