To start an LLC in Illinois, file Form LLC-5.5 (Articles of Organization) with the Secretary of State and pay the $150 filing fee.1Illinois Secretary of State. Limited Liability Company Publications and Forms You can submit it online in a single sitting. The filing itself is the easy part. The work that actually protects you happens around it: picking a name that will clear the state’s database, lining up a registered agent, writing an operating agreement, choosing how the IRS and Illinois will tax the business, and staying on top of the annual report every year after.
Pick a Name That Will Clear
Your LLC name must include “Limited Liability Company,” “L.L.C.,” or “LLC.”2FindLaw. Illinois Code Chapter 805 Business Organizations 180/1-10 – Limited Liability Company Name It also has to be distinguishable from every other entity already on file with the Secretary of State. Swapping a word or adding punctuation is not enough; the state rejects names that sit too close to an existing registration.
Search the Secretary of State’s business database before you commit.3Illinois.gov. Locate Registered Business Names It takes about a minute and saves you a rejected filing. If you plan to operate under a different name from the one on your Articles, you’ll register that assumed name separately after formation.
Set Up a Registered Agent
Every Illinois LLC has to continuously maintain a registered agent and a registered office in the state.4Illinois General Assembly. Illinois Code 805 ILCS 180/1-35 – Registered Office and Registered Agent The agent accepts legal documents on the company’s behalf: lawsuits, government notices, tax correspondence. The agent has to be an Illinois resident or a business entity authorized to operate in Illinois.
The registered office has to be a physical street address in Illinois where someone is available during normal business hours. P.O. boxes and virtual mailboxes don’t qualify. You can be your own agent if you have a qualifying Illinois address, but many owners hire a commercial service instead. The trade-off is money for privacy and reliability: your home address stays off public records, and you won’t miss service of process because you were out. Commercial agent services typically run $100 to $300 a year.
If your agent resigns, you have 60 days to appoint a replacement and update your records with the Secretary of State.4Illinois General Assembly. Illinois Code 805 ILCS 180/1-35 – Registered Office and Registered Agent Missing that window puts your good standing at risk.
Choose Management Structure and Write an Operating Agreement
Illinois LLCs are either member-managed or manager-managed, and you declare which on the Articles of Organization. In a member-managed LLC, every owner can bind the company to contracts and make business decisions. In a manager-managed LLC, only designated managers hold that authority, which is useful when you have passive investors who shouldn’t be signing deals.5DuPage County Bar Association. Member and Manager Authority After the 2017 Illinois Limited Liability Company Act and Its Effect on Real Estate Transactions
The operating agreement is your LLC’s internal rulebook. It spells out how profits get divided, how votes work, what happens when a member wants to leave, and who has authority over day-to-day decisions. Illinois law says members “may” enter into an operating agreement.6Illinois General Assembly. Illinois Code 805 ILCS 180/15-5 – Operating Agreement It isn’t required. Skipping it is still a mistake, because without one the default rules in the LLC Act govern your company, and those defaults may not match what you and your co-owners intended.
Multi-member LLCs should especially address what happens when a member dies, becomes disabled, divorces, or wants to sell. Buyout provisions keep an ex-spouse or a member’s creditor from suddenly holding a stake in your business. Single-member LLCs still benefit from a written agreement because it reinforces the separation between owner and entity, which is the whole reason to form an LLC in the first place. Document each member’s initial capital contribution too; those records fix ownership percentages if there’s ever a disagreement. The operating agreement never gets filed with the state, but keep a signed copy with your business records.
File the Articles of Organization
Form LLC-5.5 is the document that actually creates the LLC. File it online through the Secretary of State’s portal or mail a paper copy to the Department of Business Services in Springfield.7Illinois Secretary of State. LLC Articles of Organization The filing fee is $150.
The form asks for:
- LLC name, including the required designator
- Registered agent name and Illinois registered office address
- Principal place of business, which can match the registered office or not
- Whether the LLC is member-managed or manager-managed
- Purpose, which can be as broad as “any and all lawful business”
- Duration, which defaults to perpetual unless you specify an end date
- Organizer names and addresses
Expedited processing costs an extra $100 and gets your filing reviewed within 24 hours.1Illinois Secretary of State. Limited Liability Company Publications and Forms Standard processing runs anywhere from a few business days to several weeks depending on the Secretary of State’s workload. Once approved, you receive a Certificate of Organization. Keep a copy; banks and lenders will ask for it.
Get an EIN, Open a Bank Account, Handle Licenses
After formation, apply for a federal Employer Identification Number from the IRS. The EIN works like a Social Security number for the business. You need it to file taxes, open a bank account, and hire employees.8Internal Revenue Service. Employer Identification Number The application is free, takes about ten minutes on the IRS site, and the number is issued immediately.
With the EIN and Certificate of Organization, open a business bank account. Banks will ask for the formation documents, EIN confirmation, and operating agreement.9U.S. Small Business Administration. Open a Business Bank Account This isn’t optional housekeeping. Mixing personal and business money is one of the fastest ways to lose your liability protection: a court can pierce the veil and hold you personally liable if there’s no clear financial separation between you and the LLC.
Depending on your industry and location, local business licenses or permits may also apply. Municipal fees vary, and some Illinois cities require separate registration for home-based businesses, retail operations, or specific trades. Check with your city or county clerk to find out what applies.
How Your LLC Will Be Taxed
The IRS has no dedicated tax category for LLCs. Instead, your LLC defaults to a classification based on member count. A single-member LLC is a “disregarded entity,” and you report business income and expenses on Schedule C of your personal return. A multi-member LLC is treated as a partnership, filing Form 1065 as an informational return while each member reports their share of income on their individual returns.10Internal Revenue Service. LLC Filing as a Corporation or Partnership
Under either default, members pay self-employment tax on their share of net earnings. The rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare.11Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion applies to the first $184,500 of combined wages and self-employment earnings in 2026.12Social Security Administration. Contribution and Benefit Base The Medicare portion has no cap.
Electing S-Corp Treatment
If your LLC consistently earns more profit than you’d pay yourself as a reasonable salary, electing S-Corp status can shrink the self-employment tax bill. With S-Corp treatment, only the salary you pay yourself gets hit with payroll taxes; the remaining profit passes through as a distribution not subject to the 15.3%.
To make the election, file IRS Form 2553 within two months and 15 days of the start of the tax year you want it to apply to. For a new LLC, that window runs from the formation date. Miss it and the election won’t take effect until the following tax year unless you qualify for late-election relief. The election is a tax classification change only; your LLC stays an LLC under Illinois law.10Internal Revenue Service. LLC Filing as a Corporation or Partnership
The math doesn’t favor everyone. S-Corp status brings payroll obligations, and you’re required to pay yourself a reasonable salary before taking distributions. For LLCs with modest profits, payroll costs and added complexity can outweigh the tax savings. Talk to an accountant before making the election.
Illinois Replacement Tax
Illinois imposes a Personal Property Replacement Tax on partnerships, S-corporations, and trusts at 1.5% of net Illinois income.13Illinois Department of Revenue. Personal Property Replacement Tax A multi-member LLC taxed as a partnership owes it and files Form IL-1065 with the Illinois Department of Revenue. An LLC that elected S-Corp treatment files Form IL-1120-ST, and the 1.5% rate still applies.
Single-member LLCs taxed as disregarded entities generally don’t file a separate Illinois entity return; the income flows to the owner’s personal Illinois return. Once you add a second member or elect corporate treatment, the replacement tax kicks in. If you expect total Illinois tax liability above $500, quarterly estimated payments are required.
Keep the LLC in Good Standing
Every Illinois LLC must file an annual report to stay in good standing. The report updates the state on your current address, registered agent, principal place of business, and managers or members with management authority.14Illinois General Assembly. Illinois Code 805 ILCS 180/50-1 – Annual Reports The filing fee is $75.
The timing catches people off guard. Your report is due within the 60-day window before the first day of your LLC’s anniversary month. If you formed on June 15, the anniversary month is June, and the filing window runs from roughly early April through June 1. Miss the deadline and late penalties stack on top of the fee.
Ignoring the report entirely leads to a bigger problem. The Secretary of State places the LLC in delinquent status and eventually dissolves it administratively. Dissolution strips your liability protection and your legal authority to do business in the state. You can reinstate a dissolved LLC by filing an Application for Reinstatement and paying $200 plus all overdue annual report fees and penalties. Reinstatement works, but it’s slower and more expensive than just filing on time.
Extra Obligations If You Hire or Cross State Lines
Hiring employees triggers a stack of federal and state duties at once. You’ll need to register for federal unemployment tax if you pay $1,500 or more in wages during any calendar quarter or have at least one employee for any part of a day in 20 or more weeks during the year.15Internal Revenue Service. Topic No. 759 – Form 940 FUTA Tax Return Filing and Deposit Requirements You’ll also report new hires to the state’s directory of new hires, withhold federal income tax and FICA from paychecks, and comply with Illinois workers’ compensation requirements.
If your Illinois LLC operates in other states through a physical office, local employees, or regular in-person client meetings, you’ll likely need to register as a foreign LLC in those states. Common triggers include a warehouse or office, employees on the ground, and a steady revenue stream from activities in another state. Operating without foreign qualification can bring fines and cost you access to that state’s courts for enforcing your contracts.
One boundary worth knowing: the Corporate Transparency Act’s beneficial ownership reporting requirement no longer applies to LLCs formed in Illinois. Under a 2025 interim final rule, all domestic reporting companies are exempt from filing beneficial ownership information with FinCEN.16FinCEN.gov. FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons, Sets New Deadlines for Foreign Companies If your LLC is formed in Illinois and owned by U.S. persons, you have no FinCEN filing obligation.