Setting Up an LLC or C-Corp in Illinois: Your Comprehensive Guide

When starting a business in Illinois, choosing the right business structure is crucial. Whether you're considering a Limited Liability Company (LLC) or a C-Corporation, understanding local laws and regulations is essential for a smooth company formation process and ongoing compliance. Before you start here is a table to help you understand both the structures.

Feature	LLC	C-Corp
Formation	File Articles of Organization with IL Secretary of State	File Articles of Incorporation with IL Secretary of State
Ownership	Members	Shareholders
Management	Members or Managers	Board of Directors and Officers
Liability Protection	Yes	Yes
Taxation	Pass-through (default), can elect C-Corp taxation	Double taxation (corporate level and shareholder level)
Flexibility	High	Less flexible
Paperwork	Less formal	More formal (annual reports, board meetings, etc.)
Raising Capital	More challenging	Easier (can issue stock)
Transferability of Ownership	Can be restricted	Easily transferable through stock sales
Illinois Fees	$150 filing fee, $75 annual report fee	$150 filing fee, $75 annual report fee
Credibility	Good	Often perceived as more credible
Life Span	Can be limited or perpetual	Perpetual

 

How to Register an LLC in Illinois 

Starting an LLC in Illinois involves several key steps, from choosing a unique name to obtaining necessary identification numbers. Here's what you need to do:

Select Your LLC Name: Your LLC's name is its identity in the business world. In Illinois, it must be distinguishable from other registered businesses and include "Limited Liability Company" or abbreviations like "LLC" or "L.L.C." For professional services, use "Professional Limited Liability Company" or "PLLC." The name you choose will represent your business on all official documents and in the marketplace, so it's crucial to select one that aligns with your brand and business goals.

Tips:

• Consider the long-term implications of your name choice, as changing it later can be costly and complex.
• Use keywords in your name that describe your business to improve searchability.
• Check if a matching domain name is available for your business website.

Hire a Registered Agent: A registered agent is a person or company that accepts legal documents on behalf of your LLC. They must have a physical address in Illinois and be available during business hours. This role is crucial for maintaining communication between your LLC and the state, ensuring you never miss important legal notices or state communications that could affect your business standing.

Tips:

• If you use your home address, be aware that it becomes part of the public record.

• Consider how you'll handle document receipt if you're frequently away from the office.

• Professional services often provide compliance reminders for annual reports and other filings.

Submit Illinois Articles of Organization: Filing Form LLC-5.5 with the Secretary of State officially creates your LLC. This document includes essential information about your business, such as:

• The name of your Illinois Limited Liability Company
• Your LLC's business address (the address of the LLC's principal place of business)
• The effective date of the articles (if not immediate)
• The name and address of your registered agent
• The purpose of your LLC (Illinois allows a general statement of purpose)
• Your LLC's duration (if not perpetual)
• Names and addresses of initial members (for member-managed LLCs) or managers (for manager-managed LLCs)
• The organizer's name, address, and signature

This form serves as the formal registration of your business with the state of Illinois, marking the beginning of your LLC's existence as a legal entity. It establishes your LLC's basic structure and management, providing the state with crucial details about your new business.

Tips:

• Double-check all information before filing to avoid delays or rejection.

• Consider the timing of your filing if you want a specific start date for your LLC.

• Keep your approved Articles in a safe place; you'll need them for various business matters.

Create an LLC Operating Agreement: An operating agreement is an internal document that outlines how your LLC will be run. It typically includes details on ownership percentages, member roles and responsibilities, voting rights, and profit distribution. While not legally required in Illinois, it's a crucial document for preventing misunderstandings and conflicts among members, and it can provide important guidance in various business situations.

Tips:

• Include procedures for adding or removing members and resolving disputes.

• Revisit and update your agreement periodically as your business evolves.

• Consider scenarios like member incapacitation or desire to leave the business.

Obtain an Employer Identification Number (EIN): An EIN is a tax ID for your business, similar to a social security number for individuals. It's required for most LLCs, especially those with employees or multiple members. You'll need this number for tax filing, opening business bank accounts, and often for obtaining licenses and permits.

Tips:

• Keep your EIN confirmation letter; you'll need this number frequently.

• If you lose your EIN, you can retrieve it by calling the IRS Business & Specialty Tax Line.

• Consider getting an EIN even if not required; it can help separate personal and business finances.

 

Steps to Create a C-Corp in Illinois

Establishing a C-Corporation in Illinois creates a separate legal entity with its own rights and liabilities. Here's an overview of the process:

Choose a Corporate Name: Your corporation's name is its legal identity and brand. In Illinois, it must be unique and include "Corporation," "Company," "Incorporated," or an abbreviation like "Inc." or "Corp." This name will appear on all official documents, marketing materials, and business correspondence. It's a crucial decision that can impact your business's brand identity and legal standing.

If you've decided on a name but aren't ready to incorporate immediately, Illinois offers a name reservation option. You can secure your chosen name for 90 days by submitting an Application for Reservation of Name (Form BCA-4.10) to the Secretary of State. As of 2024, there's a $25 fee for this service. This reservation can be particularly useful if you need time to prepare other aspects of your business before officially incorporating.

Tips:

• Consider trademarking your corporate name for additional legal protection.

• Think about how your name will look on logos and marketing materials.

• Avoid names that could limit your business as it grows and evolves.

Appoint a Registered Agent: Like LLCs, corporations need a registered agent in Illinois to accept legal documents. This person or entity serves as the official point of contact between your corporation and the state. They receive important legal and tax documents, notice of lawsuits, and other official correspondence. Choosing a reliable registered agent is crucial for maintaining good standing and avoiding missed deadlines.

Tips:

• If you change registered agents, file the change promptly with the state to avoid complications.

• Ensure your agent understands the importance of their role in maintaining your corporate status.

• Consider the agent's ability to handle documents promptly if you operate in multiple time zones.

File Articles of Incorporation in Illinois: Submitting Form BCA 2.10 to the Secretary of State officially creates your corporation. This document includes essential information about your business, such as its name, purpose, registered agent, and initial share structure. Filing this form establishes your corporation as a distinct legal entity separate from its owners.

Tips:

• Carefully consider your corporation's purpose statement; a broad purpose can provide flexibility.

• Be strategic about the number and classes of shares authorized.

• Keep copies of your filed Articles; you'll need them for various business purposes.

Create Corporate Bylaws: Bylaws are the internal rules governing your corporation's operations. They typically include details on stockholder and board meetings, officer roles and responsibilities, stock issuance procedures, and conflict resolution processes. While not filed with the state, bylaws are crucial for smooth operations and are often required by banks and investors.

Tips:

• Include procedures for amending the bylaws as your business grows.

• Consider including indemnification clauses to protect directors and officers.

• Ensure your bylaws comply with all relevant state laws and regulations.

Hold Initial Board Meeting: The first board meeting sets the foundation for your corporate governance. During this meeting, you'll typically adopt the bylaws, elect corporate officers, authorize the issuance of stock, and make other initial business decisions. This meeting formalizes the corporation's management structure and initial policies.

Tips:

• Prepare a detailed agenda to ensure all necessary items are covered.

• Keep thorough minutes as they serve as official records of corporate decisions.

• Use this meeting to establish regular meeting schedules and communication protocols.

Issue Stock Certificates: Stock certificates represent ownership in the company. Even if you're the sole owner, formally issuing stock helps establish the corporation as a separate entity. For multi-shareholder corporations, proper stock issuance and record-keeping are crucial for tracking ownership and ensuring compliance with securities laws.

Tips:

• Use a corporate kit to ensure professional-looking stock certificates.

• Maintain detailed records of all stock issuances and transfers.

• Consult with a securities lawyer if planning to issue stock to outside investors.

Obtain an EIN: An Employer Identification Number (EIN) is a tax ID for your business, required for all corporations. You'll need this number for tax filings, opening business bank accounts, hiring employees, and often for obtaining licenses and permits. It's a crucial step in establishing your corporation's separate identity for tax purposes.

Tips:

• Apply early in the business setup process as many other steps require an EIN.

• Keep your EIN information secure to prevent identity theft.

• Remember that your EIN stays with your business; you don't need a new one for annual tax filings.

 

Setting Up a Foreign LLC or C-Corp in Illinois

If your business is already established in another state and you want to operate in Illinois, you'll need to register as a foreign entity. This process is often referred to as "foreign qualification." Here's what you need to know to know for LLC and C-Corps: 

For Foreign LLCs:

1. Choose a Name: Ensure your LLC's name is available in Illinois or register under an assumed name if it's not.
2. Appoint a Registered Agent: Select a registered agent with a physical address in Illinois.
3. Obtain a Certificate of Good Standing: Get this from your home state (must be dated within 60 days of filing in Illinois).
4. File an Application for Admission: Submit Form LLC-45.5 to the Illinois Secretary of State along with the required fee ($150 as of 2024).
5. Submit an LLC Series Disclaimer: If your LLC is a series LLC, you must also file this form.

For Foreign C-Corps:

1. Reserve Your Corporate Name: Check name availability and reserve it if necessary.
2. Designate a Registered Agent: Choose an agent with a physical Illinois address.
3. Obtain a Certificate of Good Standing: Get this from your state of incorporation (dated within 60 days).
4. File an Application for Authority: Submit Form BCA 13.15 to the Illinois Secretary of State with the required fee ($150 as of 2024).
5. Submit Initial Annual Report: File this within 60 days of qualification.

Key Considerations for Foreign Entities:

• Foreign entities must file annual reports and maintain good standing in both Illinois and their home state.
• Understand Illinois tax obligations for foreign entities, which may differ from domestic entities.
• Research any additional local permits or licenses required for your specific business activities in Illinois.
• If you cease operations in Illinois, you must file for withdrawal to properly close your foreign registration.

Remember, operating as a foreign entity in Illinois without proper registration can result in penalties and legal complications. It's advisable to complete the foreign qualification process before conducting business in the state.

Key Things to Keep in Mind After Establishing an LLC or C-Corp

After starting a company in Illinois there are ongoing responsibilities that one must keep to maintain their good standing with the state of Illinois. These requirements help ensure your business remains compliant and continues to enjoy the benefits of its chosen structure. Here are some critical aspects to consider:

1. File Annual Reports: LLCs must file before the first day of the anniversary month of formation, while C-Corps file annually as required by the Secretary of State. Pay the required fees, which are $75 for LLCs and vary for C-Corps.

For LLCs: File Form LLC-50.1 before the first day of the anniversary month of formation. The required fee is $75.

For C-Corps: File Form BCA-ar12.45 annually as required by the Secretary of State. The fees for C-Corps vary based on the corporation's paid-in capital.

1. Maintain Good Standing: File reports and pay taxes on time to avoid penalties. For LLCs, failure to file within 60 days incurs a $100 penalty. Both entities risk administrative dissolution for continued non-compliance.
2. Separate Finances: Open and maintain separate business bank accounts. Keep detailed financial records separate from personal finances to maintain the liability protection offered by your business structure.
3. Regular Meetings and Record-Keeping: LLCs should hold member meetings as outlined in the operating agreement. C-Corps must conduct regular board and shareholder meetings. Maintain minutes and important corporate records for all official meetings.
4. Obtain Necessary Licenses and Permits: Research and acquire all required local, state, and federal licenses for your specific business activities. Remember to renew these licenses and permits as needed to stay compliant.
5. Comply with Tax Obligations: Register for state taxes, including sales tax if applicable. File and pay taxes according to your entity type and business activities. Stay informed about changing tax laws that may affect your business.
6. Consider Getting a Certificate of Good Standing: This document can be useful for opening bank accounts or registering in other states. Obtain it by filing Form LLC-50.25, which costs $25, with an additional $20 for expedited service.

Illinois Tax Requirements

Understanding and complying with Illinois tax requirements is crucial for the financial health and legal compliance of your business. Both LLCs and C-Corps have distinct tax obligations, which can significantly impact your business operations and profitability. Here's an overview of the key tax considerations for each entity type:

For LLCs:

LLCs in Illinois benefit from pass-through taxation, which means the business itself doesn't pay taxes on its income. Instead, for single-member LLCs, the income is reported on the owner's personal tax return and taxed as if it were sole proprietorship income. Multi-member LLCs are taxed as partnerships by default, with each member reporting their share of the income on their personal tax returns. In addition to federal and state income taxes, LLCs are subject to a Personal Property Replacement Tax of 1.5% of net income. If the LLC sells taxable goods or services, it must collect and remit sales tax to the state. Depending on their income, LLC members may need to pay quarterly estimated taxes to avoid penalties.

For C-Corps:

C-Corporations in Illinois face a more complex tax structure. They are required to pay a corporate income tax of 7% of their net income at the corporate level. On top of this, C-Corps must also pay a Personal Property Replacement Tax, which is an additional 2.5% of net income. Unlike LLCs, C-Corps are also subject to an annual franchise tax based on their paid-in capital. The minimum initial franchise tax is $25. However, starting in 2024, Illinois has implemented a franchise tax exemption amount of $5,000. If the calculated franchise tax minus the exemption amount is zero or less, no franchise tax is due. For example, if a corporation would owe $4,000 in franchise taxes, they won't actually owe any franchise tax because the amount is less than the exemption amount. (805 Ill. Comp. Stat. § 5/15.35 (2024))

Similar to LLCs, if a C-Corp sells taxable goods or services, it must collect and remit sales tax on applicable transactions. To ensure timely payment of taxes, C-Corps typically pay quarterly corporate estimated taxes. It's important to note that C-Corps face potential double taxation, as shareholders also pay taxes on dividends received from the corporation.

Why Choose Us

Our team of experienced professionals specializes in Illinois business law and can guide you through every step of the process. We offer a comprehensive suite of services designed to make your business formation smooth and stress-free. 

• Expert advice 
• Dedicated Assistance 
• Ongoing support 
• Personalized service 

Don't let the complexities of business formation hold you back. Let us help you lay the foundation for your business success in Illinois.

Ready to Get Started?

Contact us today for a free consultation on setting up your LLC or C-Corp in Illinois. Our team is ready to help you turn your business vision into reality.

FAQs 

1. What form do I need to file to create an LLC in Illinois?

To create an LLC in Illinois, you need to file Form LLC-5.5, "Articles of Organization," with the Secretary of State.

2. Is there a specific form for registering a foreign corporation in Illinois?

Yes, foreign corporations must file Form BCA 13.15, "Application for Authority to Transact Business in Illinois," with the Secretary of State.

3. Do I need to file a separate form for an assumed business name in Illinois?

Yes, if you're operating under a name different from your legal business name, you need to file Form BCA 4.15/LLC-1.20, "Application to Adopt, Change, Cancel or Renew an Assumed Name."

4. What form is required for the annual report filing in Illinois?

 LLCs file Form LLC-50.1, while corporations file Form BCA-12.45 for their annual reports.

5. Are there any special licensing requirements for professional corporations in Illinois?

Yes, professional corporations must obtain the appropriate professional licenses from the Illinois Department of Financial and Professional Regulation, in addition to filing Form BCA-2.10, "Articles of Incorporation."

6.How do I obtain a Certificate of Good Standing for my Illinois business?

You can request a Certificate of Good Standing by filing Form LLC-50.25 (for LLCs) or Form BCA-13.50 (for corporations) with the Secretary of State.