How to start an LLC in Illinois: A simple guide
Published 5:00 AM EDT, Fri November 24, 2023
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Ready to turn your business dreams into reality in the heart of the Midwest? Whether you’re a seasoned entrepreneur or a budding startup, if you’re looking to form an LLC, Illinois is a great place to do it. This bustling state offers entrepreneurs many benefits, including various development programs and tax-based incentives.
Read on to discover how to start an LLC in Illinois and take the next step on your business journey.
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Requirements for LLC formation in Illinois
There are four requirements you’ll want to meet before starting the LLC formation process.
1. Distinguishable name
Your LLC’s name is how it conducts business in Illinois, and it must be distinct from other entities registered in the state. Here are a few more stipulations:
- LLC designator: You must include Limited Liability Company, L.L.C. or LLC in your LLC’s name. You may not use Corporation, Corp., Incorporated, Inc., Ltd., Co., Limited Partnership or LP.
- Restricted words: The name may not imply activities like banking, insurance or assurance. If you’re forming your LLC to accept and execute trusts, the LLC name must include trust. However, the words trust, trustee or fiduciary may only be used if your LLC has first complied with certain sections of the Corporate Fiduciary Act. You must also meet special stipulations to include bank, banker or banking in your LLC name. You’ll have to provide proof of meeting these requirements, so an attorney’s assistance is advisable if this applies to your LLC.
- Proper language and characters: When naming your LLC, Illinois will reject a name containing “any word or words that create a connotation that is offensive to good taste and decency,” according to the Illinois Secretary of State (SOS). Also, you may only use English alphabet letters, Arabic/Roman numerals and symbols the Department of Business Services can reproduce.
2. Principal place of business
Every LLC must designate a principal place of business. This address is required for record-keeping purposes and to ensure compliance with state regulations. Here are the key details you need to know:
- Address requirement: Your LLC must have a designated address for its principal place of business, which can be located anywhere, even outside of Illinois.
- Record-keeping: Your LLC must maintain certain essential records — including a list of LLC members, articles of organization, recent tax returns (for the last three years), the current operating agreement and the previous three years’ financial statements — at the principal place of business or other reasonable locations specified in the operating agreement.
- Accessibility: These records should be accessible during regular business hours upon request.
3. Registered agent and registered office
The Illinois Limited Liability Company Act mandates that every LLC appoint and uphold a registered agent and registered office within the state. The registered agent is the designated recipient for all legal documents and official correspondence from the Secretary of State, so this requirement is a crucial link between your LLC and legal matters, ensuring it complies with state regulations and can effectively receive legal notices and official correspondence.
It’s imperative to keep the name and address of your registered agent and registered office updated with the Secretary of State. Failure to do so can have severe consequences, potentially leading to the involuntary dissolution of your LLC.
4. Lawful purpose
The Illinois Limited Liability Company Act allows you to start an LLC in Illinois for any lawful purpose. Here are essential points to note:
- Clear purpose statement: Your LLC’s articles of organization must clearly state that purpose.
- Watch for restrictions: Other statutes and regulations may impose limitations or specific language requirements on your LLC’s purpose. When in doubt, consult with a legal expert.
- Professional services: If your LLC plans to offer licensed professional services, like those regulated by the Department of Financial and Professional Regulation, you’ll need a certificate of registration under the Professional Limited Liability Company Act. For Professional LLCs, your articles of organization must also specify the professional services offered.
- Ensure compliance: Ensure your purpose statement aligns with legal requirements to avoid having your documents rejected and returned. For instance, avoid overly broad purposes or unauthorized references to banking or insurance activities.
Steps to starting an LLC in Illinois
If you’ve met the requirements above, it’s time to form your LLC. Here’s how:
Step 1: Name your LLC
Begin by adhering to the guidelines and restrictions we covered in the requirements section above. Then, you’ll want to confirm that the name is available and consider reserving it if you’re not ready to file your LLC paperwork yet.
Check availability
See if your desired LLC name is available by using the name availability tool on the SOS’s website or by calling the Department of Business Services at 217-524-8008. If the name is deemed available, note that it’s only preliminary and doesn’t guarantee it will be available later. The Department of Business Services reserves final determination of availability until you file a name reservation, articles of organization or an assumed name application.
Consider reserving a name
You may reserve an available name for 90 days by filing Form LLC-1.15 and paying a $25 fee, and you can repeat the process to renew your reservation if needed. Note that you aren’t required to reserve your LLC’s name. The reservation is a precaution available to you if you’re concerned your desired name might be taken before you can file your articles of organization. Filing form LLC-1.15 doesn’t establish an LLC.
Step 2: Choose your LLC’s registered agent and registered office
Next, you’ll need to designate your registered agent and registered office. Here are the qualifications for each:
Registered agent
- If an individual, must be an Illinois resident.
- If an entity, must be authorized to conduct business in Illinois.
- May be an LLC organizer, manager, member or employee.
Registered office
- Must match the business office address of the registered agent.
- Must be located in Illinois.
- Must have a street address (P.O. box numbers alone aren’t acceptable).
Step 3: File articles of organization and pay fee
Now, it’s time to file with the Secretary of State. Here’s what to prepare and where to send it:
What to file
Prepare two copies of the articles of organization (Form LLC-5.5). One must be an original signed document, and one can be a copy. Include the initial $150 filing fee, payable to the Secretary of State. Cash payments aren’t accepted.
Where to file
Submit the articles of organization and the filing fee by mail to the Department of Business Services Limited Liability Division at 501 S. Second St., Rm. 351, Springfield, IL 62756. Or, you may file your LLC’s articles of organization online as long as it meets all other stipulations and doesn’t require optional provisions.
Expedited service
If you request expedited service, the Department will review and process — if approved — your articles of organization within 24 hours (excluding weekends and holidays) for an additional $100 service fee.
Notes for alternate Illinois LLC types
Series LLCs: Illinois allows the formation of a series LLC, which benefits businesses with multiple entities like rental properties. Consult an attorney to determine if this suits your situation. To create a series LLC, submit Form LLC-5.5(S), with a $400 filing fee. You can then establish individual series by filing the required Certificate of Designation Form LLC-37.40.
Low-profit LLCs (L3Cs): L3Cs are businesses that are primarily charitable with no significant intent to produce income, appreciate property or accomplish legislative or political objectives. You’ll need to include specific statements as part of your LLC’s purpose in Article 5 of the articles of organization and use “L3C” instead of LLC in the name. (Be prepared to amend your articles of organization if your company no longer satisfies L3C requirements.)
Step 4: Adhere to reporting requirements
Although filing the articles of organization officially forms an LLC, additional steps are necessary to establish your LLC as a distinct legal entity. For example, to maintain its existence, your LLC needs to comply with annual reporting required by the Secretary of State and other government agencies.
Secretary of State
The due dates for these reports are specific to when you organized your LLC. Each year, you must submit the annual report Form LLC-50.1 before the first day of your LLC’s anniversary month (corresponding to when you initially formed your LLC). For example, if your LLC’s organization date is March 21, your annual report is due before the first day of March each year. The filing fee is $75.
Failure to file the annual report by the due date will put your company in delinquent status. If you don’t file within 60 days of the due date, a penalty status is imposed, along with a $100 late filing fee. Beyond 120 days from the due date, your company faces administrative dissolution.
Most LLCs can file annual reports online through the SOS’s website. Keeping track of these deadlines and submitting your annual reports on time ensures your LLC maintains its good standing with the Secretary of State.
Financial Crimes Enforcement Network
While most LLC filing requirements are applicable at the state level, a federal reporting requirement went into effect on Jan. 1, 2024. LLCs must now file a beneficial ownership information (BOI) report with the Financial Crimes Enforcement Network (FinCEN; a bureau of the US Department of the Treasury). If your LLC was officially formed between Jan. 1, 2024 and Dec. 31, 2024, you have 90 days to file your report (beginning from your official date of formation); that window decreases to 30 days if your LLC was formed on or after Jan. 1, 2025.
To file, collect the following information about your LLC:
- Legal company name
- Trade names or doing business as (dba) names
- Formation/registration jurisdiction
- Current street address of your principal place of business in the US or the current address from which you conduct business in the US (if primarily doing business overseas)
- Taxpayer identification number (includes your EIN) or tax number issued by a foreign jurisdiction (as well as the name of that jurisdiction)
As well as the following information about each of your LLC’s beneficial owners (anyone who exercises substantial control over a reporting company or owns/controls at least 25% of the company’s ownership interests) and company applicants (defined by FinCEN as the “individual who directly files the document that creates or registers the company and if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing”):
- Full legal name
- Date of birth
- Residential address*
- US driver’s license, passport or other ID number, the name of the issuing state or jurisdiction, and an image of the document associated with the number
*Note (from FinCEN): “If the company applicant works in corporate formation — for example, as an attorney or corporate formation agent — then the reporting company must report the company applicant’s business address. Otherwise, the reporting company must report the company applicant’s residential address.”
There’s no fee to file your report, and unless your beneficial ownership information changes you’ll only need to do it once. You can file your BOI report via FinCEN’s dedicated beneficial ownership information page.
Other government agencies
Depending on the nature of your business, some LLCs may be required to file reports with other federal, state and local government agencies. Please consult an attorney or accountant for more information on your LLC’s particular obligations.
Step 5: Obtain an EIN from the IRS
All LLCs in the US with more than one member and those planning to hire employees must acquire an employer identification number (EIN) from the IRS.
You’ll need your LLC’s EIN to:
- Pay income taxes
- File tax returns
- Run payroll
- Open business bank accounts (an EIN is not always required)
- Acquire business credit cards (an EIN is not always required)
Obtaining an EIN isn’t required for single-member LLCs with no employees. (However, using an EIN for business purposes is still advisable. Your only alternative is your Social Security number, which increases your identity theft risk.)
There is no fee, and you can apply for an EIN on the IRS website.
Register with the Illinois Department of Revenue
Any entity conducting business in Illinois or with Illinois customers must register with the Department of Revenue (DOR) by submitting the Illinois Business Registration Application (Form REG-1). There is no registration fee. However, depending on the nature of your business, you may need to include additional forms or license fees with your registration. This process can be completed online, via mail or in person.
| Method | Where to file | Processing time |
|---|---|---|
Online
| 1 to 2 days
| |
Mail
| Central Registration Division Illinois Department of Revenue PO Box 19030 Springfield, IL 62794-9030
| 6 to 8 weeks
|
In-person
| Visit your local DOR office
| Not specified
|
The Illinois DOR will issue you a Certificate of Registration or License and taxpayer ID. Your tax type will determine if this is issued electronically or by mail. (Either way, MyTax Illinois is the primary method to obtain and print a copy of your certificate.)
Understanding federal and state taxes for Illinois LLCs
Understanding federal and state taxes for your Illinois LLC is an important part of running your business. At the federal level, your entity classification determines the forms you need to file.
By default, the IRS taxes single-member LLCs as sole proprietorships and multimember LLCs as partnerships unless you elect to be taxed as a corporation. As a sole proprietorship, the LLC income passes through the business to your individual filing on Form 1040, US Individual Income Tax Return. As a partnership, members will use Form 1065, US Return of Partnership Income. If you don’t want to be taxed under the default classification, you must submit Form 8832, Entity Classification Election to elect a different classification (for example, an LLC can elect to be taxed as an S corporation).
In addition to federal taxes, Illinois imposes its own set of taxes to consider.
Illinois sales tax
In Illinois, LLCs may need to collect and remit sales tax. The state’s base rate is 6.25%, but local taxes can increase the total rate. (You can look up rates for specific locations on the DOR website.) To comply, determine local tax rates and collect/remit taxes accurately. Stay informed about changing rates and filing deadlines.
Illinois corporate income tax
Your Illinois tax return filing requirements as an LLC depend on how you elect to be treated by the IRS.
If your LLC is treated as a sole proprietorship for federal income tax purposes (and you report the LLC income on your federal Form 1040), then you’ll report the LLC income on your Form IL-1040, Illinois Individual Income Tax Return. However, if you have a multimember LLC taxed as a partnership for federal income taxes (and you file federal Form 1065), the LLC will file Form IL-1065, Illinois Partnership Replacement Tax Return. Additionally, each partner should receive a Schedule K-1-P to indicate the amount that will flow to their state income tax return.
If you instead elect to be taxed as a corporation, note that the Illinois business income tax rate on corporations is 7% of net income. There is also a personal property replacement tax of 2.5% of net income for corporations (other than S corps) or 1.5% of net income for S corps, partnerships and trusts. (A tax professional can explain your options, help minimize your LLC’s tax burden and assist with accurate filing and compliance.)
Employment taxes in Illinois
All Illinois employers (this includes LLCs with employees) must register with the Illinois Department of Employment Security (IDES), report wages and pay unemployment tax. The tax rate and wage base may vary annually. For reference, in 2023, the tax rate ranges from a minimum 0.85% to a maximum 8.65%, on a wage base of $13,271.
Employers are responsible for withholding and remitting state income tax from employees’ wages as well. Compliance with state and federal payroll tax requirements is crucial, and failure to do so can result in penalties. Staying up-to-date with tax rates and regulations is essential to avoid legal issues and ensure smooth operations if your Illinois LLC has employees.
Additional reporting by Kristen Coates and Jason Rueger
We receive compensation from our partners for Featured Offer placements, which impacts how and where their offer is displayed.
Frequently asked questions (FAQs)
Starting an Illinois LLC is cost-effective and accessible for small businesses and startups. LLCs benefit from limited personal liability and can elect different tax classifications to suit their needs. Illinois also allows for Series LLCs, enabling separate entities within one structure, ideal for diverse businesses or investments.
Illinois LLCs are generally taxed as pass-through entities at the federal level. Pass-through means the LLC isn’t subject to federal income tax because profits and losses pass through to the owners (members), who report this information on their personal tax returns. However, your LLC can also be treated as a C corporation or S corporation if it meets the requirements and you determine it to be advantageous.
Illinois LLCs with employees must register with the Illinois Department of Employment Security (IDES), report employee wages and pay state unemployment insurance taxes. Liability for unemployment insurance tax depends on factors like the number of employees and wages paid.
As an Illinois LLC owner or member, you must pay self-employment taxes to cover Medicare and Social Security obligations; the current self-employment rate includes 2.9% for Medicare and 12.4% for Social Security, for a total rate of 15.3%. And you’ll pay income tax on your personal tax return (Illinois has a flat income tax rate of 4.95%).
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