How to Start an LLC in Illinois

Illinois is one of the best states in which to start a business. With industrial cities, agricultural production, natural capital, and so on, it has a diverse economic base. If you want to create a company, one of the quickest and simplest ways is to form an LLC. This is a form of business agency that is perfect for small businesses or start-ups. It’s also known as a hybrid arrangement because it has the characteristics of a sole proprietorship and a company; the owners are exempt from personal responsibility for company debts and are not required to pay separate business taxes.

LLCs have more versatility and are subject to fewer constraints and regulations than other types of companies. And, if you’ve wanted to form an LLC in Illinois, you’ve made the right decision because it’s simple to do so. You just have to follow a few steps, and you soon will be the owner of your company. 

Let’s take a look at the advantages of forming an LLC before moving to the following steps:

  1. The owners are not accountable for any company debts or litigation.
  2. The LLC’s earnings are not subject to double taxation.
  3. Compared to companies, LLCs have fewer enforcement standards.
  4. Whether the LLC is taxed as a corporation is up to the LLC.

Step 1: Pick a Creative Company Name

Isn’t it true that their names remember people? As such, it is crucial. Since the name of your organization is what people would know you by, you must choose carefully. The prestige and personality of your LLC are reflected in its name. It is what will be remembered by future customers. However, before naming your company, you must consider the following requirements:

  1. Your LLC’s name must be exclusive and not already licensed or reserved with the State.
  2. The words Limited Liability Corporation or its abbreviation LLC should appear in the name.
  3. Your LLC’s name must be free of offensive terms and contain the letters from the English alphabet or Roman/Arabic numerals.

Always double-check if your chosen name is available before printing your business cards, logos, or mentioning it on your website. You can do so in several ways. You should submit a letter to Springfield’s Department of Business Services. Call the department at (217) 524-8008 for more information. Alternatively, you can use the Business Services website at www.cyberdriveillinois.com to conduct an internet search for name availability. For a fee of $300, you can reserve your name for ninety days.

If your name is not possible to use, you can make some changes, differentiate yourself, or try different characters. Also, double-check if the URL is available. To set your name apart from others, you have to make substantial changes, make one or more of the following changes can help a bit: 

  • The use of articles a, an, the, conjunctions and, or, but, etc
  • Try using contractions.
  • Making use of abbreviations
  • Alter the tenses of the verbs

So you can give it a shot and tweak the keywords as needed. You can keep your name on hold by filling out a form after you’ve locked in your name. After that, you must apply with:

Secretary of State

Department of Business Services

Limited Liability Division

501 S. Second St., Rm. 351

Springfield, IL 62756

Step 2: Appoint a Registered Agent for your LLC 

A registered agent plays a vital part in any organization. The agent is the one who takes care of all the correspondence of your company. The notices, reminders, legal letters, and many more go through the agent first. He/she is the middle point of contact between you and the State; the State of Illinois mandates a registered agent’s appointment. According to the State, a person may be the registered agent if they are an Illinois citizen and are at least 18 years old. The business may also serve as a registered agent, but it must have an office in the State and be licensed to do business there.

Fill out Form LLC-1.36/1.37 with the Secretary of State to nominate a registered agent. You may also act as your registered agent, but that would add to your already overburdened schedule. You must be present in the office as a licensed agent, and you may be unable to fulfill your duties while on holiday.

But if you’re sure of yourself, go for it. You can even select one of your family members or friends to act as your agent.

Before you hire a registered agent, double-check that:

  • your agent has formally agreed to serve in this capacity.
  • The location of your office must be in Illinois.
  • Your registered office must have a working mailing address that is the same as your registered agent’s.

What is the function of a Registered Agent?

A licensed agent’s primary responsibility is to obtain official correspondence and documentation from the Secretary of State. It contains the following items:

  • Illinois Secretary of State communication and correspondence
  • Notices of service of process
  • Notifications and post from the state and federal governments
  • Forms and permits for taxes, reports, and corporate filings

Also, make sure that your company always has a registered agent working without the agent can create a problem for your LLC. 

Step 3: Register the Articles of Organization

The most crucial step in establishing an LLC in Illinois is filing the Articles of Organization with the Secretary of State. It is essential as it makes your business official. So, this document is an important one, be careful while filing it. 

The following must be included in the articles of organization for an Illinois LLC:

  • Name of the Illinois LLC primary business location
  • The LLC’s first day of service
  • The registered agent’s name and address
  • If the operating agreement specifies it, the date of dissolution
  • If a manager handles the LLC, the manager’s name and address must be included.
  • The person filling out the form’s name and address

The Articles of Organization may be filed in several ways. You have the option of filing it online, by postal mail, or hand-delivering it. You will have to pay $150 for the procedure, with an extra $100 for accelerated screening.

Filing Forms Online

To complete the online process, go to the Illinois Cyberdrive filing portal, and follow the on-screen instructions to fill the application. Online forms are automatically granted accelerated processing of 24 hours for a cost of $100.

Filing via Postal mail

You must first download, fill out the form. You can send the printed form to the office along with a $150 cheque or money order. You must submit the document to the following address:

Secretary of State 

Department of Business Services Limited Liability Division 

501 S. Second St., Rm. 351 

Springfield, IL 62756

This process will take up to 10 to 15 days for processing. The accelerated service is not available for postal mail. 

Submitting via hand-delivery

You can hand-deliver the application and fee to the address mentioned above if you are in the area of Springfield. If you happen to be in Chicago, you can likewise deliver the form to:

Illinois Secretary of State

Division of Business Services

69 W. Washington St., Suite 1240

Chicago, IL 60602

You now know that the turnaround time is 10 to 15 days, so if you can’t wait that long, you can speed up the process for an extra $100.

Step 4: Establish an LLC Operating Agreement

Although this paper has not to be officially filed with the State, it is still essential. It’s critical to take some preliminary steps and draft an operating agreement before starting your company. You’ll need to reach an agreement with all of the LLC’s representatives. This agreement sets out crucial information like each member’s duties, benefit and loss sharing, how existing members are replaced, new members are introduced, voting rights, and how the operating agreement can be updated. It will be effortless to work if you have all the rules laid out. 

What details should be included in the operating agreement? It should consist of the following information:

  • The LLC’s mission, as well as the services and products it provides
  • The members’ names and addresses; each member’s financial contribution to the company
  • The Admissions Procedure for New Members
  • Every member’s share of the company’s ownership, voting rights, and profit and loss distribution
  • The agenda for the meeting
  • When a team member leaves the organization, the exit plan is introduced.
  • Procedures for Dissolution

The operating agreement should be checked and signed by all LLC members, and it should be stored with other relevant business documents. You can draft a contract in two ways: write the operating agreement yourself using online templates or appoint someone to do it for you. These models will assist you in preparing a solid operating agreement. If you aspire to be confident that you don’t miss any crucial information, you should hire a lawyer. The attorney is well-versed in the law and will reach an agreement by state law, avoiding the State’s default law.

Step 5: Obtain an Employer Identification Number from the Internal Revenue Service.

LLCs do not have to pay federal income tax; instead, the company’s gains and losses are rolled over to the owner’s income tax return. Each owner is taxed at their individual state and federal tax rates on their share of the income.

The EIN (Employer Identification Number) is used by the Internal Revenue Service (IRS) to mark tax accounts. This number is required for anyone who pays business taxes. An EIN can be obtained in one of the following three ways:

Via Online

The most straightforward and most convenient way is to use the internet. You can apply online between the hours of 7 am to 10 pm from Monday to Friday, and you’ll get your number right away.

Via Fax

The second-fastest method is this one. You must get Form SS-4 and fax the completed form to (855) 641-6935. Within four working days, you will get your EIN.

Via Mail

The postal mail is the most delayed method. If you prefer to use the old-fashioned mail, you must download Form SS-4 and mail it to the address mentioned below. It can take up to four weeks for the processing to be completed.

Internal Revenue Service Operation

Attn: EIN Operation

Cincinnati, OH 45999

The creation of an LLC is based on these measures. We’ve gone over the big points so far. However, it would help if you considered some of the critical issues that are also necessary. 

Step 6: Businesses Taxes

After following all of the previous measures, the LLCs would be official for all intents and purposes. But there’s still a lot more to see. Let’s talk about taxes for a moment. Personal property replacement tax is a separate tax that applies to LLCs in Illinois. The tax rate is 1.5 percent of the LLC’s earnings, and it must be filed annually. The LLC can be charged as an S-corporation or as a C-corporation. They must file paperwork with the state government and the Internal Revenue Service. S-corporations are pass-through companies, which means they don’t have to file income taxes to the central government. If they wish to be taxed as a C-corporation, the LLC would be responsible for federal and corporate taxes.

The LLC must pay the State the withholding employers’ wages tax if it has employees. These taxes fund both the federal and State governments. So, let’s take a look at the taxes that the LLC would pay:

Federal Income Taxes

As we know, LLCs do not pay the federal government’s income taxes right away. The titleholder must include the profits and expenses of the company in their income tax returns. They have a flexible framework; if you want, you can tax your company like a corporation, as we know now.

State and Local Taxes

Both federal and State taxes act similarly. Instead of a different corporate income tax return, the owners’ income is recorded on their tax returns. But, as we mentioned earlier, there is one more state tax. If your LLC is registered as a company or association, it must pay a personal property replacement tax. The company has to pay this tax with 1.5 percent of its gross revenue. This tax will not apply if you have declared your LLC as a single proprietorship.

All Extra Tax

In addition to the regular taxation, various other instances are charged depending on particular conditions. If you sell goods, for example, you would have to pay sales and usage tax. When you hire workers, you must pay an Unemployment and Withholding insurance tax to the Illinois Labor department. You must also register payroll and withhold taxes. You can search the department’s website on the revenue official website to see which ones apply to you for all of these taxes. Also, check with your local government to see any local body taxes you must pay to your city, county, or municipality.

Step 7: Obtaining a license and submitting an annual report

Obtaining a license

There is licensing, just as there are extra taxes. Before starting a company, you can need to obtain specific licenses and certificates. You’ll need a Nursery Dealer Certification from the Department of Agriculture, for example, if you want to open a nursery in the State. If you’re going to open a restaurant that also serves alcohol, you’ll need a liquor license. You can look up which permits you might need on the State’s website. You have to register your company with the Illinois Revenue department to receive the permit. Before you begin doing business, you will receive a registration certificate. You have several options for filing:

On the internet

This is the quickest filing method because your corticated will be ready in no time. To register, go to the MyTaxIllinois page, and the process will take 1-2 days.

By Post

This method requires you to download the paper application, which you must then mail to:

Central Registration Division 

Illinois Department of Revenue

PO Box 19030

Springfield, IL 62794-9030

The application will be processed in about six to eight weeks.

Personal Consultation

If you live near one of Illinois’ regional offices, you can hand-deliver the form and complete the office paperwork. After the State has approved your application, it will mail you your Taxpayer ID Number and registration certificate.

Making a report

You’ll be able to start and expand your company once you’ve completed all of the above steps. But don’t work so hard in this race that you forget to file your annual report. It is needed. Every year, the LLC needs to submit a Yearly Report after the year of its establishment. The cost of registration is $75; if you want, you can speed up the process by paying an extra $50. Your LLC’s registered agent receives notice 42 days before the scheduled date in your company’s mail. Your company would be labeled a delinquent if you failed to file it on time.

If you do not file the report within 60 days of the due date, you will be fined $100; if you do not file the report within 120 days of the scheduled date, the business will be terminated. You have the option of submitting it online or on paper. The easiest way is to use the internet. If you file on paper, processing can take between 10 to 15 working days, but for an extra $50, you can speed up the process to 24 hours. Mail your completed paper-form to the below-mentioned addresses:

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

Finally, we’ve made it to the other side. You’re all set to launch your business and get it off the ground. Congratulations on your achievement! But hold on a second. Your LLC is now ready to go. However, you must take care of a few items after establishing an LLC. Take a look at this:

Build a Business Website

Any company’s online presence is a boon. It is the most effective way for people to locate you. If you’re making a website, the first step is to purchase a domain name and then pick a hosting service. The next step is to design; you can use the resources available on the internet to assist you. Not to mention, the website should provide all relevant details, such as business hours and contact information.

Set up a Phone System

Your company must have a business phone number that suppliers and customers can use to contact you. So, particularly for your company, get a phone number. If anybody wants to reach your company, they will have to number to contact you. It will also protect your phone number. 

Create a company logo

A logo represents your company’s branding wherever your customers connect with you, including on your website, business cards, invoices, and email signatures, among other places. You can create your logo or use an online application to assist you. You can also purchase high-quality, ready-to-use stamps that you can edit.

Create your business cards

It’s time to start designing your business cards once you’ve settled on a logo. Spreading your company, having a more extensive scope, and handing out flyers while running errands or networking are all critical. It would be best if you were prepared because any discussion could lead to a good business opportunity.

We’ve finally made it to the finish line. If you’ve read this far, we’re confident that it will assist you in forming your LLC and achieving success. If you follow all of the steps, you’ll be ready to start and develop your business in no time.

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