How to Start an LLC in Illinois and Save on Taxes in 5 Easy Steps, According to Experts

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Illinois is unusual in that you can form an LLC without having an operating agreement, but you should create one anyway in case you need to legally shield yourself down the line.
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Registering a Limited Liability Company (LLC) in the state of Illinois can create tax savings, protect personal assets, and build wealth through entrepreneurship.  

“You can mitigate liability, losses, and risk of lawsuits when you form an Illinois LLC for your business,” says Sid Peddinti, a business attorney based in Illinois who’s helped thousands of entrepreneurs protect their businesses. “An LLC helps shield your personal assets and creates tax savings. Think long-term—it’s important to research and understand the structure of an LLC and what it can do for your business.”
Starting an Illinois LLC is fairly straightforward compared to other states. You can register online, and there are options for expedited filing if you’d like to register your LLC quicker. If you’ve thought about making your Illinois-based business or side hustle official, you can register your Illinois Limited Liability Company (LLC) yourself, hire a CPA and/or lawyer to help you along the way, or you can use a guided tool such as LegalZoom to get started quickly.

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  • Price:
    From $79, plus the fees to register your LLC and file annual reports
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  • State-specific checkout?:
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Overview:

LegalZoom helps you set up an LLC in your state quickly, easily, and entirely online. An LLC is needed for important business functions, such as opening a business bank account. Different states have different business formation requirements; LegalZoom customizes the process for you based on what state you live in, and the company helped consumers form 447,000 businesses in 2021, according to a press release.

Mistakes can be made when trying to form an LLC by yourself, and business formation professionals can be expensive. If you want a cost-effective and convenient way to create your LLC (and keep more of the money you make from your side hustle or business when tax time rolls around), LegalZoom is a great option.

We asked Illinois-based legal experts and business owners what to keep in mind when registering for an LLC in the Prairie State. Here’s how to start an LLC in Illinois – and what LLC owners need to know about the process as you get yourself set up. 

Step 1: Choose a Name for Your Illinois LLC 

To form an LLC in Illinois, it’s necessary to register with the Illinois Secretary of State. You’ll have to fill out the required forms, pay fees, and meet all requirements regarding business name and formation guidelines. Illinois LLC formation paperwork can be filled out online or by mail. 

You’ll need to choose a business name for your LLC to start the process. You can check the availability of a business name by searching the Secretary of State Business Services name database. You can also reserve a name for your business entity for up to 90 days by filing an Application to Reserve a Name (Form LLC-1.15); this reservation has a filing fee of $25.

The LLC name you choose must adhere to Illinois naming rules.

When choosing an LLC name, keep in mind: 

  • An LLC name must contain the phrase “limited liability company” or the abbreviations “L.L.C.” or “LLC.” 
  • The LLC’s name must be different from the names of other business entities already on file with the Illinois Secretary of State.
  • The LLC name cannot contain words used to name a government agency (e.g., State Department, Treasury, FBI, etc.).
  • The business name cannot include the words “trust,” “trustee,” or “fiduciary” unless the business is an authorized corporate fiduciary.
  • You cannot use “Ltd.” or “Co.” as abbreviations in the name of an LLC in Illinois.
  • Certain restricted words—such as bank, lawyer, attorney, or credit union, or words associated with other professional services—may require additional documentation.

You don’t have to use your LLC’s official legal name in your Articles of Organization when you do business. You can, however, use an assumed business name, also called a fictitious business name, “DBA” (short for doing business as), or trade name. 

In Illinois, you must register your assumed name with the Illinois Secretary of State if you decide to use a DBA. You may register online or by mail by filing an Application to adopt, change, cancel, or renew an assumed name (Form LLC-1.20). The registration is good for up to five years, and the fee ranges from $30 to $150 per year.

One thing to consider when choosing your LLC name is the availability of that name as a URL for a possible website. You can check if the URL is available and think about the goals of your side hustle or business. You may wish to sell products or services online in the future with a website using the URL of your LLC name. 

“Registering an LLC in Illinois was easier than when I registered an LLC in Georgia,” says Lakshmia Marie, an Illinois-based business owner. “It was pretty straightforward. I just had to verify I was going to have a business in Illinois, and use my home address in Chicago.”

Step 2: Choose a Registered Agent

The state of Illinois requires a registered agent to be appointed for LLCs. A registered agent is a person or entity authorized to receive service of process and other official legal documents and notices on behalf of the LLC. Your Illinois registered agent can be a person—yourself or an employee of the LLC—or an entity that offers registered agent services.

A registered agent for Illinois LLCs will need to:

  • Be 18 years old and an Illinois resident.
  • Have a physical address (not a PO box) in Illinois. 
  • Keep regular business hours (9 am to 5 pm, Monday through Friday).
  • Be on-site and available to accept documents during normal business hours.
  • Be authorized to do business in Illinois (if using a registered agent service).

In the state of Illinois, you can be your own registered agent, but it means your name, address, and other private information will go on the public record. And you’ll have to keep regular business hours at your registered address

Step 3: Prepare and File Your Articles of Organization

To form your Illinois LLC, you’ll need to prepare and file Articles of Organization. This can be done online through the Secretary of State’s website or by mail. Articles of Organization is a document that establishes your LLC officially by laying out basic information about your business and registering it with the state of Illinois.

To prepare your Articles of Organization, you’ll need:

  • Your LLC name.
  • The address of your LLC’s place of business.
  • The purpose of the LLC.
  • The effective date of the LLC.
  • The LLC’s duration (perpetual or limited).
  • When the Articles become effective.
  • The name and address of the LLC’s registered agent.
  • The names and addresses of the initial manager(s) if manager-managed; the names and addresses of initial member(s) if member-managed.
  • The name, address, and signatures of the organizer(s).

Members and managers 

In the state of Illinois, an LLC can be managed by its members—but other managers can also run it. A member-managed LLC means each member shares in the management responsibilities of the LLC. A manager-managed LLC means the members appoint someone (an LLC member or non-member) to run the management of the LLC. 

Illinois law states that if an LLC is manager-managed, that must be expressly stated in the Articles of Organization and the LLC’s operating agreement. Managers are given the authority to run the business based on the LLC’s operating agreement and Articles of Organization. Smaller LLCs tend to be member-managed, while larger LLCs tend to be manager-managed. If you’re the only member and only manager of your LLC, you can classify your business as a single member LLC, which is taxed like a sole proprietorship.

“Most states have the option to form a manager-managed LLC, says Ashley SA Jackson, a business attorney and Illinois-based co-owner of Halo 7 Rum, a premium spirits company. “It depends on the different roles you want people to play. If an LLC is manager-managed, then you’ve appointed a certain group of people to run the LLC. If it’s member-managed, everybody has the same footing and manages the LLC together.”

The filing fee to submit your Articles of Organization is $150.

Once you file your Articles of Organization, the Illinois Secretary of State will review the filing. Typical processing times are one week to 10 days. You can request expedited filing for an additional $100 fee. 

The state will issue a certificate that confirms the LLC formally exists after the LLC’s formation documents are approved. This certificate will allow the LLC to obtain an Employer Identification Number (EIN), business licenses, and a business bank account.

“The Secretary of State website leaves a lot to be desired,” says Scott Tucker, founder of Scott Tucker Solutions, Inc., a financial advisor consultancy headquartered in Chicago. “I used a small business attorney to form my LLC. I’m busy as a financial advisor, and small business law and filing aren’t my specialties. I hired professionals to help.” 

Step 4: Get an Employer Identification Number (EIN)

Once your Illinois LLC has been filed and approved, you can register for a nine-digit federal Employer Identification Number (EIN) with the IRS. An EIN is like a Social Security number for your business. You can use an EIN to file taxes, open a business bank account, get a business credit card, manage payroll, and file federal taxes. Our experts recommend keeping personal and business expenses separate to ensure personal asset protection outside your business structure.

Step 5: Register with the Illinois Department of Revenue

Once you have an EIN, you’ll need to register with the Illinois Department of Revenue to pay your state taxes and comply with Illinois law. 

If you have employees, you’ll have to:

  • Report new employees to the Illinois Department of Employment Security within 20 days of hiring or rehiring. This is mandatory under Illinois law.
  • Purchase workers’ compensation insurance. Illinois businesses must purchase workers’ compensation insurance as soon as they hire their first employee.
  • Pay unemployment taxes. Employers must pay unemployment taxes as soon as they pay more than $1,500 in wages in a quarter or employ one or more individuals for more than 20 weeks in a given year.

How Much Does It Cost to Start an LLC in Illinois?

The filing fee to start a Limited Liability Company in Illinois is $150. If you’d like to expedite your LLC filing, there is an additional fee of $100 for your filing to be reviewed and receive an email response within 24 hours, excluding weekends and holidays. If you’re using a service like LegalZoom, there will be an additional charge, but it may be worth the convenience.

Our Pick
LegalZoom
LegalZoom
LegalZoom
Learn More externa link icon
  • Price:
    From $79, plus the fees to register your LLC and file annual reports
  • Additional help available?:
    Yes
  • State-specific checkout?:
    Yes
Overview:

LegalZoom helps you set up an LLC in your state quickly, easily, and entirely online. An LLC is needed for important business functions, such as opening a business bank account. Different states have different business formation requirements; LegalZoom customizes the process for you based on what state you live in, and the company helped consumers form 447,000 businesses in 2021, according to a press release.

Mistakes can be made when trying to form an LLC by yourself, and business formation professionals can be expensive. If you want a cost-effective and convenient way to create your LLC (and keep more of the money you make from your side hustle or business when tax time rolls around), LegalZoom is a great option.

Illinois-based LLCs are required to file an Annual Report every year. The filing fee for your annual report is $75, and there is a $100 fee if it is not filed within 60 days of its due date.

“Forming an LLC in Illinois is a simple process; it’s done electronically online,” says Brad Helfand, an Illinois-based business owner and CEO of Vous Vitamin, a company that offers customized vitamin subscriptions. “One thing to keep in mind is that you must submit annual report updates to the state until or unless you dissolve the company.”

Potential additional fees to start an LLC in Illinois include:

  • Reserving your name for up to 90 days before LLC formation by filing Form LLC 1.15 and paying the $25 filing fee.
  • Filing an application to adopt, change, cancel, or renew an assumed name, better known as a DBA, by filing Form LLC-1.20 and paying the $25 filing fee.
  • Obtaining certified copies of your Illinois business documents by ordering them through the Secretary of State and paying $25.
  • Obtaining an Illinois certificate of good standing by ordering it through the Secretary of State and paying the $25 fee.

Is It Worth Starting an LLC in Illinois?

As soon as your Illinois-based side hustle or business makes money, you should consider registering an LLC. The structure of an LLC helps small business owners protect your personal assets, lowers taxes, and creates the opportunity to build more than a one-person business. If you are the only member and only manager of your business, you can file as a single member LLC, which can be taxed like a sole proprietorship.

“You need to keep in mind that Illinois has a state income tax,” says Jay Parks, a CPA, and owner of Jay D. Parks & Associates. “Make sure you take that into account when you’re figuring out your business goals. There also are some city taxes depending upon where you’re at. Typically, you’ll get some taxes levied against income in larger cities such as Chicago.” 

How Long Does It Take to Form an LLC in Illinois? 

In the state of Illinois, typical processing times to form an LLC are 7 to 10 business days if you file online, or 4 to 5 weeks if you file by mail. For an additional $100, you can request expedited service and receive a decision within 24 hours—excluding weekends and holidays.

Do You Need to Create an Operating Agreement to Start an LLC in Illinois?

An LLC operating agreement is not required by law in the state of Illinois. 

An operating agreement is an internal document that establishes how you will run your LLC. It sets out the members’ and managers’ rights and responsibilities, including how the LLC will be managed. 

Our experts say having an operating agreement can further preserve your limited liability, especially if you have co-founders or other stakeholders in the business. If you don’t have an operating agreement, state LLC law will govern how your LLC operates if legal disputes arise. 

Do You Need an EIN to Start an LLC?

You do not need an EIN to start an LLC in Illinois.

However, you’ll want to get one as soon as your LLC is approved so that you can open financial accounts, obtain a business credit card, and register with the Illinois Department of Revenue. Registering an EIN with the IRS is free.

Starting an LLC in Illinois may feel intimidating, but the process is reasonably straightforward. Registering an LLC can help turn your side hustle or business into an entity that creates financial independence. Take some time to go through this guide and get the official documentation you need to be set up for success.