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What is the process for forming a limited liability company (LLC) in Illinois, and what are the benefits and drawbacks of this type of business structure?

Picture of Chris Battis By   ·  1 minute read

The process for forming a limited liability company (LLC) in Illinois involves the following steps:

  1. Choose a name for your LLC - This name must be unique and not already in use within the state of Illinois.
  2. File Articles of Organization - This document establishes your LLC as a legal entity and includes the name of your company, the purpose of your company, and the names and addresses of your LLC’s members.
  3. Obtain an Employer Identification Number (EIN) - This is a unique nine-digit number that identifies your LLC for tax purposes. You can obtain an EIN through the IRS website.
  4. Create an Operating Agreement - An Operating Agreement outlines the financial and operational structure of your LLC, such as the rules for distributing profits and the responsibilities of each member.

The benefits of forming an LLC include:

  1. Limited liability - Members are not personally liable for the debts or obligations of the company beyond their initial contribution.
  2. Pass-through taxation - LLCs are not taxed at the entity level. Instead, profits and losses are passed through to the members and are only taxed on their personal income tax returns.
  3. Flexible management structure - Unlike corporations, LLCs do not have to adhere to a formal management structure, allowing for more flexibility in decision-making.

The drawbacks of an LLC include:

  1. Formality requirements - While LLCs are less formal than corporations, they still require certain formalities such as conducting annual meetings and keeping accurate records.
  2. Difficulty raising capital - LLCs are typically not as attractive to investors as corporations, which may make it difficult to raise capital.
  3. Self-employment tax - Members of an LLC are considered self-employed and must pay self-employment taxes on their share of the profits.

It is important to note that this advice is intended for general informational purposes only and should not be relied upon as a substitute for legal advice from a licensed attorney. If you have questions about your specific situation or the formation of your LLC, it is recommended that you consult with an experienced attorney.