Start an LLC in Illinois

Starting your own company in Illinois takes time and money. You will face particularities of mentality, compliance with laws, and differences in the paperwork process when starting your own business. To do it legally in Illinois, read the detailed guide prepared by our qualified team. 

Step 1: Name Your Illinois LLC

The first step is to come up with a unique name. It should be a reflection of you and your product, which not only sticks in mind, but also becomes the face of your company on the domestic and international market. 

Before brainstorming and going through dozens of names, determine your company’s goals, status, and product quality. The name should represent you. It will be on all promotional products, on the website, and in official documents. 

At the same time, do not be trivial. The name must be out of fashion, if you plan to build a long-term business.

However, creativity is not enough. You need to meet legal requirements of the state. Particularly, you must choose a name that complies with a number of rules:

  1. The name must indicate the type of your business. For example, an LLC (Limited Liability Company) must include the abbreviation “L.L.C.” or “LLC”. You cannot specify any other type of organization that does not correspond to reality;
  2. The name cannot imply that it was formed for the purpose of financial security, insurance, etc;
  3. You can use only English characters in the name, except for numerals, they can be Roman or Arabic;
  4. The name should not offend anyone’s interests;
  5. The name must be unique.

It is worth talking about the uniqueness of the company name. The names registered with the Secretary of State cannot be repeated. A name will be considered invalid if the differences between the existing name and the new one are minor. Insignificant differences are considered:

  1. In the spelling of the type of company. For example “LLC” or “L.L.C.”;
  2. In the articles. It is not enough to replace “the” with “a” or “an”;
  3. Contractions or changes the verb tenses. 

Determine the Name is Available

Because of the importance of creating a unique name, you should use the Corporation/LLC Search service. It will help you check the availability of the desired name and save a lot of time, effort, and money. 

Use the name search, even if the name you choose you have never heard. It may be a small family-owned bakery in the suburbs, a small tattoo studio in the city center, or a restaurant on the outskirts of the city. 

When you find the right name for your future company, you can reserve it, even if the company formation documents aren’t ready yet. This will allow you to secure a name for a certain period of time. Meanwhile, you can prepare all the necessary documents and submit them for registration.

Optional: Name Reservation

The name reservation procedure costs $25 with a 90-day reservation period. 

To apply, you must fill out a Name Availability Form. The document does not have an electronic form. You need to fill out a hard copy and mail it to the Application to Reserve a Name

Mailing address:

Secretary of State
Department of Business Services
Limited Liability Division
501 S. Second St., Rm. 351
Springfield, IL 62756

Processing time is 2 weeks after the Corporation/LLC Search receives your form. In addition, if you are ready to open a company when registering an LLC, you do not have to reserve the name. You can indicate it in the filing documents, and it will be registered automatically after checking its uniqueness.

Step 2: Choose a Registered Agent

According to the Illinois Secretary of State, a registered agent is a person authorized to represent the interests of a company before state agencies. 

What a registered agent does:

  1. Handles tax returns and keeps track of tax payments;
  2. Receives incoming letters and notices from the state;
  3. Prepares all necessary documents.

Who needs a registered agent? Every company! In practice, you won’t have time to deal with all of the paperwork, especially if your office is located out of state. 

According to Illinois state law, it is mandatory for every company to have a registered agent. To register them, you need to list their information in the Articles of Organization of your company. 

Individual as Registered Agent

To become your agent, a person needs only to be a resident of Illinois, and be of legal age. In other words, no special education is required by law. All these requirements depend on your personal preferences. 

If you do want to control the entire process on your own, or simply cannot financially afford to hire someone else, you can indicate your name as a registered agent in the Articles of Organization. 

Registered Agent Service

If you need help with starting a business, or if you want to do it quickly and without any financial losses, we recommend that you hire a company which provides such services. The company will take care that all requirements are met when registering the company. It will take some of the responsibility off your shoulders and allow you to dive into your own affairs.

Step 3: File the Formation Documents with the State

Finally, after going through all the preparation steps, we start forming an LLC. At this point you have already chosen a name for your company, and designated a registered agent. You must also prepare the Articles of Organization, filled out according to all the requirements. 

There are several ways to submit the Articles of Organization:

  • In person;
  • By mail;
  • Online.

The cost and processing time of the procedure depend on the method of filing. It usually costs $150, and if you want to expedite the process, you will have to pay an additional $100 fee.

Online Filing

If you want to process the paperwork quickly, go to the Illinois CyberDrive website, and fill out an application form under “Article of Organization” section. The cost will be $250 and the application will take 24 hours to process.

Mail

To apply through the mail without spending too much money, you need to download the application form on your computer, print and fill it out, then send the application form to the address:

Secretary of State 
Department of Business Services Limited Liability Division 
501 S. Second St., Rm. 351 
Springfield, IL 62756

It costs $150. Don’t forget to enclose a check for its payment. If you want to process the payment through an accountant, they need to be licensed by the state. The processing time for such an application is 10-15 days.

In-Person

You can also visit your nearest regional office. Specialists will provide you with an application form and you can fill it out right there. The address is: 

Illinois Secretary of State
Division of Business Services
69 W. Washington St., Suite 1240
Chicago, IL 60602

Step 4: Create an Operating Agreement

It is not necessary to have the Articles of Organization, or Operating Agreement, when registering. However, in practice it is shown that these documents greatly simplify many processes. For example, an Operating Agreement in Illinois will help:

  1. Provide the proof of the assets distribution;
  2. Legalize the company in the eyes of the bank;
  3. Regulate membership agreements;
  4. Govern the tax structure.

Specialists recommend drafting the Operating Agreement. Even if it seems insignificant to you now, it will help you solve a lot of problems in the future. 

Nowadays, there are three methods how to prepare it:

  1. You can hire a professional. A professional lawyer can help you draft an agreement quickly and avoid any mistakes;
  2. Write and submit the agreement on your own. You can find a free template on the Internet and based on it you can write this document;
  3. Hire an online service. This is a great option if you want to save money and, at the same time, get professional and quality services.

What method to choose is up to you. Each of them leads to the same result. The only difference is the time and money spent. 

What are default laws?

The default law is a set of general laws that are specific to a particular state. These laws govern situations not written in the Operating Agreement. If you do not take into account any points, the default state law will come into force.

To avoid any negative impact of the default law on your business, we recommend that you draft an Operating Agreement taking all the nuances into account.

Step 5: Get an EIN

Tax liability plays an important role in the USA. It is impossible not to pay taxes. It entails criminal liability, penalties, and affects your reputation. 

There are two ways for an LLC to organize the tax structure:

  1. If you work without employees, do not sell goods, and are not treated as a corporation, you do not have to file a separate tax return. You report all of your income and losses on your individual tax return;
  2. If you hire employees, or plan to sell products, you must pay state and county taxes by obtaining an EIN. You can do this at:

Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999

An EIN is a nine-digit number for the identification of tax accounts. It is assigned to sole proprietors and companies. 

If you want to get an EIN, you must provide a valid state social number. 

To do this, use one of the following methods.

Online

To file online, you don’t have to leave the office. In addition, you have the opportunity to do it from 7 a.m. and 10 p.m. EST Monday through Friday.

After filling out the form, you will immediately obtain your EIN, and you can continue your business activity

Fax

A popular method of sending documents is fax. You will find it in almost every office. To use it, you must fill out Form SS-44 paper application and send it to the fax number at (855) 641-6935. It takes four business days to process an application.

Mail

Keep in mind that such applications take a lot of the processing time, compared to 1 day for online applications, and 4 days for sending fax documents. You will wait about 4 weeks for the answer by mail.

Step 6: Taxes, Licensing & Income Reporting

A little more time needs to be spent on paperwork to meet Illinois requirements.

Federal Taxes

Most companies do not file separate corporate tax returns, this duty is on the owners. All income and expenses are reported on the owners’ personal 1040 tax returns. LLCs are flexible with tax structure, therefore for federal income tax purposes  they can be treated as:

  • Sole proprietorship (for an LLC with 1 member);
  • Partnership;
  • C-corporation;
  • S-corporation.

State Taxes

Illinois doesn’t impose a privilege or franchise tax. This means that you do not have to pay additional state income tax if the owners report business income and expenses on their personal returns.

Additional Taxes

Depending on the type of LLC activity, you may be subject to additional taxes that need to be paid on time. Take a look at the most popular types of taxes an LLC may have:

  1. Sales and Use Taxes (if your LLC sells retail);
  2. Payroll Tax (if you hire employees);

Through the Illinois Department of Labor they will be able to obtain an Unemployment Compensation Number. 

You may owe a local tax to its city, municipality, or county. Their amount and how they are paid may vary from city to city. For more information on additional taxes, visit the official Department of Revenue website.  

Licensing

Some activities in the U.S. are required to be licensed. Moreover, it raises the level of confidence in your product, or in you as a professional. 

Don’t neglect getting an official license. It will make you competitive in the market, and provide more opportunities for development.

Your LLC must be registered with the Illinois Department of Revenue and there you can receive a Certificate of Registration before conducting business. To apply, you must submit a completed form in one of the following ways:

Online

You can download your completed application on the MyTaxIllinois portal and receive your certificate in 1-2 days. 

By Mail

You can send your completed application to the regional offices and get a response in 4-6 weeks at the official address:

Central Registration Division 
Illinois Department of Revenue
P.O. Box 19030
Springfield, IL 62794-9030

In-Person

You can also visit the Department of Financial and Professional Regulation in person and fill out an application there. 

Do not forget to check out the official website of the Department of Financial and Professional Regulation to see if you need a special license that meets your business goals.

Reporting

The State of Illinois is very meticulous about filing your documents on time. No matter how busy you are, how many contracts you sign per day, or what you do for American society. 

There are several steps how to file an Annual Report:

  1. Your registered agent will receive a letter about a deadline to file a report. Usually it is six weeks before the due date;
  2. You need to prepare the reporting documentation according to the current requirements and pay for its verification. Today, the filing fee is $75. You can pay an additional $50 fee for an expedited review;

Be aware that if you miss the deadline by even one day, it will be considered as a violation. You will have to pay a $100 penalty.

Furthermore, your LLC may be even dissolved if you do not file a report within 4 months of the final filing date. After that, your business will be illegal.

You can submit documents online. Filing online is done through the Department’s official website, and takes only a few minutes. Documents submitted through the website are processed within a couple of days. 

You can submit a hard copy of your report. Processing the paper form can take up to 15 days. If you choose to send a paper report, here is the address:

Secretary of State Department of Business Services
Limited Liability Division 
501 S. Second St., Rm. 351 
Springfield, IL 62756
Illinois Secretary of State
Division of Business Services
69 W. Washington St., Suite 1240
Chicago, IL 60602

Congratulations! Now you are ready to start your own business. As you can see, starting a business in Illinois is not difficult. Just six steps, and you can realize your dream.