The Illinois Limited Liability Company Act, codified at 805 ILCS 180, is the state statute that governs how an LLC is formed, managed, and wound down in Illinois. It gives owners corporate-style liability protection with partnership-style flexibility, and it sets the default rules that apply whenever your operating agreement is silent. If you are forming or running an Illinois LLC, the Act controls the paperwork you file, the duties members and managers owe each other, how new owners come in and existing ones leave, what personal creditors can reach, and the annual reporting that keeps the company alive.
Forming the LLC
An Illinois LLC comes into existence when the Secretary of State accepts Form LLC-5.5, the Articles of Organization filed under 805 ILCS 180/5-5. The name must include “Limited Liability Company,” “L.L.C.,” or “LLC,” must not use terms like “Corporation,” “Inc.,” or “Limited Partnership,” and must be distinguishable from every other LLC and corporation already on file.1Illinois General Assembly. Illinois Code 805 ILCS 180/1-10
The Articles also have to state the principal place of business (the address does not need to be in Illinois), a business purpose (which can be as broad as “any lawful business”), the name and Illinois address of a registered agent, the names and business addresses of any managers and of members with management authority, the duration (perpetual unless you say otherwise), the organizer’s information, and a confirmation that the company has at least one member at filing. Optional provisions on internal affairs, like transfer restrictions, can be included in the Articles instead of leaving them for the operating agreement.2Justia. Illinois Code 805 ILCS 180 Article 5 – Organization
The filing fee is $150, and $100 more buys expedited processing within 24 hours. You can file online through the Secretary of State or mail the form to the Department of Business Services in Springfield.3Illinois Secretary of State. Limited Liability Company Publications and Forms Once accepted, the file-stamped Articles are conclusive evidence (except in a challenge by the state itself) that the LLC was properly formed. The company’s existence begins on the filing date, or on a later date you specify, up to 60 days out.4Illinois General Assembly. Illinois Code 805 ILCS 180/5-40
The Operating Agreement and What the Act Won’t Let You Waive
Illinois does not require you to file an operating agreement with the state, but that document is where most of the real governance happens. It controls how profits and losses are split, how members vote, what triggers a mandatory buyout, and how the company dissolves. Where the operating agreement is silent, the Act’s default rules fill the gap, and those defaults are not always what you would choose.5Justia. Illinois Code 805 ILCS 180 Article 15 – Management
The Act draws hard limits on how far the operating agreement can go. It cannot eliminate a member’s fiduciary duties, though it can carve out specific activities that will not violate those duties as long as the carve-outs are reasonable. It cannot strip away a member’s right to access company records, cannot remove the power of judicial expulsion for serious misconduct, and cannot eliminate the obligation of good faith and fair dealing. A single-member LLC’s operating agreement can be as simple as a written document signed by the sole owner.
Member-Managed vs. Manager-Managed
An Illinois LLC is member-managed by default unless the operating agreement provides otherwise. This trips people up: the management structure is set by the operating agreement, not by the Articles of Organization, even though the LLC-5.5 form asks you to list managers.5Justia. Illinois Code 805 ILCS 180 Article 15 – Management
In a member-managed LLC, every owner has equal rights in running the business. Each member can sign contracts, hire employees, and handle routine decisions, with ordinary matters decided by a majority vote of the members. In a manager-managed LLC, authority shifts to one or more designated managers who do not have to be members. The managers run daily operations; members who are not managers move into a more passive investor role. A majority of the members appoints or removes managers, and each manager serves until a successor is elected or the manager resigns or is removed.6Illinois General Assembly. Illinois Code 805 ILCS 180/15-1
Fiduciary Duties Members and Managers Owe
Managing members in a member-managed LLC and managers in a manager-managed LLC owe two core duties: loyalty and care. In a manager-managed company, a member who is not also a manager owes no fiduciary duties to the company simply by being an owner. That distinction matters.
The duty of loyalty has three parts. You must turn over to the company any profit or benefit you get from conducting company business or using company property. You must deal fairly with the company when your personal interests are on the other side of a transaction. And you cannot compete with the company while it is still operating.5Justia. Illinois Code 805 ILCS 180 Article 15 – Management
The duty of care is narrower than most people expect. You are liable only if your conduct rises to gross negligence, recklessness, intentional misconduct, or a knowing legal violation. A bad business decision that loses money is not enough by itself. Courts apply a business judgment presumption: as long as you acted in good faith, with reasonable care, and with an honest belief you were acting in the company’s best interest, the decision stands even if it turned out poorly.
On top of these duties, every member and manager is subject to the implied covenant of good faith and fair dealing. Even when you have the legal right to take an action, you cannot exercise it dishonestly or in a way designed to deprive another member of the benefits they bargained for. Courts look closely at this standard when a controlling majority takes actions that disproportionately harm minority members.
Adding Members and How Members Leave
After the LLC is running, a new person becomes a member in one of three ways: the operating agreement spells out an admission process, all existing members consent, or the person acquires an interest through a merger or similar statutory transaction. When the operating agreement is silent, unanimous consent of the current members is required.7Justia. Illinois Code 805 ILCS 180 Article 10 – Members Choosing business partners is not a majority-rules question unless you specifically agree to make it one.
Someone who acquires a financial interest but is not admitted as a member (a purchaser, or a judgment creditor) gets only the right to receive distributions. They cannot vote, access company records, or participate in management. The distinction between a full member and a mere transferee is one of the strongest protections in the Act.
A member leaves through dissociation. The statute recognizes voluntary withdrawal, transfer of the entire interest, expulsion under the operating agreement, unanimous expulsion by the other members when doing business with the member becomes unlawful or the member has transferred substantially all of the interest, judicial expulsion for wrongful conduct or persistent breach, death or the appointment of a guardian, and bankruptcy or the appointment of a receiver.8Justia. Illinois Code 805 ILCS 180 Article 35 – Dissolution and Dissociation
In a member-managed LLC, dissociation is wrongful only when it violates an express provision of the operating agreement, and a member who leaves wrongfully is liable to the company and the other members for the damages the departure causes; those damages can be offset against distributions the departing member would otherwise receive. In a manager-managed LLC, a member generally does not have the power to dissociate before the company dissolves unless the operating agreement grants that right.
Charging Orders and Personal Creditors
If a member is personally sued and a creditor wins a judgment, the creditor cannot seize LLC assets or force a liquidation. The Act designates the charging order as the creditor’s exclusive remedy for reaching a member’s interest. The order directs the LLC to pay the creditor any distributions that would otherwise go to the debtor-member.9Justia. Illinois Code 805 ILCS 180 Article 30 – Assignment of Membership Interests
The creditor gets only financial rights. They cannot vote, attend meetings, or take part in management. A court can appoint a receiver over the distributions and, if necessary, order a foreclosure sale, but even the buyer at foreclosure obtains only the distributional interest and does not become a member. The debtor-member or the LLC itself can extinguish the charging order at any time by paying the judgment in full.
Annual Reports and Staying in Good Standing
Forming the LLC is not the end of your paperwork. Every Illinois LLC must file an annual report on Form LLC-50.1. The report is due within the 60 days before the first day of your anniversary month, which is the month your Articles were originally filed. The filing fee is $75, with an optional $50 expedited fee.3Illinois Secretary of State. Limited Liability Company Publications and Forms
The report updates the state on the company’s current name, registered agent and office address, principal place of business, and the names and addresses of managers or members with management authority.10Justia. Illinois Code 805 ILCS 180 Article 50 – Fees and Other Matters If the Secretary of State finds the report does not conform to statutory requirements, it goes back for corrections, and no late penalties apply as long as you return the corrected version within 60 days of the original due date. Miss the deadline entirely and the LLC can be administratively dissolved, stripping its authority to do business until reinstatement. The state does not always send aggressive reminders, so this catches people off guard.
Federal Tax Treatment Is Separate
Illinois law creates the LLC as a legal entity, but the IRS does not treat “LLC” as a tax classification. A single-member LLC is a disregarded entity by default, with income and expenses flowing to the owner’s personal return. A multi-member LLC is treated as a partnership and files Form 1065. Either can elect corporate (C-corp or S-corp) tax treatment by filing Form 8832, and the election generally cannot take effect more than 75 days before or 12 months after the filing date.11Internal Revenue Service. Limited Liability Company (LLC)
Nearly every LLC needs a federal Employer Identification Number, even without employees, to open a business bank account, file returns, and hire workers. The IRS issues EINs for free online. Form the LLC with the state first, because applying for the EIN before the entity legally exists can cause delays. The IRS limits applications to one per responsible party per day.12Internal Revenue Service. Apply for an Employer Identification Number (EIN)
Beneficial Ownership Reporting
The federal Corporate Transparency Act originally required most LLCs to file Beneficial Ownership Information reports with FinCEN. As of March 2025, FinCEN issued a revised rule exempting all domestic reporting companies from filing initial reports or updating previously filed ones, and Treasury has stated it will not enforce penalties against U.S. citizens or domestic companies under either the old or revised rules.13Federal Register. Beneficial Ownership Information Reporting Requirement Revision and Deadline Extension Foreign reporting companies remain subject to BOI reporting but are exempt from reporting the information of any U.S. person who is a beneficial owner. This area has been in flux, and the domestic exemption could change if FinCEN issues further rulemaking. For now, a standard Illinois LLC formed by U.S. persons has no BOI filing obligation.