The limited liability company (LLC) has been an incredibly popular business structure for decades, but in the grand scheme of things, it’s still a relatively recent addition to the American business landscape.
There are actually still new variations of the LLC popping up across the country, with the most popular one being the series LLC.
The series LLC is only available in certain states, including Illinois. A series LLC is a collection of LLCs that are grouped under one parent LLC. This enables businesses to separate different parts of the company into separate LLCs, allowing them to isolate the liabilities of each segment from the others.
Because the series LLC is still relatively new in some states, we get a lot of questions about what exactly the series LLC is, and how you can form one. That’s why we decided to write these articles, which break down how the series LLC formation process works in each state.
If you’re interested in forming a series LLC in Illinois, read on to find out how it’s done.
That said, if you’re looking for a time-tested way to protect yourself and personal assets as a business owner, the traditional LLC is the way to go. You can either form it yourself or hire an LLC service to handle the paperwork. See our LLC reviews for more info.
What Is a Series LLC?
Let’s start by briefly covering what a series LLC actually is. In general, a series LLC is exactly what it sounds like ― it’s a collection of LLCs that operate under the umbrella of a master LLC. While each LLC in the series is part of the larger company, this business structure also keeps each LLC financially insulated from the others. In theory, this means that a lawsuit against one of the LLCs should have no effect on the others in the series.
Each LLC in a series has the same limited liability protections that a standard LLC has, meaning that if you’re sued, creditors can only come after your business assets rather than pursuing your personal possessions. While a series LLC does still protect your personal car, house, bank accounts, etc., it also protects the other LLCs in the series from the lawsuit. In other words, creditors can only pursue the assets of one LLC, rather than the entire series.
How Can I Form a Series LLC in Illinois?
Choose a Name for Your Series LLC
The first step to forming any type of LLC is to first select a name for your new business. You should choose a name that is memorable, and also one that briefly describes what your business does, or what your organization stands for. You will also need to run a business name search to make sure your chosen name is available in Illinois, and isn’t already being used by another company.
Also, you’ll need to include either the phrase “limited liability company” or the letters “LLC” in your business name. Additionally, you cannot include any terms that refer to specific business types ― like “bank” or “hospital” ― unless you actually run one of those businesses, and you also can’t use any words that refer to other business types ― such as “incorporated” or “inc.”
Finally, it’s important to note that in Illinois, each segment of your series LLC must include the parent LLC’s name. However, each LLC in your series must have a different name from the others. For example, if your parent LLC is called “Scott’s Foods,” and you want to differentiate your fine-dining LLC from your fast-casual LLC, you could name these segments “Scott’s Foods Dining LLC” and “Scott’s Foods Fast LLC.”
For more info on naming an LLC ― whether that’s a series LLC or a traditional LLC ― check out our comprehensive guide to naming an LLC.
Designate a Registered Agent
Next, you’ll need to choose a registered agent for your series LLC. The registered agent must have an office located in Illinois, and they must be available to receive document deliveries from the state during all standard business hours.
You don’t need to worry about designating different registered agents for each segment of the LLC, as you can have the same registered agent for every LLC in the series if you want to.
Prepare and File the Articles of Organization
In most states that allow series LLCs, the same Articles of Organization document is used to form either a traditional or series LLC. However, Illinois actually has two separate versions of the Articles of Organization — the document for standard LLCs is Form LLC-5.5, while the version for a series LLC is Form LLC-5.5(S).
In addition, Illinois charges a much higher formation fee for series LLCs, as these entities pay $400 compared to just $150 for traditional LLCs. Still, Form LLC-5.5(S) is a relatively simple document that only requires some basic information about your business.
You’ll need to indicate what your business name will be, who your registered agent is, and where their registered office is located within Illinois. You will also need to identify all of your LLC members, decide what date you want your formation to take effect, and include the name, signature, and title of your LLC organizer.
Once you have this form ready, you can file it with the Illinois Secretary of State’s Department of Business Services, along with your $400 formation fee.
Prepare and File the Certificate(s) of Designation
Illinois has an additional step that’s required to form the actual LLC segments within the series, which is filing documents known as Certificates of Designation, or Form LLC-37.40. Illinois requires series LLC owners to file one of these certificates for each individual LLC within the series, and there is a $50 fee for each certificate you need to file.
Acquire an EIN
Next, you should obtain a federal tax ID number known as an Employer Identification Number (EIN) from the Internal Revenue Service for each LLC in your series. The EIN is essentially a Social Security Number for your business, as it is a nine-digit numerical code that you can use to identify your business on tax forms, and it also helps you open business bank accounts and hire employees.
It’s quite easy to get an EIN from the IRS. All you need to do is fill out the free form located on the IRS website, and you’re good to go. You will receive your number immediately upon filing.
Draft a Series LLC Operating Agreement
In Illinois, entrepreneurs are legally required to create an operating agreement for the parent LLC in a series, although there is no requirement to have separate operating agreements for each LLC within that series. The reason it’s a legal requirement is that the LLC agreement is the document that provides your business with the basis to establish each individual LLC in the series.
Beyond that, the LLC agreement is a vital document, because it describes many aspects of how your series LLC will operate. In this agreement, you’ll outline what the different segments of your series LLC are, indicate the roles of each member/owner, detail the owners’ voting rights, and explain the financial contribution and allocation plans.
You should also indicate whether you want your business to be managed by its members or by a manager, discuss how an owner can be replaced if necessary, and outline a dissolution procedure if you ever need to close up shop.
Create a Financial Infrastructure
It’s crucial for any LLC to open a business bank account, as this helps you maintain the separation of personal and business finances that is required of all formal business entities. However, there’s an extra layer to this step for series LLCs, as you’ll need to open a bank account for the series’ parent LLC, as well as for each of the separate LLC segments under its umbrella.
If you fail to open a separate bank account for each segment, you will run the risk of losing the isolated liability of each LLC in the series. You need to be able to prove that these segments are truly separate if you want to maintain the liability shields between them.
In addition, this would be a good time to either hire an accountant or purchase accounting software for your series LLC. For traditional LLCs that don’t have particularly complex accounting needs, it’s usually sufficient to use accounting software, but a series LLC is a bit more complicated, and we therefore prefer hiring an accountant to make sure everything is done correctly.
Obtain Licenses and Permits
There is no general business license required in the state of Illinois, but there are plenty of licenses and permits that are required for businesses in certain industries. Thankfully, the Illinois.gov website has a convenient resource for registration, licenses, and permits. This page also includes information on taxation, small business resources, and more.
Also, keep in mind that there are federal licenses for some industries, and you may also need to acquire licenses in your county or municipality.
Understand Maintenance Requirements
Illinois requires all LLCs (whether traditional or series) to file an annual report with the state. This report is where you keep the state updated regarding any changes made to your business since the previous year’s filing. In general, you’ll need to inform them of a change to your business name or address, the name or address of your registered agent, and any changes to your ownership group.
Illinois only requires series LLC owners to file one such report, as you do not need to file separate annual reports for each LLC within your series.
Can I Hire Someone to Form My Series LLC?
When forming a series LLC, you have three options. You can tackle the DIY route, you can hire an attorney, or you can use a reputable online business formation service. The DIY option can be quite the hassle, and hiring a lawyer is obviously very expensive. That’s why we prefer hiring a business formation service.
These companies provide convenience and peace of mind that you don’t get from the DIY route, and they’re also much cheaper than hiring a lawyer to form your business. However, compared to the dozens of services that form traditional LLCs, there aren’t nearly as many companies offering series LLC formations.
Fortunately, one of our favorite LLC formation providers does offer series LLC formations, and that’s Northwest Registered Agent. They will not only form your series LLC, but their industry-best registered agent service (included at no extra charge) includes local scanning of every document they receive on your behalf. They also have the best customer support available for LLC formation services.
For more information on what Northwest can do for you, head on over to their website to get your Illinois series LLC formed today.
The process of forming a series LLC in Illinois isn’t too terribly different from the formation process for a standard LLC. However, you do need to make sure that you submit the series version of the Articles of Organization, and also file a Certificate of Designation for each individual LLC in your series.
At the end of the day, if you want to skip some of the hassles and worries that come with forming your own Illinois series LLC, you always have the option to hire Northwest Registered Agent to handle it for you.
We hope this article helped you develop your understanding of how to form a series LLC in Illinois!