How to Form an LLC in Illinois

A Limited Liability Company (LLC) combines the limited liability of a corporation with the flexibility of a partnership or sole proprietorship, making it a suitable business structure for business owners seeking to limit their personal liability. This article outlines the steps to form an LLC in Illinois.

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Step 1: Choose a Name for Your Illinois LLC

Your LLC's name must be unique from other registered businesses in Illinois. Use the Illinois Secretary of State Business Services name database to check name availability. If available, you can reserve it for up to 90 days by filing an Application to Reserve a Name (Form LLC-1.15) with a $25 filing fee.

Your LLC name should end with "Limited Liability Company," "LLC," or "LLC" per Illinois law. Certain abbreviations like "Ltd." and "Co." are prohibited, and the name cannot contain terms like "Corporation," "Incorporated," or "Limited Partnership."

For trading under a different name than your LLC's legal name, you'll need to register an assumed business name (or a "D.B.A. ") with the Illinois Secretary of State. You can register online or via mail with an Application to Adopt, Change, Cancel, or Renew an Assumed Name (Form LLC-1.20). The registration lasts up to five years, and the filing fee ranges from $30 to $150 per year.

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Step 2: Appoint a Registered Agent

Every Illinois LLC must have a registered agent in the state—an individual or business entity authorized to accept legal documents on behalf of the LLC The registered agent can be an Illinois resident or a corporation authorized to conduct business in Illinois. This agent must have a physical street address in Illinois.

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Step 3: File Articles of Organization 

Form your LLC by filing Articles of Organization (Form LLC-5.5) with the Illinois Secretary of State Department of Business Services. Include information like the LLC's name, address, when the Articles become effective, the registered agent's details, LLC's purpose, its duration, initial members or managers' details, and the organizer(s) name, address, and signatures. The filing fee is $150, and you can file online or by mail. Online filings are expedited within 24 hours.

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Step 4: Prepare an Operating Agreement

Though not mandatory in Illinois, an operating agreement is strongly recommended. This internal document lays out how you'll manage your LLC, and the rights and responsibilities of its members and managers. It also helps affirm your LLC as a separate entity, which can protect your limited liability status. You don't need to file the operating agreement with the state.

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Step 5: Obtain an E.I.N.

An LLC with more than one member must obtain an I.R.S. Employer Identification Number (E.I.N.), even without employees. A one-member LLC requires an E.I.N. only if it will have employees or if you choose to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You can obtain an E.I.N. by completing an online application on the I.R.S. website. There is no filing fee.

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Step 6: File Annual Reports 

Illinois LLCs must file an annual report with the Secretary of State before the first day of the LLC's anniversary month (the month it was formed). File the report online or by mail with Form LLC-50.1. The filing fee is $75. If you file late (more than 60 days after the due date), you'll incur a $100 penalty.

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By following these steps, you can establish an LLC in Illinois. Remember that while LLCs provide benefits like limited liability, operational flexibility, and pass-through taxation, they may require more paperwork and higher fees than other business types, so it’s important to weigh the pros and cons before deciding.