Unlike the heavily populated states on the east and west coasts, Illinois is one of the most important cultural and financial hubs of the American midwest. Whether you want to start a business in farm country, Chicago, or one of Illinois’s many college towns, any business you form has a chance to thrive in this state.
First, though, you have to get started. That means you will have to put down some money. That might sound ominous, but it’s relatively painless if you know what you’re doing. We’re here to help you figure out where you need to spend your money, as well as optional purchases you’ll want to make that can make your life easier, both now and in the future.
This article will help you make a budget for starting an LLC in Illinois.
- The required costs for every LLC
- Extra costs we recommend you incur
- The different ways you can form your LLC, as well as the pros and cons of each
Total Illinois LLC Cost – $150
Forming an LLC in Illinois only requires that you file articles of organization, which will cost you $150. Though many states require a separate statement appointing a registered agent, in Illinois, you will do that in your LLC’s articles.
A complete and updated fee schedule from the Illinois Secretary of State can be found here.
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How Much it Costs to Start an Illinois LLC – the Basic Costs
Of course, there’s quite a bit more to starting your company than just filing a legal document. There are several things you need to consider, and all of them cost money. While you probably want to save as much money as possible, this section will outline the costs you need to think about incurring if you want to have the best start you can have.
Articles of Organization Filing Fee – $150
Of all your LLC’s legal papers, this one is the most important. Articles are like an LLC’s birth certificate. Without articles of organization, the company doesn’t exist in any sense. Once they have been filed, it can do business, pay taxes, and take any other legal action. Thus, you need to make sure your LLC’s articles are done first and done right.
This isn’t as tough as it sounds. While you can draft the Illinois LLC articles from scratch if you want, there’s no need. Illinois provides a basic fill-in-the-blank form (LLC-5.5) with all the details you need. You can file your articles with the Secretary of State by using its online system.
If you have a complicated business or ownership structure, you may need an attorney to draft your Illinois LLC articles of organization. In most cases, though, the form above should be fine.
Illinois LLCs – Optional Costs to Consider
$150 may be all you need to get your LLC running. That doesn’t mean, though, that you shouldn’t plan on spending more. There are many other costs you should also plan for to give your LLC the best start it can get.
Expedited Filing Service – $100 for Articles; varies for other documents
Processing time varies in Illinois based on whether you file your documents through the state’s online system or the mail. Processing time for documents is about 5 to 10 business days if you file online. If you use the mail, you’ll need to add time for the documents to work their way through the postal system.
If you’ve gotten to this point, though, you probably don’t want to wait two weeks just so the state can process your legal papers. In that case, you’ll need expedited service. This comes with an extra fee that depends on the type of document you’re filing. For your articles, that adds $100 to the filing fee, for a total of $250.
For the cost to speed up other kinds of filings, check the current LLC fee schedule. Keep in mind that all expedited service requests must be made in person at the Secretary of State’s office.
Business License – $125 and up per year
Your Illinois LLC may or may not need a license, depending on what kind of business it does and where it is located. The costs of Chicago’s business licenses, for example, vary widely depending upon the kind of business you run. Contact your county and city governments for your exact requirements.
Registered Agent Fee – about $100 per year
When you file your articles, you’ll have to name your LLC’s resident agent so that the state and the public can timely communicate with your LLC. This is important if someone decides to sue your LLC. That may not sound like fun, but it is critical to the life of your business that you know exactly when this happens.
Because your agent’s details are included in your articles, you don’t pay an extra fee to the state to name an agent. Still, you should think about hiring a company to serve as your company’s agent.
Many owners are tempted to serve as their LLCs’ agents. This is not a good idea. It involves making your address public and always being available just in case someone wants to sue your company.
It’s an easier and more cost-efficient plan to hire an Illinois registered agent service for your LLC. These registered agent companies usually charge $100 per year and take care of all your agent needs. It’s money well spent.
Operating Agreement — Variable
An operating agreement sets down the rules of your LLC. It says how the people in charge should do their jobs, when meetings must be held, how members can enter and exit the company, and almost any other matter you might need to address.
Illinois won’t force your LLC to have an operating agreement if you don’t want one, but we strongly recommend that you consider it. Without a written contract, you have much less control over what happens to your company when something unexpected happens.
If you choose to have an LLC operating agreement, you don’t have to file it with the state. You can write it yourself, but unless you are a lawyer or know exactly what it’s supposed to look like, we don’t recommend that option.
A lawyer would likely charge you by the hour for drafting an Illinois LLC operating agreement. While that agreement would likely be a good one, that could also run you at least a few hundred dollars, and probably well over a thousand in Chicago. If you use an LLC formation service, you can have a good agreement drafted, though, for as little as $39.
DBA Fee – $30 per year
After filing their articles, many LLC owners find that the legal name of your LLC does not quite serve their needs. The name might be hard to remember, sound too much like that of another company, or need to reflect a change in management or ownership.
These are common problems. All you’ll need to do is apply for 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
The state has another form for this: the Application to Adopt, Change, Cancel
The cost of a DBA is a bit tricky. They have to be paid up through the nearest year divisible by five (e.g., 2025 or 2030), at which point they will need to be renewed. The cost comes out to $30 per year. If you want to expedite this filing, you will also need to pay an extra $50.
You can renew a DBA by saying so in your LLC’s annual report and paying the renewal fee.
Name Reservation Fee – $25
Maybe you have a good plan and the perfect business name for your company, but you’re not ready to start just yet. If you want to make sure that you can use a certain name when you are ready, you can file an Application to Reserve a Name with the Secretary of State for $25. (Expedited service for this document costs an extra $50.)
Domain Name – about $20 per year
In this day and age, small businesses need a presence on the Internet. The first step in creating a good website is to get your own domain name. While this might have been pricey in the past, it is now very affordable.
You should secure your domain name as soon as possible, even if you don’t have plans for a website right now. If you don’t, a competitor could buy your ideal domain and its variations to block you from using them. Domain squatters also sift through newly registered LLC names and will buy their domains only to relist them with huge markups.
In general, a domain ending in .com will be more expensive than a .net or .info domain, and some names will likely be taken, meaning you will have to do some searching (and maybe compromising).
A domain name from GoDaddy.com or a similar registrar may cost you between $20 and $50 per year, with regular specials and sales where you can get substantial discounts.
Registering with the State Tax Office – Free
All LLCs should register for a free account with the state tax office so that they can pay taxes, like sales and use tax or employment taxes.
Getting a Federal Employer Identification Number (“EIN”) – Free
An EIN is a number created and assigned by the Internal Revenue Service to a business for paying taxes. (Think of an EIN as a social security number for a business.) Some LLCs need them, and some don’t.
Regardless of whether the IRS says you need one, we recommend that you get an EIN. Many banks won’t allow your company to have its own account without one. Having an EIN can also simplify the process of getting credit.
You can apply online and get an EIN for free in minutes, or you can apply for one through the mail or fax. Whatever you do, don’t pay someone else to get an EIN for you. It’s too easy to pay someone else to do it unless it is part of a broader service package.
Foreign LLC Qualification Fees – about $100 per extra state
If your business takes off, congratulations! You may soon start thinking about expanding to new locations. If one of those places is in another state, you’ll have to pay for the privilege of doing business there. You won’t have to re-form your business, but you will have to register as a foreign limited liability company with the Secretary of State there and pay some extra fees.
The exact fees will depend on the state in which you are registering. As a rule of thumb, expect to pay about $100 in filing fees to register your LLC in another state.
Writing Formation Costs Off
Because it takes money to start your business, you can write off many, if not all, of your costs on your taxes for a deduction. The IRS has a lot of guidance on this matter, and you should compare your specific costs to the materials on the IRS website.
Keep in mind that, in most cases, an LLC is taxed by both Illinois and the IRS as a pass-through entity. Generally speaking, LLC owners can deduct up to $5,000 of their business startup expenses in the first year.
Phil is starting a small sports memorabilia shop in Chicago. He will work the whole operation himself, without any employees. Because he just signed a lease that starts next week, he will need to get set up as quickly as possible.
Phil’s LLC formation costs are as follows:
- Illinois Articles of Organization filing fee: $150
- Illinois Articles of Organization expedite fee: $100
- Chicago secondhand shop (valuable objects) business license: $1,100 (Note that this license is good for two years, but Phil has to pay for both years up-front.)
- Resident agent fees: $100
- DBA fee: $30
- DBA expedite fee: $50
- Operating Agreement: $39
- Web domain costs: $50
Phil has elected to have his LLC taxed as a pass-through entity by both the IRS and the state. This means that he will claim both his business income and deductions on his personal tax returns.
Phil’s startup costs, which will form his deduction, total $1,619. His taxable income before the deduction was $35,000, which puts Phil in the 12% income tax bracket. Though Illinois tends to follow federal guidelines on business deductions, the state’s tax rate is lower. Like all other Illinois taxpayers, Phil pays state income tax at a flat 4.95% rate.
With the deduction, Phil’s taxable income in Illinois will be reduced to $33,381. That saves him $194.28 in federal taxes and $80.14 on his federal state taxes, for a total savings of $274.42.
Keep in mind that if Phil had more than $5,000 in expenses, he would likely be able to claim those, but he could not deduct them all in the first year.
Cheapest Way to Start an LLC in Illinois
Now that you know all the basic costs, it’s time to shop around. Not every business needs to be formed in the same way, and you can save both time and money by picking the best option for you.
Formation Service – $39 + state fees
A business formation service is a popular and inexpensive way for new LLC owners to get started.
These companies are dedicated to helping entrepreneurs bring their visions to life. They have not only the knowledge of all the state laws you need to know, but also forms, documents, and procedures to make your life as easy as possible.
Formation services are quick and complete ways to handle formation needs for most LLCs.
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
While formation services can be great for most people, they are not always the best choice. Some cons for these services are:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
Attorneys are licensed, reliable, and powerful resources for business formation. They are also quite expensive. Let’s use Phil as an example here. Phil’s income is not very high, and he lives in a quite expensive city. A good business attorney in Chicago could cost as much as $1000 per hour. That is not an effective use of Phil’s resources.
A business owner with more money than Phil, though, could benefit from having an attorney if their business was at all complicated. For that reason, some owners choose to go this route.
Despite the expense, sometimes hiring a lawyer is the best choice.
- Lawyers help you manage risk. An LLC with complicated legal issues needs a lawyer. Let’s say that instead of a sports shop, Phil wanted to start an immigration law firm. In that case, a lawyer would be able to help Phil comply with the numerous federal and state laws that would affect the firm.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
For most people, getting an attorney comes with considerable downsides that outweigh any benefits.
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very caring people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
Many people, after searching the Internet for the information they need, decide to try forming their new LLCs themselves. This process can give you a lot of personal expertise, but remember that time is money. If you are spending hours on your business formation, that’s time you’re not spending on the substance of your business.
In most instances, then, it is more cost-effective to just pay an LLC formation service, with confidence that everything has been done correctly, rather than try to reinvent the wheel yourself.
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t figure out the value of your time, a DIY solution is the cheapest option.
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that then costs them more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual Illinois LLC Fees: How Much Will it Cost to Maintain your LLC?
Even after you’ve formed the LLC, there are annual costs for which you will have to budget. These include both government fees and amounts paid to third parties, like:
- Local Business License, depending on exact location: $250 and up every two years
- Annual report fee: $75
- Registered agent fee: $100
- Domain name: $20
The report should be filed within the 60 days before your LLC’s “anniversary month,” or the month you originally filed your articles of organization. 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.
If you are about to miss the deadline, you can expedite the filing of your report to 24 business hours for $50.
Also, keep in mind that any small business should have an accountant. Costs for accounts vary significantly, but you should spend an average of $2,000 to $3,000 per year on an accountant in most cases.
How Much are LLC Taxes in Illinois
According to the Department of Revenue, how your LLC is taxed depends on how you characterize it with the IRS. If the IRS treated your LLC as a pass-through business entity, Illinois will do so too, and will not tax your LLC’s income.
If your LLC elects a different tax treatment (e.g., as an S Corporation or partnership), then you will need to file the appropriate form noted in the Department of Revenue link above.
You will, however, have to pay other taxes associated with your business. For example, if your LLC hires workers, you will have to pay employment taxes. If it sells goods and services (and it almost certainly will), you'll also have to collect sales and use tax.
Finally, the state may impose a personal property replacement tax on LLCs treated as pass-through entities. For more information, consult with the Illinois Department of Revenue.
Illinois LLC Formation Costs Quick Links
- City of Chicago — Business Licensing
- Illinois DBA application (Form LLC-1.20)
- Illinois Department of Financial and Professional Regulation
- Illinois Department of Revenue — How does Illinois tax a Limited Liability Company (LLC)?
- Illinois Department of Revenue — Business Income and Expense Questions and Answers
- Illinois Department of Revenue — Personal Property Replacement Tax
- Illinois Department of Revenue — Sales and Use Taxes
- Illinois Department of Revenue — Withholding Income Tax
- Illinois Personal Property Replacement Tax Information
- Illinois Secretary of State — Application to Reserve a Name (Form LLC-1.15)
- Illinois Secretary of State — File Articles of Organization Online
- Illinois Secretary of State — Form Articles of Organization (Form LLC-5.5)
- Illinois Secretary of State — Form LLC Annual Report (Form LLC-50.1)
- Illinois Secretary of State — LLC Publications/Forms
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- MyTax Illinois — Online Tax Services
Illinois LLC Formation Costs FAQs
How much does it cost to start an LLC in Illinois?
The minimum cost is $150. You must pay at least this amount to file your LLC’s articles of organization with the state.
What is the cheapest way to start an LLC in Illinois?
A do-it-yourself approach will have the lowest price tag, but it isn’t the cheapest in terms of your time. The best balance of price and time, for most people, is to use a formation service.
Do I need to hire an attorney to form an LLC in Illinois?
No. Most people will not need to invest the considerable expense and time of hiring a lawyer. A formation service or a DIY approach will work for most business owners.
Can I pay to form an LLC more quickly in Illinois?
Yes. Formation services will generally complete formation tasks faster than business owners acting on their own. For an extra state fee, the Illinois Secretary of State will also process any document you file within 24 business hours.