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Illinois is a state of opportunities—from the bustling city of Chicago to the rich agricultural communities downstate. There are numerous options for structuring businesses in Illinois. One of the most popular is thelimited liability company, or LLC. This guide walks through the basics of setting up an LLC in this lively, busy market.
How to start an LLC in Illinois
- Choose an idea for your LLC
- Name your Illinois LLC
- Create a business plan
- Get a federal employer identification number (EIN)
- Obtain your Illinois articles of organization
- Choose a registered agent in Illinois
- Obtain business licenses and permits
- Understand Illinois tax requirements
- Prepare an operating agreement
- 在伊利诺斯州检查商业保险选项
- Understand financial considerations
- Market your LLC
What is an LLC?
Limited liability companies are a common type of business entity in the United States that account formore than 35% of all businessesin the country, according to the National Small Business Association. A key benefit of running an LLC is that it provides liability protection for business owners, meaning they are not financially responsible for legal claims brought against the entity or most business debts. Owners are known as “members.” LLCs formed by one owner are called single-member LLCs, and LLCs formed by more than one owner are called multi-member LLCs.
Limited liability companiesare a common type of business entity in the United States that account formore than 35% of all businessesin the country, according to the National Small Business Association. A key benefit of running an LLC is that it provides liability protection for business owners, meaning they are not financially responsible for legal claims brought against the entity or most business debts. Owners are known as “members.” LLCs formed by one owner are called single-member LLCs, and LLCs formed by more than one owner are called multi-member LLCs.
Is an LLC right for you? What is an LLC?
There are two aspects of an LLC you’ll want to consider when deciding whether the business structure is the right choice for your Illinois venture:
- Do you have personal assets in need of protection? If so, forming an LLC in Illinois would allow you to shield those assets from creditors or litigants in the event your business faced bankruptcy or civil lawsuits.
- Are you looking to limit your tax liability? Unless your LLC elects to be taxed as a C corporation, it is considered a “pass-through” entity in Illinois. This means that your company’s profits wouldn’t be subject to corporate taxes, and instead would be taxed one time at your personal-income level—and the personal-income levels of any co-owners, similar tosole proprietorshipsorpartnerships.
If you’ve decided an LLC is right for you, then follow these 12 steps below to get yours off the ground.
1. Choose an idea for your LLC
Before you officiallystart your business, you’ll want to finalizean idea伊利诺斯州LLC。这个思维过程s more than just figuring out what you’re going to sell: a product versus a service, or perhaps a range of products and services. It’s also about your LLC’s positioning in the Illinois business ecosystem—are you selling direct-to-consumer or business-to-business? There are at least two other major considerations you’ll be making before settling on an idea for your Illinois LLC:
- Who is your customer? The picture of your Illinois LLC won’t be complete without knowing your target customer. You can accomplish this by conducting a competitive analysis of other businesses in your market, analyzing marketplaces where similar products or services are sold (like Amazon or the Apple Store), surveying prospective customers, or researching industry trends.
- What is your projected profitability? Profitability is important to the future success of a business. What will pricing look like? Will products or services be bundled or packaged? Does a subscription model make sense? What is the break-even point? And lastly, how many products or services will have to be sold to make a profit?
2. Name your Illinois LLC
After deciding on a core idea for your Illinois LLC, it’s time to make another key decision: What are you going to name your company? A good name is essential to building brand recognition. A general rule of thumb is to consider a name that effectively communicates what your business does. Think short, catchy, and memorable, while also aligning with your business mission. Additionally, there are specific rules to adhere to when naming LLCs in Illinois:
- The LLC’s name must contain the phrase “limited liability company,” or a variation of its abbreviation, LLC or L.L.C.
- Your name may not include words that could cause anyone to confuse your LLC with a government agency, such as the U.S. State Department or the Illinois Department of Motor Vehicles, for example.
- LLC names in Illinois must be unique from any other Illinois business. You can check byconducting an online searchwith the Illinois Secretary of State’s Corporation/LLC Search. The web feature ensures the name you want is not shared with another business.
3. Create a business plan
A workablebusiness planwill include your company’s name along with a brief description of what it sells. Other components include a thorough market analysis, an outline of the managerial structure and other personnel, descriptions of products and services you plan to market, a customer segmentation report identifying target customer subtypes (like singles with disposable incomes and business-to-business, for example), as well as marketing, logistics and operations, and financial plans.
4. Get a federal employer identification number (EIN)
A federal employer identification number (EIN), also known as a federal tax ID, is a nine-digit number assigned to businesses by the IRS for tax purposes. It functions similarly to a person's Social Security number. Your Illinois LLC will need an EIN if you plan to employ anyone, or are required to file certainexcise tax forms. Excise taxes are imposed by the federal government on the sale of certain goods, including fuel, airline tickets, some heavy machinery, tobacco, and tires.
5. Obtain your Illinois articles of organization
To formally establish your LLC in Illinois, you must file articles of organization, a document that officially details basic information about your business. The required form in Illinois isForm LLC-5.5, which can be filed with the Illinois Secretary of State’s office online or by mail. The state filing fee is $150, payable to the Secretary of State by certified check, money order, or other accepted forms of payment. You’ll be required to disclose the LLC’s name, address of the principal place of business (PO boxes are not acceptable), and information on a registered agent.
6. Choose a registered agent in Illinois
Illinois requires the appointment of an Illinois-based registered agent—someone empowered to receive service of process on your company’s behalf. A registered agent in Illinois must be a resident of the state and can be yourself, an employee within the company, or registered agent service authorized to conduct business in the state. These agencies must be available during regular business hours to accept documents on your behalf.
7. Obtain business licenses and permits
Running an LLC in Illinois also requires compliance with certain state and local licensing rules. To operate legally in the state requires aCertificate of Registrationbusiness license, sometimes called a “seller’s permit.” This essentially permits your business to impose a state sales tax on whatever product or service you market. To find out what county- and city-level licenses and permits might be required, check with your county and city’s administrative office.
8. Understand Illinois tax requirements
Federal taxes are collected by the IRS on a quarterly basis. Depending on the nature of your business, you may also be required to register for some state taxes. If you’re selling something that requires a sales tax to be attached, register for a seller’s permit, also known as a Certificate of Registration business license. That process can be completed through theMyTax Illinois website.
Special taxes payable by Illinois LLCs might include:
- Hotel taxes.Paid by businesses that offer hospitality services in Illinois.
- Liquor taxes.Paid by businesses that retail alcoholic beverages.
- Cannabis and tobacco taxes.Paid by businesses that sell cannabis and/or tobacco products.
- Motor fuel tax.Paid by distributors and suppliers of automotive gasoline.
If you have employees in Illinois, you will also need to register for unemployment insurance tax and employee withholding tax on behalf of those workers. These taxes may also be paid through the MyTax portal.
9. Prepare an operating agreement
An LLC operating agreement is a legal document that outlines how your Illinois LLC will conduct business. Among the covered details:
- Your LLC’s name and primary address
- How long you plan to run the LLC
- Information on the LLC’s registered agent
- Information about the articles of organization
- The business’s purpose and mission statement
- Organizational chart listing members and their respective investments in the LLC
- The manner in which profits and losses will be divided between the members
- The process for admitting new members and offboarding outgoing ones
- An overall management plan for the LLC
- Various indemnification and liability provisions
10. Examine business insurance options in Illinois
While LLCs offer a degree of personal asset protection, you may still want to purchase insurance to better protect your business interests. Such insurance would cover your business’s products, vehicles, and other assets not protected by the LLC shield. Also, if you intend to hire employees in Illinois, it’s necessary to purchase workers’ compensation insurance. The federal Small Business Administrationmaintains a listof forms of insurance your new Illinois small business may need, including:
- General liability insurance.This provides coverage against financial losses that result from property damage, injury on the job, and defending or pursuing lawsuits, to name a few.
- Product liability insurance.With this insurance, coverage is provided against financial losses that result from legal proceedings relating to the sale of a defective product that causes injury to a customer.
- Professional liability insurance.This covers financial losses resulting from malpractice suits (generally for businesses in specialized fields like law, accounting, or medicine).
- Business owners insurance.An insurance package that bundles coverage options that are typical for small-business owners.
11. Understand financial considerations
Besides purchasing insurance, you will probably want to make other business investments to get your Illinois LLC up and running. This could be for renting a brick-and-mortar retail location, developing a professional website, ad placements, and buying equipment and software for payment processing, bookkeeping, and other essential services. You may also want to hire lawyers, accountants, or other professionals who can provide services to help support your business.
12. Market your LLC
Illinois is a crowded business environment. Therefore, starting a business in the state requires that you identify and develop a stand-out brand. A brand is more than just a catchy name, it’s your business’s whole identity. Important branding and marketing elements include:
- Brand logo.An effective logo expresses your LLC’s function and mission.
- Company colors and fonts.Working within a set, limited range of colors and fonts helps create brand cohesion and, by extension, easier recognition for your LLC.
- Visibility.It would be challenging for a brand in 2022 to be successful without a robust web presence. Beyond a functional website, consider investing time and resources into building out your LLC’s social media presence.
Starting an LLC in Illinois FAQ
How much does it cost to form an LLC in Illinois?
Starting an LLC in Illinois costs, at minimum, $150, which is the fee required to file your articles of organization—or articles of incorporation—with the Illinois Secretary of State.
Do you need a registered agent for your LLC in Illinois?
Yes, all LLCs incorporated in Illinois must name a registered agent with an in-state mailing address.
How do state taxes work for LLCs in Illinois?
Unless LLCs elect to be treated as corporations, state taxes are applied to them in the same way federal taxes are—one time, at the personal income levels of its members.