How to Start an LLC in Illinois: Step-by-Step From an Attorney-CPA

Limited liability companies are the usual choice for new Illinois businesses: liability protection, a choice of tax treatment and light administration. This guide walks through how to start an LLC in Illinois in ten steps, then how it is taxed, what keeps it in good standing, where the liability shield stops, and what the Illinois Limited Liability Company Act (805 ILCS 180) does differently.

1. How to start an LLC in Illinois in ten steps

The filing itself takes an afternoon. The decisions around it are what the steps are about.

Step 1 of 10 Choose a name and check it

An Illinois LLC name must contain "limited liability company", "L.L.C." or "LLC" (805 ILCS 180/1-10) and be distinguishable from every entity already on the Secretary of State's records; search it in the business entity database before you do anything else. Names that suggest a bank, an insurer or a licensed profession need the regulator's approval, a low-profit LLC must put "L3C" in its name, and a name can be reserved for $25. The name in the Articles is the legal name; a trading name is an assumed name, registered with the Secretary of State after formation for $150 per five-year period.

Step 2 of 10 Appoint a registered agent

Every Illinois LLC must continuously maintain a registered agent and registered office in Illinois: a person or company at a street address, not a post-office box, that accepts lawsuits and official notices, including the annual-report reminder. The address becomes public record. Be your own agent only if you will reliably be at that address during business hours for years; otherwise use a commercial agent, and either way update the Secretary of State ($25) the week the address changes. A notice of delinquency sent to a former address is how most administrative dissolutions begin.

Step 3 of 10 Decide who manages and who owns

The Articles ask whether the LLC is member-managed (every owner can act for the company) or manager-managed (only the named managers can). A single-owner LLC is almost always member-managed; where one person runs the business and others have invested or hold interests for estate reasons, manager-managed keeps the authority clear. Fix the ownership percentages now too; they drive Step 6 and Step 7.

Step 4 of 10 File Articles of Organization (Form LLC-5.5)

File online through the Secretary of State's Department of Business Services. The Articles state the LLC's name, the registered agent and office, the principal place of business, the purpose, the duration (usually perpetual), the organizer, and whether the company is manager-managed. The fee is $150, or $400 for an LLC with the power to establish series (805 ILCS 180/37-40); expedited processing is $100 more. The LLC exists when the Secretary of State files the Articles; keep the filed copy, because the bank will ask for it in Step 9.

An LLC that will provide a service licensed by the Illinois Department of Financial and Professional Regulation — medicine, dentistry, accounting, architecture, engineering and others — must instead be organized under the Professional Limited Liability Company Act (805 ILCS 185) and registered with the Department before opening (805 ILCS 180/1-25); a law firm registers with the Illinois Supreme Court under Rule 721. The business formation page covers the professional entities.

Step 5 of 10 Get an EIN from the IRS

Apply for the employer identification number on the IRS website: free, a few minutes, issued immediately on approval. A multi-member LLC, an LLC with employees, and an LLC electing corporate tax treatment must have one; a single-member LLC with no employees may use the owner's Social Security number, but a bank account and clean vendor paperwork are reason enough to get an EIN anyway.

Step 6 of 10 Sign an operating agreement

Illinois does not require a written operating agreement; the Act recognizes one that is oral, in a record, implied or any combination (805 ILCS 180/1-5 and 15-5). That is precisely why you should sign a written one: without it the Act's default rules decide how profits are shared, who can bind the company, how an interest transfers and what happens on a member's death. Cover contributions, percentages, voting, distributions, management authority, new members, transfer restrictions, buy-out triggers and price, and dissolution. If the LLC will elect S-corp status, distributions must be pro rata by ownership; a partnership-style special allocation creates a second class of stock and ends the election. Even a single-member LLC benefits from a short agreement documenting the separation between owner and company.

Step 7 of 10 Decide how the LLC will be taxed

By default the IRS treats a single-member LLC as a disregarded entity (Schedule C) and a multi-member LLC as a partnership (Form 1065 with K-1s). An LLC can elect C-corporation treatment on Form 8832 or S-corporation treatment on Form 2553; an LLC that files Form 2553 does not also need Form 8832. The S election must be filed within two months and fifteen days of the start of the tax year it is to cover, so a new LLC that wants S status in year one has a short window after formation, and it pays only when the profit above a reasonable owner salary is large enough to cover payroll, a separate return and the Illinois 1.5 percent replacement tax. The S-corp election page has the deadline rules, an illustrative break-even and the reasonable-compensation requirement; Section 2 below covers the Illinois side.

Step 8 of 10 Register with the Illinois Department of Revenue and IDES

If the LLC will sell goods or taxable services, or withhold Illinois income tax from employees, it must register with the Illinois Department of Revenue before making sales or hiring. Register through MyTax Illinois using Form REG-1; online applications are processed in about one to two business days. An LLC that becomes an employer must also register with the Illinois Department of Employment Security within 30 days of starting up, which can be done in the same MyTax Illinois session.

Step 9 of 10 Local licenses, bank account and insurance

A business inside the City of Chicago needs a license from the Department of Business Affairs and Consumer Protection before it opens; suburban villages have their own license or registration rules. The Cook County Clerk's assumed-name registration ($50) applies to sole proprietors and partnerships, not to LLCs. Open the business bank account with the filed Articles, the EIN letter and the operating agreement, and run every dollar of the business through it; commingled funds are the most common fact in cases where a court disregards an LLC. Arrange general liability insurance and, with employees, workers' compensation.

Step 10 of 10 Calendar the annual report and the rest

The annual report (Form LLC-50.1, $75, plus $50 per series) is due before the first day of the LLC's anniversary month every year and can be filed during the preceding 60 days. Filing late costs a $100 penalty, and an LLC that ignores the notice of delinquency is administratively dissolved and pays $200 plus the back reports to be reinstated; the annual report article covers the sequence. Put the date in the same calendar as the Form 2553 deadline, the Illinois return due date and the assumed-name renewal. As of October 2026 a U.S.-formed LLC has no federal beneficial ownership (BOI) report to file; the corporate records page tracks the status, which has changed before.

2. How an Illinois LLC is taxed

An LLC does not have a tax status of its own; it chooses one. A single owner reports on Schedule C, pays self-employment tax on the net profit, and pays Illinois tax at 4.95 percent on his or her own return. Multiple owners default to partnership treatment: each member pays income and self-employment tax on his or her share whether or not cash is distributed, and the LLC itself files Form IL-1065 and pays the 1.5 percent personal property replacement tax. An S election converts the owner into an employee for part of the profit — the reasonable salary carries payroll tax; distributions above it do not — at the cost of payroll, a separate return (Form 1120-S and IL-1120-ST) and the same 1.5 percent replacement tax. C-corp treatment is rare for a small Illinois LLC because of the 9.5 percent combined Illinois rate and the second tax on dividends, but it has a place where profit will be retained or investors require it. The entity selection page works through the numbers.

3. Staying in good standing

Beyond the annual report, keep the Articles and amendments, the operating agreement and amendments, a membership schedule, records of contributions and distributions, written consents for significant decisions (admitting a member, borrowing, buying property, electing S status), tax returns and financial statements, and the IRS acceptance letter (CP261) if S status was elected. The Act imposes no minutes requirement on LLCs, but lenders, buyers and courts all ask for the paper trail. Show the full legal name with "LLC" on contracts and invoices, and put the annual-report date and the tax deadlines in a calendar that someone other than the founder also sees; the corporate records and compliance page has one for LLCs and corporations.

4. Liability protection and where it stops

Members of an Illinois LLC are not personally liable for the company's debts solely by reason of being members, and skipping internal formalities is not by itself a ground for personal liability (805 ILCS 180/10-10). The shield is not absolute. Illinois courts can disregard an entity where owner and company are not really separate — commingled funds, undercapitalization, personal expenses paid by the company, no separate books — and where respecting the entity would promote injustice or fraud. Personal guaranties signed for a lease or a loan are outside the shield entirely, as is the owner's own negligence. Keep separate accounts, sign as the LLC, keep the capital adequate, and read the guaranty clause before signing a lease.

5. Features particular to Illinois LLCs

• Perpetual duration. An Illinois LLC exists until it is dissolved; there is no fixed term to renew.
• Series. One LLC may establish separately shielded series for different assets, each with its own records and a $50 certificate of designation (805 ILCS 180/37-40); separate books are the price of the protection.
• Dissociation and death. A member is dissociated on death, on the appointment of a guardian, or on a judicial finding of incapacity (805 ILCS 180/35-45); the estate or heir becomes a transferee entitled to distributions but not to management rights unless the operating agreement or all other members admit it as a member (805 ILCS 180/30-10).
• Judicial dissolution. A court can dissolve an LLC on a member's application where the owners are deadlocked or the business cannot reasonably continue under the operating agreement.

6. Who uses an Illinois LLC, and for what

• Owner-operated businesses. Trades, restaurants, consultants and shops in the southwest suburbs: liability separation and the option to elect S status once profit justifies it.
• Rental real estate. Each property in its own LLC or series isolates one building's liabilities from the others; check the lender's consent before the deed is recorded.
• Professional services. Licensed professionals form a PLLC, owned only by licensed persons; the tax choices are the same.
• Family businesses. A manager-managed LLC lets a parent keep control while transferring economic interests to children over time, the starting point of business succession planning.

Questions people ask

How much does it cost to start an LLC in Illinois?

The Illinois Secretary of State charges $150 to file Articles of Organization for a standard LLC and $400 for an LLC that can establish series. Expedited processing is $100 more. Reserving a name in advance is $25, and an assumed-name registration is $150 for each five-year period, prorated in the first period. The EIN from the IRS is free. After formation the only recurring state fee is the $75 annual report (plus $50 per series). Professional fees for an operating agreement and tax election are in addition to those figures and are quoted separately.

How long does it take to form an LLC in Illinois?

Online Articles of Organization are processed by the Secretary of State in the normal course, and expedited processing is available for an additional $100. The EIN is issued the moment the online application is approved. Illinois Department of Revenue registration through MyTax Illinois takes roughly one to two business days; a paper registration takes several weeks (IDOR quotes four to eight). The slowest step is usually the operating agreement, because it requires the owners to decide things they have not yet discussed.

Is an operating agreement required in Illinois?

The Illinois Limited Liability Company Act does not require a written operating agreement; the Act recognizes an agreement whether it is oral, in a record, or implied. In practice the absence of a written agreement means the statute's default rules govern voting, profit sharing, transfers and what happens when a member dies or leaves. Banks, landlords and buyers will ask for the written agreement, and a multi-member LLC that intends to elect S-corp status needs one with pro-rata distribution terms. A single-member LLC should still have a short one to document the separation between owner and company.

Can I be my own registered agent in Illinois?

Yes, if you have a street address in Illinois — not a post-office box — where you can reliably receive legal papers during business hours. The registered agent's name and address are public record and appear on the Secretary of State's website. Owners who work from home and prefer privacy, or who are not at a fixed location during the day, use a commercial registered agent. Either way, the agent address must be kept current with a $25 filing whenever it changes; most administrative dissolutions begin with a notice sent to a stale agent address.

Does my Illinois LLC need an EIN?

An LLC with employees, more than one member, or an election to be taxed as a corporation must have an employer identification number. A single-member LLC with no employees can technically use the owner's Social Security number for federal tax, but almost every bank requires an EIN to open a business account and using one keeps the owner's number out of vendor paperwork. Apply on the IRS website; it is free, takes minutes, and the number is issued immediately. Beware of third-party sites that charge for the service.

General information as of July 17, 2025, revised October 5, 2026; not legal advice; laws change; consult a lawyer about your situation.