You have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.
And we’re not talking about renting office space or paying employees — before you sell a single product, there are startup costs associated with launching an LLC in Illinois.
Make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common Illinois startup fees here.
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Overall Illinois LLC Formation Costs
LLC Name Reservation Fee
If you’re thinking about reserving a business name but you’re also ready to start your LLC, stop right there. A name reservation isn’t required for LLC formation in Illinois, so sometimes it’s more efficient to just file your Articles of Organization, which will register your name on the spot. But if your business isn’t ready yet and you want to protect that perfect name, a reservation is quite helpful. It’s $25 for a nonrenewable 90-day hold.
To clarify, most states don’t require name reservations, and they’re rarely necessary. If you’re concerned about someone else registering the name you want, you could opt to simply form your LLC instead of reserving the name.
Whether you reserve your business name or not, you should always perform an Illinois business name search to make sure the name you want is available.
Articles of Organization Fee
This is the big one, the most important (and most expensive) form that you’ll file to start your Illinois LLC. The Illinois Secretary of State won’t officially recognize your business until you’ve successfully filed the Articles of Organization. The filing fee is $150 for hard copy filings. If you’re in a hurry and need to expedite the process, that’s an additional $100. In case you’re fretting about the cost, know that this is a one-time filing, so as long as it’s accepted, you won’t have to pay it again.
The information you’ll need to file your Articles of Organization includes the official business name of your LLC, your principal business address, the effective date of your LLC formation, the name and address of your registered agent, a brief description of the nature of your LLC’s business, your LLC’s dissolution date (optional), the names and addresses of each LLC manager (or each LLC member with management responsibilities), the date, and the name, address, and signature of your LLC organizer.
Before we move on, we’ll mention that Illinois also allows series LLCs. However, if you’re forming an Illinois series LLC, you’ll need to use a specialized version of the Articles of Organization, along with a separate form known as the Certificate of Designation. For more information, take a look at our in-depth article on this topic.
You may not need a business license in Illinois. Or, you may need several. It all depends on the type and location of your business. For example, someone looking to open a brewery would need to apply for a Liquor Manufacturing License. Each city also has its own licensure requirements, so you’ll need to check with your local government to see if you might need additional licenses. Costs vary depending on the license.
What are some of the most commonly required business licenses for Illinois LLCs? If your business operates in a regulated industry, you will probably need some sort of professional license to operate in compliance with state law. On the municipal level, things like alarm permits, building permits, and zoning permits are all very common.
LLC Formation Service
Starting an LLC in Illinois can be a complicated and time-consuming process. If you want to spend less time on paperwork and more time planning your business, you might opt for an Illinois LLC service. These services take care of the registration process for you, so you don’t have to spend time on research, paperwork, and filings.
Most of these services (which are often frequently used LegalZoom LLC alternatives) offer LLC registration services like Articles of Organization filing, tax consultations, and phone/email support for a flat rate, with options to pay more for premium packages with premium services like Employer Identification Numbers, operating agreements, and expedited filing.
Registered Agent Service
Appointing an Illinois registered agent is an important part of your LLC formation process. Your registered agent is responsible for handling sensitive legal and tax documents and keeping your business compliant with Illinois business law. In short, you need an agent you can trust.
While you can be the registered agent for your own LLC, this puts pressure on you to keep up with business filings and potential legal disputes. Sometimes it’s better to hand off that responsibility to a professional. A registered agent service ensures that your annual reports and other forms are filed efficiently, saving you from the penalties of delinquent filings and the stress of having to do it yourself.
If you have questions or concerns about the LLC formation process or if it’s the best business structure for you, sometimes it’s best not to take chances and consult an attorney. They’re not cheap, but they can provide essential business advice, professional filing assistance, and peace of mind.
Some attorneys offer free consultations (usually 30-60 minutes) but will charge by the hour after that. On average, business attorneys charge between $150-350 per hour. Some will offer a flat rate for setting up an LLC, which can range from $500-2,000.
Cost variations depend on the experience and location of the lawyer. There are a lot of lawyers to choose from so, to make sure you’re finding the right fit, take advantage of resources like Avvo. Avvo is an online database of lawyers from every state, so you can sort them by location, rates, specialties and more. It will help you in determining the right Illinois business attorney for your LLC.
If you don’t want to go digging for your own attorney, we compiled the following list of highly rated business lawyers in Illinois. All of these attorneys are primarily focused on the business world, they all receive five-star ratings from clients, and they all have excellent Avvo ratings.
Foreign Qualification Fee
This only applies if your LLC was formed in another state and is now expanding into Illinois. If this describes your LLC, you will file an “Application for Admission to Transact Business” instead of the Articles of Organization.
All foreign business entities are required to foreign qualify in Illinois, or they could incur some pretty severe penalties. Like the Articles of Organization, the Application for Admission isn’t cheap — it carries a $150 price tag. But also like the Articles of Organization, you only have to pay it once.
LLC Annual Fees
To help keep its business records up to date the state of Illinois requires all of its businesses to submit annual reports. These are due by the first day of your LLC’s “anniversary month,” the month in which it was formed. There is a filing fee of $75 with an expedited service option for an additional $50, and you can count on making those payments every year. Annual reports are available to file online or with a hard copy.
The information required to file your annual report includes the name of your LLC, the name and address of your registered agent, the jurisdiction where you originally formed your LLC, the date you organized your LLC in Illinois, your principal business address, the names and addresses of all managers (or all members with management authority), the date, your name, and your signature.
If you’d like more information on the Illinois LLC annual report, consult our full article on this topic!
By default, LLCs are classified as “pass-through” entities, which means that the LLC itself doesn’t file a tax return — its members simply file their own personal taxes. Plus, Illinois doesn’t impose a “franchise” or “privilege” tax on LLCs. However, it does require LLCs taxed as S corporations or partnerships to pay a “Personal Property Tax,” 1.5% of your net income. On top of that, there are some other specific circumstances that may yield additional taxes for your LLC.
- If your LLC is a resale business, it needs a Retailer’s Occupation Tax Number.
- If your LLC is a wholesale business, it needs a Resale Certificate Number.
- If your LLC hires employees, it will need to pay an unemployment insurance tax and a payroll tax. It also must obtain an Unemployment Compensation Number.
- If your LLC is set up to be taxed like a corporation, it will pay the 7% corporate income tax and a higher Personal Property Tax, 2.5% of its net income.
Visit the Illinois Department of Revenue website for more information on business taxes.
What if I Don’t Pay?
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Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.
Let’s say you forget to file your annual report by the due date. This will cause you to lose your good standing with the state, and your business will be labeled “delinquent.” The same goes for registered agent changes, paying necessary taxes, and other business filings. For annual reports specifically, there is also a $100 late fee if the report isn’t filed within 60 days of the due date, and if the business still hasn’t filed after another 120 days, it will be administratively dissolved.
Aside from the threat of dissolution, being labeled “delinquent” isn’t a good time. The Secretary of State’s office will not process any new filings by a delinquent business. Further, delinquent businesses cannot obtain a Certificate of Good Standing, which you’ll need if you want to foreign qualify in other states, apply for business loans, renew your professional licenses, and more.
Planning Your Expenses
By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in Illinois.
Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees — like annual reports — so your business doesn’t fall out of good standing.
Key Steps for Starting an Illinois LLC
- The first step to forming an Illinois LLC is to come up with a good name for your business. You’ll want to make sure the name you want is still available and hasn’t already been claimed by another business, so you’ll need to search the state’s business database to verify its availability.
- Next, you’ll need to choose your registered agent. While you can legally serve as your own registered agent in Illinois, this role can actually be more of a hassle than you might expect. That’s why we always recommend hiring a reputable registered agent service that can handle the responsibility of this position on your behalf.
- The third step involves the preparation and filing of your Articles of Organization. You’ll need to fill out the paperwork and pay a $150 fee. Once the state processes this document, your LLC will be officially open for business!
- That’s not the end of the road for the startup process though, as you’ll also need to create an operating agreement for your LLC. There is no legal requirement for Illinois LLCs to have written operating agreements, but it’s still an extremely important element of any LLC. The operating agreement is an internal document that outlines how your LLC will operate, and there are several aspects of this document that can prevent messy ownership disputes down the line.
- You will also need to acquire a federal tax ID number (also known as an EIN, or employer identification number). This is essentially a Social Security number for your business, as it is a nine-digit code used to file taxes, hire employees, open business banking accounts, and more.
- Next, you’ll need to register for any relevant taxes with the Illinois Department of Revenue, and also obtain all licenses and permits that apply to your business type. Keep in mind that, depending on the nature of your business, you might require licenses from the federal, state, county, and municipal governments.
Once you’ve finished all of these steps, you’re ready to operate a compliant business entity with the state of Illinois!
Key Steps for Maintaining an Illinois LLC
After you’ve completed all of the items in the previous section, you’ll need to focus on maintaining your LLC. The first step in this process is to open a business bank account. This will help you keep your business and personal expenses entirely separate, and it will also help immensely with your accounting and taxation responsibilities.
You should also keep detailed records of every financial transaction that takes place with your LLC. This means maintaining a file of invoices for every purchase and sale you make, along with information regarding your employees or contractors and the work they perform for your business.
As we already mentioned, annual reports are a key component of LLC maintenance in this state, and there are harsh financial penalties for delinquent reports. Additionally, you might want to hold an annual meeting to discuss goals and priorities for your LLC, although this is an optional step.
Frequently Asked Questions
Before we wrap things up, let’s take a look at some of the most common questions we hear from readers regarding the LLC formation process in Illinois.
What are the state business tax rates in Illinois?
If your LLC is taxed like a sole proprietorship or general partnership, you’ll need to pay taxes on your business income at the state’s personal income tax rates (4.95%). If your LLC is taxed like a corporation, you’re required to pay Illinois’ 7% corporate income tax on your business revenue. Additionally, LLCs taxed as S corporations or partnerships need to pay a 1.5% personal property tax, while LLCs taxed as C corporations pay 2.5%.
How quickly does Illinois process LLC formations?
The Secretary of State should be able to process your LLC’s formation within 7-10 business days.
How many small businesses are there in Illinois today?
The state of Illinois is home to more than 1.2 million small businesses. Entrepreneurs of all backgrounds and business types find that Illinois is a great place to own and operate a small business.
What are the top small business resources and websites in Illinois?
The Illinois chapter of the Small Business Development Center is a great place to start, as they offer a wide variety of tools and resources for Illinois LLCs. The U.S. Small Business Administration’s Illinois District Office is another valuable resource, and the state’s small business resource page also has plenty of good info.
Should I form my LLC in Illinois, or choose a state like Delaware or Wyoming?
Some people like to form their LLCs in states with favorable legal settings. For instance, Delaware is often seen as the most business-friendly state, as it has an entire court system that’s dedicated solely to business matters. As for Wyoming, this state has some of the most generous anonymity laws for LLC ownership.
However, for most people, your best option is to simply form your business in your home state. Forming in a different state can be a tremendous hassle, and it can add some unnecessary complexity to tax issues as well.
Cost to Start an LLC in All 50 States
We break down the LLC costs in detail in all 50 states. View all of our State LLC Costs guides below.