How to Start an LLC in Illinois

Here you will get to know how to name your LLC right, how to file Articles of Organization, select a registered agent, get licenses, taxation, and how to remain in compliance with annual requirements. At the end, you will have a clear step-by-step guide that will enable you to start and manage an Illinois LLC without any fear.

1. Name Your Illinois LLC

The selection of the appropriate name to use in your LLC is probably one of the most critical initial tasks since it will be your brand name and the legal name of your business. The name of a strong LLC must be memorable, inimitable, and to the point.

Get time to explain your business concept, then, settle on a name. Naming will be easy when you know your industry, target audience and your long-term goals. A good number of business owners can brainstorm with their friends or colleagues that they can rely on, whereas others can use online business name generators to get ideas. Such tools may be useful, but they cannot substitute the consideration of decisions as they might overlook industry peculiarities or branding issues.

After creating a list of shortlist of names, do a business name search via the Illinois Secretary of State site. This will prevent the use of a name that is already used or too close to an existing business. A general internet search and domain availability is also to be carried out to ensure that you do not confuse with other companies.

Once the availability has been established at the state level, it is prudent to go to the US Patent and Trademark Office (USPTO) database to see whether the name is a federal trademark. This assists in safeguarding your brand and this avoids litigation in the future.

Name Reservation Illinois LLC

Illinois grants the option of reserving a business name in case you are not prepared to file your LLC at the moment. Reservations of names are done through mail but not online. You will have to get the name reservation form on the Illinois Secretary of State website, fill it with your proposed business name and contact details and mailed with a fee of 25 to:

Illinois Secretary of State
The department of business services is the name of the third department
Limited Liability Division
501 S. Second St., Room 351
Springfield, IL 62756

What is the name of the business? Doing Business As (DBA) in Illinois

In some cases, an LLC is obliged to work under a different name other than its legal name. This is where a DBA or as it is called in Illinois an assumed name comes in handy. To illustrate, when your LLC is named JJ Waffles, LLC and you wish to conduct the sale of baked goods by the name JJ Muffins, you could post that name as an assumed name. An LLC is allowed to have a number of DBAs under the same legal entity.

By registering an assumed name, you are able to open bank accounts, accept payments and promote your business using the DBA. In Illinois, the assumed names are registered at the office of the Secretary of State and you will require the file number of your LLC in order to fill the application.

The rights under assumed names are valid until the first day of the LLC anniversary month in the following calendar year which is divisible by five. They are then renewed after every five years. The prices are as follows: fees depend on the year and are between 30 and 150, and other payment processor fees. Illinois has both regular and fast processing with expedited processing being handled within 24 hours.

2. Select a Registered Agent

The Illinois LLC requires a registered agent. The registered agent will also take care of accepting official papers like legal notices, state correspondence and tax forms on behalf of your business. This is to make sure that your LLC does not miss crucial deadlines or legal correspondence.

Registered agent under Illinois may be a physical person or a corporate body, the owner of LLC being one of them. Nevertheless, there are some requirements that the agent has to comply. They should be 18 years, have a physical street address in Illinois (no P.O. Boxes), and must be available during regular business hours. In case of a business agent it should be licensed to conduct business in Illinois.

The reason is that many owners of LLCs prefer to outsource the services of a professional registered agent. Although this increases the yearly expenditure marginally, it offers privacy, reliability, and flexibility, particularly among the business owners who work at home, do a lot of traveling or do not want their personal address published in public documents.

3. Decide Your Management Organization

The Illinois may be either LLC is member-managed or manager-managed. In a member-managed LLC, all the members are involved in running and making decisions of the business. This is an ideal structure when it comes to small businesses where owners are involved.

In the manager-managed LLC, there are managers who run the operations and the remaining members are passive investors. A manager can be a member of the organization, but he or she must have at least one manager who is not a member. This is the most suitable type of LLC that has many owners that do not want to be involved with daily operations of the company.

In case you fail to specify a management structure in your Articles of Organization, the state of Illinois will consider your LLC member-managed. The reason why selecting the right structure is also relevant is that it influences authority, liability and decision making.

4. Documents Articles of organization to the Illinois Secretary of State

LLC Incorporation in Illinois $135 to file Articles of Organization with the Illinois Secretary of State. This is a legal form of registering your business with the state and contains essential details of your business that include:

• LLC name
• Principal office address
• Name and address of registered agent
• Business purpose

Contact Information of Illinois Secretary of State

Webpage: Illinois Secretary of State

Physical Address:
213 State Capitol
Springfield, IL 62756

Phone:
800-252-8980 (Illinois)
217-785-3000 (outside Illinois)
Chicago Business Line: 312-793-3380

5. Prepare an Operating Agreement

Operating agreement provides information on the ownership and operation of your LLC. Though the state of Illinois does not mandate any operating agreement, its presence is highly encouraged- even in single-member LLCs. The document assists in building credibility, averts disagreements, and enhances protection of limited liability.

The common operating agreement includes proportions of ownership, the duties of the management, voting rights, the allocation of profits and losses, the manner of transfer of members into or out of the entity, the procedures of resolution of disputes and the practice of record keeping. Although there are templates on the internet, getting your attorney to review or draft your agreement is a sure way of making sure that your agreement incorporates your unique business requirements and is in accordance with the Illinois law.

6. Register Your Employer Identification Number (EIN)

The IRS issues you with an Employer Number (EIN) that is used to define your LLC in taxation. You need to have an EIN in case your LLC has more than one member, employees are employed, or you have a business bank account.

The IRS site offers free EIN applications. In the application, you have to specify a responsible party, which is a person that regulates and runs the funds and operations of LLC.

7. Acquire Business Licenses and Permits

Depending on the nature of your business and a place you are located, you might require federal, state, or local licenses and permits. The federal government has certain permits on industries by other agencies like OSHA. On the state level, the business selling taxable goods or services is required to get an Illinois sales tax license via MyTax Illinois.

There is no general business license in Illinois, however, a variety of professions and industries lay down particular registrations. It might also be needed by the local cities and counties to issue zoning permits, signage permits or local business registrations.

The inability to receive the appropriate licenses may lead to fines or penalties, and that is why it is crucial to check the requirements with state and local authorities or address a business attorney.

8. Determine Your Tax Status

The Illinois LLCs are taxed by default as a pass-through entity, this is, the LLC does not pay income tax. Profits and losses are instead transferred on to the personal tax returns of the owners.

Single-member LLCs are taxed as sole proprietorships, with the income stated on 10-K form Schedule C and paid taxable as self-employment. Multi-member LLCs are in default taxable partnerships and are required to file Form 1065, where they are required to report their portion of income.

C-corporation or S-corporation tax status is also available with LLCs. C-corporations are subject to the double taxation and might be beneficial to businesses that hold earnings. S-corps have the capability of eliminating self-employment taxation since the owners can divide income into distribution and salary.

Illinois also levies a Personal Property Replacement Tax, state income tax, sales tax as well as employment taxes according to the business operations.

Measurement Annual Reporting and Continuous Compliance

Illinois LLCs are required to submit Annual Report on an annual basis in order to be in good standing. The report must be filed prior to the first day of the anniversary month of the LLC and the filing charge is in the amount of 75 dollars. The penalty of late filing is 100 dollars and administrative dissolution may occur in case it is not filed within 180 days.

Illinois LLC FAQs