Starting an LLC or limited liability company in Illinois is easy and affordable for your organization or business. However, just like other states, there are some specific requirements you’ll need to follow to ensure you’re filing the right way, leading to the approval you need.
If you’re interested in starting an LLC, you’ll need to file with the Illinois Secretary of State, pay the necessary fees, fill out the proper forms, and meet all legal naming requirements. We’ve put together a step-by-step guide to ensure you’re setting up your LLC in Illinois the right way.
Related: Best LLC Services
What Is An LLC?
Before filing your LLC in Illinois, it’s essential to understand what an LLC is to make sure it’s right for your company.
An LLC is a flexible business structure that provides limited liability for its members. It’s a hybrid between a partnership and a corporation. When forming an LLC, you’re able to take advantage of the benefits that corporations and sole proprietors have while still getting the flexibility you need when it pertains to your operations and tax status. LLC’s are a way to keep your taxes simple while reducing your personal financial risk.
The benefit to using an LLC is that there is no maximum number of members, and the members may be other LLCs, corporations, individuals, or foreign entities. Any type of industry or business can file an LLC, such as restaurants, builders, contractors, landscapers, IT firms, marketing agencies, consulting firms, and many more. If you’re ready to file, follow these five steps to get your LLC started today.
Related: Best Small Business Ideas
Find a Business Name
There are specific guidelines you need to remember when creating your LLC name. First, all LLC names need to contain the words LLC, L.L.C, or limited liability company, so that it’s clear how your business has filed.
You’re not allowed to use the following terms in your name:
- Co, Corp, or Corporation
- L.P., or Limited Partnership
- Agency Language such as FBI, Treasury, or State Department
You’re unable to use these terms because they refer to a different type of business registration. On top of that, you’re unable to file a name that’s already on file with the Illinois Secretary of State. If you have a name in mind, it’s best to check the name database to ensure it’s available on the Secretary of State’s website. If you’re still unclear about the guidelines, read the official state guidelines to ensure that your application is approved.
While this is not a requirement, you should also ensure the domain name or URL is available for purchase. If you notice the URL is already taken, consider changing your name so you don’t get confused with the brand identity of another company.
Assign a Registered Agent
Next, you’ll need to choose who will be the registered agent for your LLC. Choose this person carefully because they are responsible for receiving government information, documents, tax forms, and more on behalf of your business.
This entity can be a business, an employee at the company, or even yourself. However, the business or person must be a resident of Illinois or be registered in the state of Illinois to be eligible for this position. The registered agent must also have an Illinois street address to send necessary documentation and correspondence from the government to the LLC.
File Articles of Organization
To officially register your LLC in Illinois, you’ll need to either fill out the form named LLC-5.5 – Articles of Organization with the Illinois Secretary of State Department Business Services, either online or in-person, along with a $150 filing fee. If you choose to file by mail, you’ll likely need to wait ten business days to get the form approved. However, online filings are fast-tracked and often approved within one business day.
Make sure to fill out the entire form, including information such as the name and address of your LLC, name and address of your LLCs registered agent, a statement regarding the LLC’s duration and purpose, the names and addresses of members, along with the name, signature, and address of the organizer.
Get an Employer Identification Number (EIN)
If you’re going to have more than one member in your LLC, you’ll need to have an EIN or employer identification number. An EIN is an IRS assigned nine-digit number used for tax purposes and allows you to do things like hire employees, open a business bank account and manage state or federal taxes. You can obtain one for free by applying online or by mail through the IRS. It’s important to note that you’ll need to do this process even if you’re converting your business to an LLC.
From there, you’ll need to select how the entity will be taxed. This is one of the most significant benefits of using an LLC because it gives the ultimate flexibility regarding how your organization is taxed. While there might be some limitations, you can choose to classify your LLC as an S-Corporation, C-corporation, Partnership, or Sole Proprietorship. This clarification doesn’t apply to the legal structure, just the way the LLC is taxed.
Create Operating Agreement with other Members
While the operating agreement is not necessary to obtain your LLC, it’s essential to ensure that it runs smoothly. This document will show the responsibilities and rights of the people included in the formation of your LLC. You can define your management and financial structure, override state default rules, and protect your LLC status if you need to go to court.
While you can determine what you’d like to include in the LLC operating agreement, most operating agreements contain the following information:
- Who will manage the LLC
- The rules for votes, meetings, provisions, buy-sell, or buyouts
- Responsibility and rights of members
- The percentage of interest that each person holds in the LLC.
Creating this document will keep your business easy to manage and save headaches as situations arise in the future. Once created, this should be kept on file for future reference but will not be filed with your LLC application.
The Bottom Line
If you are thinking about starting a business in Illinois, you should definitely consider an LLC.
This business structure comes with many benefits, with the most important being liability protection for you personally.
That said, it’s important to follow the rules when setting up your LLC. By appropriately filing all the paperwork according to Illinois standards, your LLC has the best chance of protecting you in case of an issue.
While filing your LLC and creating the necessary documents can be mundane, it’s worth the time. By doing the work on the front-end, you can help assure your business the best opportunity for success.