If you are trying to start an LLC in Illinois, you’ll find that there are lots of rules you need to follow. They can be confusing. Sometimes it’s hard to tell whether a law even applies to what you want to do!
The good news is this: we’re here to help. Though the sheer number of rules can look scary, we’ll walk you through in clear, easy-to-digest steps.
In this article, you’ll find all the information you need to start an LLC in Illinois, including:
- Tips on drafting and filing the documents you need for your Illinois LLC formation
- Guidelines for staying within state and federal law
- The actual laws and rules you need to follow
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Step 1: Name your Illinois LLC
You can’t form your company until you have a good name. While you have a lot of options in picking a name, the Illinois Limited Liability Company Act section 1-10 sets down a few hard rules.
Words You Have to Use
First, your name must include one of the following terms: “limited liability company“, “L.L.C.”, or “LLC.”
If you are forming the LLC for a low-profit charitable or educational purpose under section 1-26, you must have the term “L3C” in your LLC’s name. And if your LLC works with trusts, the law requires that you have the word “trust” in the name.
An LLC name also has to be “distinguishable” from other business names in the state. The Illinois Secretary of State has the final say over whether a name is okay. They may require you to add words to make your name more different from that of another company.
For example, let’s say you want to open a pizza place and call it “Chicago Deep-Dish Pizza, LLC.” But there is already a corporation called “Chicago Deep-Dish Pizza, Inc.” In that case, you have to make your name different enough from the existing corporation.
Section 1-10(f) wouldn’t allow you to just add words like “the” or “company” to make your name distinguishable. You would have to add substantive words like “Chicago Deep-Dish Pizza on Michigan Avenue, LLC,” and even then, the Secretary of State’s office would still have the final say over whether the name was okay.
Words You Can’t Use
Section 1-10 bars your LLC from using names that suggest it is a different kind of company. So, you can’t use words or abbreviations that suggest your company is a corporation or partnership.
Unlike some other states, you also cannot just use the word “limited” or the abbreviation “Co.” in your name.
Your company’s name cannot contain the words “trust”, “trustee”, or “fiduciary” unless it has permission to do so under the Illinois Corporate Fiduciary Act.
Likewise, if any other laws are controlling your area of business, you will have to make sure that your business name is okay under those laws before moving on.
The big rule is this: if you need a license to do your job, double-check with the Secretary of State to make sure your company name complies with the law.
Research the LLC Name You Want
The Illinois Secretary of State offers a name search. Use this tool to see whether there are any other businesses in the state that have the name you want.
You should also do a few extra searches to make sure that there are no other companies that have names too close to yours. Otherwise, the Secretary’s office might reject your name for being too similar to another company’s name.
Get a Matching Domain
Once you settle on an LLC name, we recommend you get a matching domain, even if you don’t have immediate plans for a website.
Competitors can buy your perfect domain and its variations to block you from using them.
Domain squatters sift through public records of newly registered LLCs and will buy their matching URLs, only to relist them with huge markups.
A domain name from GoDaddy.com or a similar registrar will cost you between $20 and $50 per year, with regular specials and sales where you can get large discounts.
It pays to check now.
Once you have your domain name, you can also create a branded email address through GoDaddy.
Illinois DBA: Using a Fictitious Business Name
Maybe, after doing a name search and working with the Secretary of State’s office, the legal name of your LLC is not quite what you want it to be. Or perhaps another company has formed, and you want to make it clear to the public that you are not the same.
In this case, you will need an assumed name or DBA (“doing business as”) name for your LLC.
Section 1-20 of the Illinois Limited Liability Company Act gives rules for using a DBA in Illinois. DBAs require an application to the Secretary of State with the following information:
- Your LLC’s legal name
- The state where your LLC was formed (here, that would be Illinois)
- A statement that your LLC wants to use an assumed name
- The assumed name (DBA) your LLC will use
Illinois DBAs are good for five years at most. The exact expiration date will depend on the month that you filed your articles of organization, known as your LLC’s “anniversary month.” The first day of your anniversary month in a year divisible by five (e.g., 2025, 2030) will be the expiration date for your DBA.
You can renew a DBA by saying so in your LLC’s annual report and paying the renewal fee.
The application to obtain a DBA should be made on a form LLC-1.20. A DBA costs $30 per year and is renewed every five years.
For example, if you obtain your DBA in 2022, you will pay $90 to have it through 2025. At that point, you may renew for $150, and your DBA will be registered through 2030.
Step 2: Appoint an Illinois Registered Agent for your LLC
Section 1-35 of the Limited Liability Company Act requires your LLC to name a registered agent for mail and service of process, along with that agent’s business office. Service of process is a legal term for business letters or legal papers. In other words, your agent is there for the state or the public to communicate with you.
Registered agents are vital to have if your LLC is sued. When that happens, the Illinois Code of Civil Procedure requires the people suing to give your LLC’s registered agent the papers. If they can’t find your agent, you could lose the lawsuit by default judgment. (A default judgment happens when you lose because you didn’t respond.)
The law allows any Illinois resident or other person who can do business in the state to serve as the agent for your LLC. Many first-time business owners try to be the registered agents for their LLCs. They don’t see why they should pay someone else to do the job. This is not always a wise choice.
Seasoned owners often hire a registered agent company. This company lets the LLC use its address as the registered office and agent. That way, the agent gets your important letters and service of process. Then, that information is passed on to the LLC’s members (i.e., the LLC owners).
You might be thinking that the job doesn’t sound hard enough to justify hiring someone else. Being your own agent can be tempting for a few reasons:
- It’s cheap: You’re not paying someone for something you can do yourself.
- It’s simple: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important papers personally.
Those are solid points. But there are also a lot of reasons not to do it yourself, and not all of them are obvious:
- No privacy: Your name and address will be published on the Secretary of State’s website.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: Agents must be open for service during all business hours. They don’t get time off.
- Business interruptions: If your agency address is the same as your business address, your clients may be interrupted by people serving lawsuits. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your agency address is correct and up to date. If you make a mistake or miss something, that’s on you.
Registered agent companies are an easy way to avoid these issues. They aren’t pricey, either. They usually cost around $100 per year. Their name and address, not yours, are listed on the Internet. Depend on your agent to make sure you don’t miss anything. That way, you can focus on your business.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
A registered agent company can also help if your LLC will do business in multiple states and you need to register as a foreign LLC. Just find a company that does business in all those states, pay them a single fee for multiple agents and offices, then let them worry about the details.
Step 3: File Your Illinois LLC Articles of Organization
You’ve got your LLC’s name and agent. That means you are now ready to form your company. The legal act that creates your LLC is filing the articles of organization. Illinois sets forth the rules for your articles in Section 5-5 of the Limited Liability Company Act.
Filing the articles may seem like a small, formal step, but it is crucial. Until you file your articles, your LLC doesn’t exist and can’t do anything. It’s thus vital to make sure that you follow the strict letter of the law in filing your articles.
If you would like to avoid the hassle of handling your own LLC filing, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my Illinois Articles of Organization?
Section 5-5 sets forth the things you need to have in your articles:
- Your LLC’s name and address
- Its principal place of business
- The name and address of each person organizing the LLC
- Your LLC’s purpose, which can be stated as “all lawful business”
- The name of your LLC’s registered agent and the address of the agent’s office
- A statement that your LLC has one or more members at the time of formation
- The name and business addresses of all managers, and whether any LLC member is also a manager
- How long the LLC will last (by default, it won’t dissolve unless you say you want it to here)
- Any other legal statements, including ones required by your LLC’s operating agreement
If this seems a bit too involved, you can just use the form articles of organization provided by the Secretary of State (form LLC-5.5(S)).
Illinois LLC Filing Fee
The Secretary of State’s office quotes a $150 state fee for filing your articles of organization. The Secretary of State’s current fees are also listed in section 50-10 of the Limited Liability Company Act.
Illinois LLC Processing Time
The current processing time for articles of organization is 5 to 10 business days. That quote assumes that you have filed your articles online. If you file by mail with hard copies, you should also add time for mailing to that estimate.
If you need your articles processed sooner, the Secretary of State does offer expedited processing. For $250, your articles will be processed within 24 business hours of receipt by the office.
For example, if you file online at 10:00 a.m. on a Tuesday, expedited service would get your articles processed by 10:00 a.m. on Wednesday.
Step 4: Draft your Illinois LLC Operating Agreement
Section 15-5 of the Limited Liability Company Act allows, but does not require, LLCs to have an operating agreement. An operating agreement is a contract between the members of your LLC that states the rules of the company. It can be very useful to have, especially when the unexpected happens.
The law provides a lot of details and directions about how LLCs should be run, including:
- the duties and powers of members
- how to admit new members to the LLC
- how members should manage the LLC
- whether certain actions need a meeting to be valid
- how the LLC should be dissolved
Not all of the law’s rules may fit your company, though. That’s where an operating agreement comes in. They can set new rules in a lot of areas, including:
- The rights and duties of LLC members. If one LLC member runs the business or handles the books, the operating agreement should say so.
- The rights and duties of the manager. Managers also have special duties to the company and the members. The operating agreement should state these.
- What the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
- How new members can join. They also have rules about how members can leave.
- How and when profits are paid to members. They can also create different types of membership and payment schemes.
- Whether members or managers are in charge. They also say how to hire and fire managers.
- How and when the LLC should end. You might not want to dissolve your business now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
- How to change the rules. You should be able to change the contract when the LLC needs you to. The operating agreement should set down the rules for making changes.
Section 15-5(c) of the Limited Liability Company Act further sets down several specific things that an operating agreement may do, including:
- Restrict or eliminate a member’s fiduciary duty, other than the duty of care a member owes if the LLC is member-managed (i.e., these do not apply where there is a non-member manager in charge)
- Change a member’s duty of care to the LLC, except that you can’t authorize someone to break the law or engage in misconduct on purpose
- State-specific actions by members or managers that do not violate duties
Several strict limits on the power of the agreement to change the law are listed in Section 15-5(b). When you are drafting an operating agreement for your company, you should consult a professional for the best way to accomplish your company’s goals.
Unlike articles of organization, operating agreements are not filed with the state. They are your private contracts, and you can change them as your company’s needs change.
Your LLC and its members are unique, as are the demands of your business. Therefore, it makes sense to put together an operating agreement as soon as you can.
Step 5: Get an EIN (Employer Identification Number) for Your Illinois LLC
The IRS keeps track of your tax return with your social security number. With companies, it’s a bit harder because they don’t have social security numbers.
That’s where EINs come in. The IRS uses them to track a company’s taxes in the same way it uses social security numbers to track individuals’ tax information.
Not all LLCs need an EIN. To see whether your LLC needs an EIN, ask yourself these three questions:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If the answer to any of the above questions is yes, you will need an EIN.
The good news is that it’s not hard to get one. The IRS has a detailed website on the topic and allows you to apply online. The whole application process takes about five minutes. Alternatively, you can also file IRS form SS-4 via mail or fax.
Because it’s so simple, you should never pay anyone to get an EIN for you unless they are throwing it in as an added benefit to a bigger service package.
First Tasks After Registering your Illinois LLC
Forming your LLC is an important step to starting your business, but it’s not the only one. You still have some crucial items to complete before you open your doors.
Open a Business Bank Account
There are many good reasons to get your LLC its own bank account:
- Accounting: You’re in business to make money. You can’t tell if you’re making money unless you know exactly how much your company spends and deposits every month.
- Credit: Even successful companies need to borrow money. You don’t want to use your personal credit, though, for a business expense. Keeping your company’s money separate helps build up company credit.
- Personal Asset Protection: Keeping your company’s money separate from your own is the whole point of even forming an LLC. Without a business bank account, you risk losing that personal liability protection.
Proper business accounting is a must. You must keep detailed financial records about your business, its expenses, and its income. You can’t do that if you mix your own information and money with that of the business. Having a bank account for your LLC is the best way to keep your LLC’s books.
Getting credit for your business is not something a lot of new owners think about. You’re probably not tempted to think about going into debt right now, but you may have to in the future when you need real estate or other improvements, or you have to modernize your business. When that happens, the LLC should borrow money as a separate entity, not you.
Legal protection is arguably the most important reason to get an LLC bank account. The whole idea of having an LLC for your business is that if someone sues it, your own assets are not at risk. This company/individual separation is called the corporate veil. (Even though an LLC is not a corporation, it's still called a “corporate” veil.)
If you treat your company’s assets like your own, the veil can be pierced, and you can lose that precious legal protection. So, for example, if you are taking the company’s money and using it to pay your household bills, someone who sues the LLC could collect their judgment from you personally!
Mixing business and personal assets is risky. Don’t do it. Go to the bank now and open up an LLC bank account.
Get Business Insurance For Your Illinois LLC
Your business is a high-value asset. Like your other assets (house, car, etc.), you should protect it by buying insurance.
Here are some types of insurance you should think about for your LLC:
- General liability insurance: You’ll need this if there's an injury on your property. It pays for judgments and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers drivers and vehicles for your business.
- Workers compensation insurance: Though Illinois law doesn’t require you to have workers’ compensation insurance for LLC members, it does for almost every other employee. These policies protect those employees against on-the-job injuries.
- Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses will be covered.
Keep Your Illinois Company Compliant
Once you’re done with those tasks, you’re ready. But your LLC does have more things that it needs to keep track of to stay compliant with Illinois law. Here are a few things that you will need to keep in mind as you run your company.
Illinois Business Permits and Licenses
The state of Illinois doesn’t require your LLC to have a business license. However, the city or county where your LLC is located might. Make sure you check with local authorities to get the proper permits.
Also, even if you don’t need a business license, you may need a professional license for your line of work. Consult with the Illinois Department of Financial and Professional Regulation for more details.
Illinois Tax Requirements
The Illinois Department of Revenue follows the IRS’s lead in treating LLCs as pass-through entities. In other words, the state does not tax the LLC directly. Instead, it taxes income on members’ personal tax returns.
For example, if the IRS treats your single-member LLC as it would a sole proprietorship, then you will have to report the LLC's income on Form IL-1040, Illinois Individual Income Tax Return.
However, this means that if your LLC is taxed by the IRS as a partnership or corporation, it will have to file tax forms for those entities with the state. To determine the best option for you, speak with a qualified business accountant.
Illinois may impose a personal property replacement tax on LLCs treated as pass-through corporations. For more information, consult with the Illinois Department of Revenue.
Federal LLC Tax Filing Requirements
As discussed above, your LLC is considered a pass-through business entity for federal tax purposes unless you elect otherwise. Profits or losses from your LLC should be on Schedule C of your personal tax return.
Annual Report and Other Filing Requirements
Limited Liability Company Act 50-1 requires your LLC to file a yearly report with the Secretary of State. That report must include:
- Your LLC’s name
- The address of your principal place of business
- Your LLC’s registered agent and their office address.
- The names and addresses of all LLC managers and/or members acting as managers
- Any other necessary information requested by the Secretary of State
The report should be filed within the 60 days before your LLC’s “anniversary month,” as described above. If you file the report on time, the filing fee is $75. An LLC that files a late report will also be charged a penalty of at least $100.
Section 1-40 of the Limited Liability Company Act also requires your LLC to keep these records available at its principal place of business:
- The full name and last known address of each LLC member
- The amount of cash each member has put into the LLC
- The agreed value of the other property or services each member has contributed or has agreed to contribute
- The date each LLC member joined the company
- The articles of organization
- Copies of the LLC’s tax returns and reports for the last three years
- The operating agreement
- Any LLC financial statements for the last three years
Illinois Business Formation Quick Links
- Illinois Corporate and Limited Liability Company Name Search
- Illinois DBA application (Form LLC-1.20)
- Illinois Department of Financial and Professional Regulation
- Illinois Department of Revenue
- Illinois Limited Liability Company Act Article 1 (General Provisions)
- Illinois Limited Liability Company Act Article 5 (Organization)
- Illinois Limited Liability Company Act Article 15 (Management)
- Illinois Limited Liability Company Act Article 50 (Fees and Other Matters)
- Illinois Limited Liability Corporate Fiduciary Act Article 1 (General Provisions)
- Illinois Personal Property Replacement Tax Information
- Illinois Secretary of State — Form Articles of Organization
- Illinois Secretary of State — LLC Publications/Forms
- Illinois Workers’ Compensation Commission
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
Illinois LLC FAQs
How much does it cost to start an Illinois LLC?
It costs $150 to file your articles of organization and form your LLC.
What is the processing time to form my Illinois LLC?
5-10 business days. If you mail your articles, add time for mailing. For $250, you can expedite that processing time to 24 business hours.
What are the benefits of an Illinois LLC?
An Illinois LLC protects your personal assets while giving you favorable tax treatment. You can also use an operating agreement to customize your business structure, so it best serves the needs of you and the other LLC members.
Where do I check if my Illinois LLC name is available?
Use the Illinois Corporate and Limited Liability Company Name Search. To make sure your name is distinguishable, conduct multiple searches with different parts of your proposed name to make sure there are no other companies with names too similar to yours.