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What steps do I need to take to form a limited liability company (LLC) in Illinois, and what are the advantages of doing so?

Picture of Chris Battis By   ·  2 minute read

To form a limited liability company (LLC) in Illinois, follow the steps below:

  1. Choose a Name for Your LLC: Your LLC must have a unique name that is not currently in use by another LLC in Illinois. You may search the name availability on the Illinois Secretary of State website.
  2. File Articles of Organization: The next step is to file Articles of Organization with the Illinois Secretary of State. The form requires information about the LLC's name, registered agent, and business address.
  3. Create an Operating Agreement: An Operating Agreement is a legal document that outlines the ownership and operating procedures of the LLC. It is not required by Illinois law, but it is highly recommended to create one.
  4. Obtain an Employer Identification Number (EIN): An EIN is a unique number assigned by the Internal Revenue Service (IRS) that identifies your LLC for tax purposes. You can apply for an EIN online through the IRS website.
  5. Obtain Necessary Business Permits/Licenses: Depending on your business activities, you may need to obtain additional permits and licenses from the state or local government.

Advantages of forming an LLC in Illinois:

  • Limited Liability: As the name suggests, LLCs provide limited liability protection to their owners. This means that the owners are not personally liable for the debts and obligations of the LLC. Their personal assets, such as homes, cars, and bank accounts, are protected from business creditors.
  • Flexible Taxation: LLCs have the flexibility to choose how they will be taxed. By default, an LLC is taxed as a pass-through entity, which means that all profits and losses are passed through to the owners' individual tax returns. However, LLCs can choose to be taxed as a corporation if desired.
  • Easy to Form and Manage: Compared to other business structures, LLCs are relatively easy to form and manage. They require less paperwork and formalities, and the owners have more flexibility in how they run the business.

Limitations and Exceptions:

  • Limited Liability: While LLCs provide limited liability protection, there are some limitations to this protection. For example, if the owners personally guarantee a loan or commit fraud, they may still be held personally liable for the LLC's debts.
  • Annual Fees and Requirements: In Illinois, LLCs are required to pay an annual fee and file an annual report with the Secretary of State. Failure to do so can result in fines and penalties.

Suggestions for Further Action:

  • Seek Legal Advice: While this information is intended to provide a general overview of forming an LLC in Illinois, it is important to note that specific legal requirements and considerations may vary depending on your unique circumstances. It is always a good idea to consult with a licensed attorney before forming an LLC.
  • Obtain Business Insurance: While LLCs provide limited liability protection, it is still important to obtain business insurance to further protect your business assets and operations.