How to Start an LLC in Illinois (Step-by-Step Guide)

For many new companies, forming as an LLC is the best option as it is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Additionally, LLCs often enjoy a lower tax rate than corporations. However, forming an LLC can be a little complicated, and each U.S. state has its own checklist for starting an LLC with minor procedural variations.

LLC formation in Illinois is a relatively standard process without uncommon requirements. In essence, an LLC is formed in Illinois by filing Articles of Organization with the Illinois Secretary of State, but there are a handful of other guidelines to follow.

Starting an LLC in Illinois step-by-step

1. Select a name for your Illinois LLC

Follow naming requirements

There are three major guidelines to follow when naming your LLC in the state of Illinois:

1. Your LLC’s name must be distinguishable from the names of existing business entities on file with the Illinois Secretary of State.
2. Your LLC’s name must end with the words, “limited liability company”, or the abbreviations, “LLC” or “L.L.C.”
3. Your LLC’s name must not include the words or abbreviations, “Incorporated”, “Corporation”, “Corp.”, “Inc.”, “Co.”, “Ltd.”, “L.P.”, or “Limited Partnership”.

Need help coming up with a business name? Check out our free business name generator.

Reserve your LLC name with the Secretary of State

After selecting a name for your LLC, you can reserve it with the Illinois Secretary of State. First, check the name’s availability using the Secretary of State Business Services Name Database. If your chosen LLC name is available, you can reserve it for 90 days through the filing of an Application to Reserve a Name. Filers must pay a $25 filing fee to the Secretary of State.

Assumed business name option

As an alternative to using the LLC’s official legal name when filing Articles of Organization in Illinois, a company also has the option of filing with an assumed business name, aka a trade name, or “DBA” name (doing business as).

An assumed business name can be registered online using the Illinois Secretary of State website or via postal mail by mailing a completed Application to Adopt, Change, Cancel, or Renew an Assumed Name along with a filing fee payment of $30 to $150 a year depending on the year you file it.

2. Designate a registered agent

As in every U.S. state, forming an LLC in Illinois requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf.

The registered agent must either be a state resident with a street address in Illinois OR if the individual or professional service is based out-of-state, they must have a business office in Illinois.

3. File Articles of Organization

An Illinois LLC is officially formed through the filing of Articles of Organization with the Illinois Secretary of State, Department of Business Services. Filing of the Articles of Organization can be done online or by using postal mail. You must pay a filing fee of $150 (or an additional $100 fee for expedited service). Using a credit card is the preferred payment option.

Your LLC Articles of Organization should include the following information:

• Name of LLC
• Date of filing
• LLC’s principal office address
• Duration of LLC (perpetual or for a specified period of time)
• Registered agent name and address
• LLC’s organizational purpose
• Names and addresses of LLC members and managers
• Names and signatures of organizers
• A statement addressing the LLC’s intended duration of existence

4. Create an operating agreement

Although not a legally mandated step for forming an LLC in Illinois, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies. This document should describe the LLC’s business structure, establish the individual responsibilities and obligations of LLC members, and detail how the LLC will be run.

Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.

5. Obtain an IRS Employer Identification Number (EIN) 

All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of a single-member LLC). The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and to perform a number of other important functions.

You can apply for an EIN online on the IRS website without paying a filing fee.

6. Fulfill your legal obligations

Once an LLC is registered, it is important that its members devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.

Annual Reports

Illinois LLCs are required to file an annual report with the Secretary of State office. An annual report must be filed every year prior to the first day of the month when the LLC was initially formed in the state. LLCs have the option of filing their annual report online or via postal mail by filing Form LLC-50.1. Both options require an LLC to pay a state fee of $75. Those who file their annual report late must pay a $100 fine in addition to the principal filing fee.

Review necessary business licenses

While some states require a general business license for all LLCs, Illinois does not require this kind of licensure.

• Register with the Illinois Department of Revenue: However, every business must register through the Illinois Department of Revenue to obtain a Certificate of Registration. For most businesses, this is free, and it will also include the issue of a state taxpayer ID. Both are required to do business in Illinois, and the ID will serve as your seller’s permit for sales tax purposes. You can do this online through MyTaxIllinois or by filing Form REG-1 via mail.
• Review the state website to see if you need state licenses: Depending on your industry, you may need other state-level licenses, often called occupational licenses. These will be regulated individually based on what kind of work you do. For example, operating a nail salon and hair salon both require different forms of this license. Visit the Illinois Department of Commerce First Stop Business Information Center for information on state-issued licenses.
• Check with local business officials too: There are also local-level licenses you will need to consider. Like the state licenses, this could include a general business license or an occupational license. Consult with the city clerk of the municipality where your LLC’s principal place of business is located for advice on obtaining local licenses.

Understand state tax registration

One of the most popular benefits of an LLC is that it is a pass-through entity, meaning its profits are not taxed. Instead, LLC owners report all profits and losses on their personal income tax returns.

• Illinois tax rates: In Illinois, you’ll pay a flat tax rate of 4.95% and federal taxes. You may also need to pay self-employment taxes and Medicare taxes. An LLC will automatically be considered a sole proprietorship for tax purposes; if it is a multi-member LLC, it will be taxed as a partnership. If you prefer a different status, you can also file elective forms for consideration to be treated as either an S-corporation or a C-corporation.
• Franchise tax: Until December 31, 2025, Illinois businesses must also pay a franchise tax. This amounts to 0.1% of their paid-in capital, with a maximum of $1 million. Other taxes may be applied based on municipality and industry.

Understand BOI reporting

Starting in 2024, certain businesses categorized as reporting companies, including LLCs, will be subject to additional reporting obligations.

Enforced by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), this initiative aims to combat money laundering by necessitating specific businesses to disclose their Beneficial Ownership Information (BOI). A beneficial owner is an individual who directly or indirectly wields substantial control over a reporting company or possesses ownership of 25% or more of its interests.

To comply with BOI reporting requirements, businesses can use the electronic filing system that became available on January 1, 2024. The reporting deadline varies depending on the establishment date. For newly formed entities, there’s a 90-day grace period from the date of notice confirming their creation or registration’s effectiveness. After January 1, 2025, all reporting businesses must file within 30 days of establishment or registration.

Non-compliance with these requirements carries significant penalties, so it is essential for affected businesses to familiarize themselves with these regulations and ensure timely and accurate reporting to avoid severe consequences.

Learn more about BOI reporting.

Post LLC tasks

Set up business bank accounts

Maintaining a clear separation between personal and business finances is crucial for the success of your LLC. By having a dedicated business bank account, you create a clear distinction between your personal assets and liabilities and those of your business. This separation protects personal assets from potential business liabilities and ensures compliance with legal and tax requirements. Separating personal and business finances is particularly important for LLCs, as this business structure offers limited liability protection.

Having a separate business bank account simplifies bookkeeping and financial management. You can easily track and monitor your business income and expenses, making it easier to prepare accurate financial statements, file taxes, and comply with any regulatory requirements.

When choosing a bank, look at factors like their level of service and reputation, as well as if they have other business offerings like credit cards or lines of credit. Consider these options:

• Found Bank could be an ideal choice for your LLC, especially if you prioritize accessibility and inclusivity in your financial services, as they focus on providing accessible banking solutions to underserved communities, potentially aligning with your business values.
• Relay offers an innovative banking app that could benefit your LLC by providing collaborative financial management among team members.
• Mercury could be a strong choice for your LLC due to its specialized services tailored for startups and small businesses, offering efficient account management tools and support for financial growth.

Obtain a Certificate of Good Standing

In the state of Illinois, obtaining a Certificate of Good Standing for your corporation or LLC is a straightforward process.

• How to request the certificate: The state offers a convenient online Corporation/LLC database that allows you to search for and obtain these certificates. Once you’ve located your business entity in the database, you can request a Certificate of Good Standing.
• Payment and processing: After paying the $25 fee, the certificate becomes available for immediate printing. This process ensures that your business remains compliant with state regulations and provides you with a tangible document confirming your entity’s good standing in Illinois.

Build a website

Building a website after you start your LLC is essential as it provides your small business with a 24/7 online presence, expanding your reach and credibility. It serves as a platform to showcase your products or services, engage with customers, and establish your unique brand identity.

While a website is necessary, you might not know where to start. Follow these steps to get started:

1. Search for and purchase a domain name.
2. Sign up for web hosting.
3. Pick a web builder like Domain.com or GoDaddy to create a site with no coding experience necessary.
4. Tailor your site to your customers, adding appropriate pages, content, and images.
5. If you’re selling goods, add an e-commerce section to your site.
6. Review, test, and publish your site.

Domain name availability is a priority: Be sure you reserve your proper domain name quickly and put up basic information like contact details so that you can easily be found. In order to make sure that potential clients can quickly locate you online, think about selecting a domain name that accurately captures your brand identity and is simple to remember.

Consider the cost of setting up an LLC

Average cost to set up a business in Illinois: $255-$485

Setting up an LLC in Illinois comes with costs. Consider these immediate fees:

• Incorporation fees: The primary cost associated with starting your LLC  is the filing fee with the Illinois Secretary of State, which is $150 online or $180 for paper filing. This fee covers the processing of your Articles of Organization and the formal establishment of your business.
• Publication fees: Additionally, there are publication fees that vary by county, typically amounting to around $30 per week for three consecutive weeks to publish a notice of your LLC formation in a local newspaper, although this requirement may be waived in certain cases.
• Annual Report filing fees: Each year, including the first year you’re in business, you must file an Annual Report with the State. The cost to submit this document is $75.
• Registered agent fees (optional): You can pay a registered agent service to accept communications on your company’s behalf. By doing so, you’ll list the registered agent service as your registered agent on your LLC formation documents. While this isn’t mandatory, many businesses like the peace of mind of knowing a professional company receives important documents and notifies owners of any incoming communication. The fee for this kind of service varies but is usually between $50 to $200 a year.

Foreign LLCs

LLCs formed out of state that intend on doing business in Illinois must also register with Illinois’s Secretary of State, Department of Business Services. Here are the steps that foreign LLCs must follow to legally operate in Illinois:

1. Comply with LLC naming guidelines and check name availability online (If your company name is unavailable for use in the state, include a completed Application to Adopt, Change, Cancel or Renew an Assumed Name during registration).
2. Appoint an Illinois registered agent.
3. Obtain a Certificate of Good Standing from LLC’s original state of registration.
4. File an Application for Admission to Transact Business with the Illinois Secretary of State via postal mail and pay a filing fee of $150.