How to Form an LLC in Illinois 2026: Complete Guide

Forming an LLC in Illinois provides liability protection and tax flexibility for your business. While Illinois has higher filing fees than some states, the process is straightforward with online filing available. This comprehensive guide covers everything from choosing a name to maintaining annual compliance.

Why Form an LLC in Illinois?

• Limited Liability Protection: Personal assets protected from business debts and lawsuits
• Pass-Through Taxation: Avoid double taxation (profits taxed once on personal returns)
• Flexible Management: Member-managed or manager-managed options
• Credibility: Professional image for customers and partners
• Easy Profit Distribution: Not restricted to ownership percentages
• Fewer Formalities: Less paperwork than corporations

Step-by-Step Formation Process

Step 1: Choose Your LLC Name

Your Illinois LLC name must comply with naming requirements (805 ILCS 180/1-10):

• Be distinguishable from existing business names in Illinois
• Include "Limited Liability Company," "LLC," or "L.L.C."
• Not contain restricted words ("bank," "insurance," "university") without proper licensing
• Not suggest government affiliation

Name Availability Search: Check Illinois Secretary of State Business Entity Search

Name Reservation (Optional):

• Reserve name for 90 days
• File Form LLC-1.15 (online or by mail)
• Fee: $25 (online), $50 (paper)

Prohibited Name Elements

• Cannot be identical to existing entity
• Cannot be "deceptively similar"
• Cannot imply different business type (e.g., "Corporation" or "Inc.")

Step 2: Designate a Registered Agent

Every Illinois LLC must have a registered agent (805 ILCS 180/1-35):

• Has a physical Illinois street address (no P.O. boxes)
• Available during normal business hours
• Is either an Illinois resident or business entity authorized in Illinois
• Receives legal documents and official correspondence

Options:

• Self-serve: You can be your own registered agent
• Professional Service: Hire registered agent company ($125-$300/year)

Step 3: File Articles of Organization

File Form LLC-5.5 (Articles of Organization) with Illinois Secretary of State:

Filing Options:

• Online: Illinois Business Services (fastest, 1-3 business days) - $150
• By Mail: Send to Springfield office (7-10 business days) - $150
• Expedited (24-hour): Add $100 expedite fee ($250 total)
• Same Day: Add $200 expedite fee ($350 total) - limited availability

Required Information:

• LLC name
• Principal office address (can be out of state)
• Registered agent name and Illinois street address
• Name and address of organizer (person filing)
• Management structure (member-managed or manager-managed)
• Purpose of LLC (can be "any lawful purpose")
• Effective date (immediate or future date within 60 days)

Step 4: Create an Operating Agreement

While not required to be filed with the state, an operating agreement is strongly recommended:

What to Include:

• Ownership percentages and capital contributions
• Member rights, responsibilities, and authority
• Profit and loss allocation
• Management structure and decision-making procedures
• Voting rights and procedures
• Procedures for admitting new members
• Buy-sell provisions and transfer restrictions
• Dissolution procedures

Benefits:

• Clarifies ownership and prevents disputes
• Overrides default state rules
• Strengthens liability protection (shows LLC is legitimate entity)
• Required by most banks for business accounts
• Helpful for tax purposes

Step 5: Obtain an EIN

Get a free Employer Identification Number from the IRS:

• Online: IRS.gov (immediate) - recommended
• By Fax: Form SS-4 (4 business days)
• By Mail: Form SS-4 (4-6 weeks)

When You Need an EIN:

• Opening a business bank account
• Hiring employees
• Filing tax returns
• Multi-member LLCs (required)
• Single-member LLCs choosing corporate taxation

Complete Cost Breakdown

Illinois Annual Report Requirement

All Illinois LLCs must file an Annual Report (Form LLC-50.1):

Key Details

• Due Date: First business day of LLC anniversary month
• Fee: $75
• First Report: Due in month following first anniversary of formation
• Filing Method: Online via Illinois Business Services (recommended)
• Grace Period: 75 days after due date before penalties

What's Included

• Confirmation of principal office address
• Registered agent information
• Names and addresses of managers/members
• Nature of business

Late Filing Consequences

• After 75 days: Additional $100 late fee
• After extended period: Administrative dissolution
• Reinstatement: Requires filing missing reports plus fees

Ongoing Requirements

State Obligations

• Annual Report: File and pay $75 each year
• Maintain Registered Agent: Keep current agent on file
• Update Changes: File Statement of Change if agent or principal office changes
• Assumed Name (DBA): Register if doing business under different name

Tax Obligations

• Federal Taxes: File Form 1065 (multi-member) or Schedule C (single-member)
• Illinois Income Tax: LLCs are pass-through entities (profits taxed on personal returns)
• Replacement Tax: 1.5% tax on net income (if more than $1,000 profit)
• Sales Tax: Register if selling goods or taxable services
• Withholding Tax: If you have employees
• Unemployment Insurance: If you have employees

Business Licenses and Permits

• No statewide business license required in Illinois
• Local licenses: May be required by city or county (varies widely)
• Professional licenses: Required for licensed professions
• Industry-specific permits: Food service, liquor, etc.

Illinois Replacement Tax

Unique to Illinois, LLCs must pay a Personal Property Replacement Tax (35 ILCS 5/201(c)):

Key Details

• Rate: 1.5% of net income
• Applies to: Partnerships, S-Corps, LLCs, trusts
• Threshold: Only if net income exceeds $1,000
• Filing: Included with IL-1065 (partnership return)
• Purpose: Replaces property tax that corporations pay

Calculation Example

• LLC net income: $100,000
• Replacement tax: $100,000 x 1.5% = $1,500

Professional LLCs

Illinois allows licensed professionals to form Professional LLCs (805 ILCS 180/1-5):

Who Must Form Professional LLC

• Attorneys
• Physicians and healthcare providers
• Architects
• Engineers
• Accountants
• Other state-licensed professionals

Requirements

• Name must include "Ltd. Liability Co.," "Professional Limited Liability Company," or "PLLC"
• All members must be licensed in same profession
• File same Articles of Organization (Form LLC-5.5)
• May require approval from licensing board
• Does not protect from malpractice liability

Illinois Series LLC

Illinois allows Series LLCs - one LLC with multiple separate "series":

How Series LLCs Work

• One master LLC with multiple internal series
• Each series has separate assets, liabilities, members
• Liability protection between series (if properly maintained)
• Pay one filing fee for master LLC
• Each series can have different business purpose

Benefits

• Cost savings (one filing instead of multiple LLCs)
• Useful for real estate investors (separate property in each series)
• Simplified administration

Drawbacks

• More complex recordkeeping required
• Must maintain strict separation between series
• Not recognized in all states
• Limited case law on liability protection
• Banks may be unfamiliar with structure

Operating an Out-of-State LLC in Illinois

If your LLC was formed in another state but does business in Illinois, you must register as a foreign LLC:

When Foreign Registration Required

• Maintaining an office in Illinois
• Regularly conducting business in Illinois
• Owning or leasing real property in Illinois

Foreign LLC Registration

• File Application for Admission to Transact Business (Form LLC-45.15)
• Filing fee: $150
• Designate Illinois registered agent
• Submit Certificate of Good Standing from home state
• Must file Illinois Annual Reports ($75/year)

Dissolving an Illinois LLC

To officially close your Illinois LLC:

1. Vote to Dissolve: Members approve dissolution per operating agreement
2. Wind Up Business: Pay debts, distribute assets, cancel permits
3. File Articles of Dissolution: Form LLC-50.50 with Secretary of State
4. Fee: $100
5. File Final Tax Returns: With IRS and Illinois Department of Revenue
6. Cancel Registered Agent

Frequently Asked Questions

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

Online filings are typically approved within 1-3 business days. Mail filings take 7-10 business days. Expedited 24-hour service is available for an additional $100 fee. Same-day service ($200 fee) is available but limited and may not always be offered.

Do I need an Illinois address to form an Illinois LLC?

No. Your principal office address can be anywhere in the world. However, you MUST have an Illinois registered agent with a physical Illinois street address.

What's the difference between member-managed and manager-managed?

Member-managed: All members (owners) participate in day-to-day management. Most common for small LLCs.
Manager-managed: Members appoint one or more managers (who may or may not be members) to run operations. Members are passive investors. Common for larger LLCs or when some members want limited involvement.

Can one person form an LLC in Illinois?

Yes. Illinois allows single-member LLCs. Formation process is identical to multi-member LLCs. You still get liability protection. For federal taxes, single-member LLCs are "disregarded entities" (taxed as sole proprietorships) unless you elect corporate taxation.

What is Illinois Replacement Tax?

The Personal Property Replacement Tax is a 1.5% tax on LLC net income over $1,000. It's unique to Illinois and replaces personal property tax that corporations pay. It's paid annually with your Illinois partnership tax return (IL-1065).

What happens if I don't file my annual report?

You have 75 days past the due date before penalties apply. After that, you'll owe a $100 late fee on top of the $75 filing fee. If you remain delinquent for an extended period, the state will administratively dissolve your LLC. Reinstatement requires filing all past-due reports and paying accumulated fees.