You could be lying awake at night wondering if you made a good decision with your money or not when it comes to forming an LLC in Illinois because these types of companies are often associated with high costs.
That’s why we want you to know that there are low-cost alternatives out there if you look hard enough for them. This article provides a good example.
Cost to Form an LLC in Illinois
The cost to form an LLC in Illinois is $500. That fee goes toward the filing fees you’ll need to pay when you file your Articles of Organization with the State of Illinois. With this complete, you can then open up a checking or savings account under your new business name (which should be included on the paperwork).
Once you do that, you’re ready to get started doing business in this state. Keep in mind that you will also have annual renewal fees to pay if your LLC stays active each year after it’s initially formed.
An average annual fee runs $125-$180 depending on how much revenue your company takes in yearly and if it has other members involved who are actively participating.
1. Price for Online Filing
If you’re wanting to get the process started online, you can file your Articles of Organization with the Illinois Secretary of State for $125. This is a 3-4 day turnaround where you’ll get the paperwork back via email after it has been reviewed by one of their staff members.
You then have 6 months from that point to submit your filing fee with your completed Articles of Organization before they will ask for it again.
2. Price for Paper Filing
If forming an LLC in Illinois through paper means is more appealing to you, be prepared to pay $250 when filing your Articles of Organization with this state’s Secretary of State. It’s going to take about 2-4 weeks before you receive it back in the mail after everything has been looked over and approved.
3. Registered Agent services
If you don’t feel like taking on the responsibility of being a company’s registered agent, there are firms out there who will do it for you for about $100-$150 annually. The benefit to them doing so is that they’ll be listed in the state’s records as someone who has the authority to receive legal documents on your LLC’s behalf.
4. Post-Incorporation Fees
There are also annual fees to pay after your LLC gets established by filing its initial paperwork with Illinois. Make sure you have enough money set aside to cover these expenses when they come up because otherwise, you risk losing your business entity due to neglecting to pay them.
The yearly costs usually run between $50-$300 per year based upon your business revenue and if you have other LLC members involved.
5. Business Permits and Licenses
Before you can begin transacting business in Illinois, your LLC will need to get a Federal Tax ID number assigned to it.
You cannot apply for this online so plan on getting one by visiting the Internal Revenue Service office in Chicago and ask them about how to go about applying for an Employer Identification Number (EIN) using form SS-4. This should only take a few minutes since they have everything pre-filled out for you already.
For sales/use tax purposes, the state of Illinois requires that all LLCs doing business here collect a 6.25% sales/use tax from their customers and send it to the state treasury department on a monthly basis. Failure to do so will result in penalties being enforced against your company from the state.
It is possible to get a discount on these taxes if you choose an EIN over an ITIN when doing business in Illinois.
6.Tax Registration Certificate
As soon as your LLC gets created in this state, it will need to fill out and return form IL-505-I within 6 months of its filing date. This form verifies that the company is registered with Illinois for sales/use tax purposes and can also be used by third parties (such as contractors and suppliers) who need proof that they’re dealing with a legitimate entity.
Failure to do so could end up costing your LLC fines and penalties from the state’s treasury department later on down the line.
They will want to collect sales/use tax from you if your LLC is not registered for doing business in Illinois at all, or you are operating out of an unlicensed location.
If this happens, the state may end up having one of their agents come to your facility to inspect it and assess how much back taxes are due plus any interest or penalties that have accrued over time.
You can stop them by filling out the IL-505-I form before they get there so their visit will be unnecessary and nothing will happen afterward.
7. Social Security Number for Tax Purposes
Although many companies choose EINs instead of SSNs when applying for Federal Tax ID numbers, your LLC still needs to get one assigned to it that meets the IL-505-I registration requirement in order to do business with Illinois state.
You can apply for one online via the Social Security Administration’s website or you can get it over the phone by calling (800) 772-1213 and hearing what they have to say about getting an EIN assigned.
8. Other LLC Filing Costs in Illinois
There are other expenses that your LLC might accrue if you’re doing business here and not sticking to the basics. If you’ve had somebody come out and inspect your company’s location, then they’ll probably bill you for their services and this will be passed on to your LLC as a cost of doing business.
If there is any legal action taken against your LLC for something along the lines of violating an agreement, not paying taxes, or otherwise breaking IL state law, it can expect to be hit with attorney fees and costs by the party who took it upon themselves to initiate such proceedings.
To avoid having this happen to your business, make sure you know all about what forms need filing when in order to stay compliant with Illinois law.
To make an official record of the proceedings that take place in a meeting with your LLC members or shareholders, you can hire a notary public to come and witness it for you.
Not only will this keep everybody honest, but it will also prevent any second-guessing about what was said and done when the minutes from these meetings are used as evidence when somebody tries to sue your company at some later date.
You’ll need to send form IL-1003-V to the state’s treasury department in order for them to give you permission to go ahead and use a private notary, so do this before hiring somebody out.
You have no legal standing if you want them to handle signing off on important documentation with their seal of approval.
How to Register an Illinois LLC Yourself
Step 1: Name Your Illinois LLC
You can choose a name for your LLC that complies with the state’s rules and has not already been taken by somebody else.
The name must:
- Be restricted to certain words that are allowed
- Reference the LLC’s purpose, including an abbreviation of it
- End with a corporate designator (like “Inc.,” “Corp.” or “LLC”)
You will also need to make sure your LLC name doesn’t imitate the name of some other company in Illinois by using their initials.
If you don’t do this step correctly, then your LLC could be sued for trademark infringement and ordered to stop using its name immediately.
To find out if somebody else already has a similar name and is operating under it, search the state’s business records database: https://www1.sos.state.il.us/BusinessEntity/BusinessSearchNetNonprofitSearchMainAction2Active.action
You can ask for help when it comes to naming your business if you need somebody else to double-check that you are following these rules.
Step 2: Choose a Registered Agent
This is one of the LLC filing requirements in IL that you have to meet when you set up your business with them.
A registered agent is a person who lives in Illinois, is at least 18 years old, and can accept legal documents on behalf of your LLC during the hours when it’s not open for business.
You can’t hire anybody else or ask an employee to act as this person – they need to be completely independent of your organization.
- You are allowed to name yourself as the registered agent if you want but this doesn’t usually work out well when somebody tries to sue your company for something it did wrong.
- It would be better off if the name on this position was somebody who had no ties with your business whatsoever.
- If you don’t choose an agent within 30 days after you file your LLC paperwork with the state, then they will go ahead and pick one for you.
- You can complain about their choice but it’s likely that nothing will change if this person is already formally sworn in by the local county clerk’s office.
Step 3: File the Articles of Organization
This is the other Illinois LLC filing requirement that needs to be met.
You can file online but you will need a credit card and a printer to get the job done quickly. If you don’t already have one, then make sure to buy a USB Thumb Drive too because these are only accepted by the Secretary of State when they ask for printed copies of your documents after they’ve been completed online.
The state does not charge any fees for submitting your Articles of Organization but if you do it before January 1st, 2017, then you’ll have to pay an extra 7% sales tax on top of that amount too once your LLC is approved.
If you’re going to check out what’s available from all the registered agents in Illinois, then it would be better off to visit the secretary of state’s website where you can find these people in alphabetical order after punching in your county’s name.
Step 4: Create an LLC Operating Agreement
This is a legal document that details the internal rules and regulations that your LLC will live by.
Everybody who owns part of this business has to sign off on it before they receive their slice of its profits or losses. It doesn’t have to be notarized, however, because it’s an internal company matter.
You’ll need to show it to anybody else who you do business with and needs proof that you actually own the LLC in question.
Step 5: Get an EIN
Even though you don’t have to pay taxes right away, you still need a Tax ID Number if you want to hire employees, open a bank account or make an independent contractor deal with somebody else.
The EIN is actually a nine-digit number that the Internal Revenue Service (IRS) uses to keep their records straight when somebody files a tax return for your company.
You’ll also need it if you plan on filing any lawsuits against another business in IL state because these documents will be processed faster if they’re sent over with this code included.
Pros and cons of forming an LLC.
- Limited Liability Protection
- Tax Exemption for some Profits and Losses
- No Annual Residency Formalities like S-Corps or C-Corps
- Can be treated as an S-Corp for tax purposes
- More Expensive than Sole Proprietorship or Partnership
- Not as easy to manage in comparison with C-Corps or S-Corps
Do you have to pay for an Illinois LLC every year?
The fee for owning your LLC is typically about $500 a year but if you’re late on it then they can charge as much as double that amount.
This used to be the only way that somebody could file a lawsuit against their company in IL, however, lawmakers over at Springfield recently decided to make some changes and give everybody a better option.
You’ll now have to pay extra money every time you go through this process even though it won’t depend entirely on how long you were out of compliance with sales tax rules. You will need to cough up more cash each time you submit your Annual Report form too whether there are any outstanding errors or not.
Is an LLC really necessary?
A Limited Liability Company is absolutely necessary for small business owners who want to own their company and be treated as a separate legal entity.
- They can still file taxes like a normal individual but they will not have any debts or losses attributed to them personally once an accident, foreclosure or lawsuit comes about.
- At this point, it’s worth mentioning that the assets in your LLC cannot be seized if you sell them to somebody else and these accounts will stay frozen until creditors get what they’re owed.
- If you only plan on owning one single-member LLC, then there’s no need to go through all of these extra steps because the Secretary of State won’t ask you for anything except for your annual report (if applicable) and standard filing fee when your company is approved.
- If you want to get a Federal ID number too, then you’ll have to fill out an SS-4 form and send it over to the IRS so they can register your name correctly with their database. They should hand this document back within fifteen business days from when they first receive it in the mail.
- When somebody tries to file a lawsuit against them in Illinois, then the LLC laws state that any judgments must be sent directly after their assets because these accounts cannot be touched by creditors.
You will need a lawyer’s help if you plan on contesting anything because there are many rules and regulations associated with this transaction for some reason. Your attorney can charge whatever price they feel like once this process is complete but make sure to ask for an estimate before you sign any contracts with them.
Do I need to keep track of all of my LLC’s income?
The main reason why it’s so important to file your taxes on time is that the IRS will do it for you if you get behind. You have up to three years after submitting your first tax return where they can start taking money out of your wages or bank accounts if you don’t take care of this problem yourself.
- This process can destroy anybody’s finances even though some people might feel immune from consequences since the IRS only gains money through interest on loans and penalties that they place on delinquent taxpayers’ credit scores.
- When filing taxes for an LLC, you’ll have to complete form 1065 which essentially calculates how much money you’ve made throughout the past year.
- You’ll also have to pay taxes on any dividends, sale proceeds, or interest that you gained from investing in stocks or other securities too because these amounts are technically considered as income.
If you need assistance filling out your tax return for your LLC, then there should be plenty of options out there where you can hire somebody to do it for an hourly rate or flat fee.
There’s no reason why anybody would want to go through this process alone so it’s definitely worth looking into if you’re interested in figuring out all of the costs beforehand.
What kind of reports does Illinois require?
As mentioned earlier, there are three different things that must be filed every year with the Secretary of State which include an Annual Report form, a Statement of Information, and your Biennial Statement.
Illinois Annual Report
The Illinois Annual Report is where you will list all of the officers in your LLC and it needs to be submitted before March 1st every year (it doesn’t matter if you finish this process early or not).
You can make corrections to these forms at any time but there’s no need to fill out anything extra unless somebody has passed away or left the company unexpectedly.
Statement of Information
Statement of Information forms are completely optional but they might be required depending on how complicated your business structure is (LLCs usually don’t need this though).
You’ll have to create an attachment for your Articles of Organization if you want extra insurance against legal claims during bankruptcy procedures. Most people won’t ever need this during their lifetime so it’s probably not worth paying the extra money for.
Finally, there is also a Biennial Statement that needs to be filed once every two years within120 days of your company’s anniversary date (typically January 1st).
However, if you’re not going to renew your LLC then you’ll only have to submit one additional report after four years. This is definitely cheaper than having to file a new 4-page application for a brand new company every single year!
What is the cheapest way to get an LLC?
If you want to form your LLC as soon as possible, then there are a few different options that you can choose from.
Some of them require hundreds of dollars upfront or thousands of dollars yearly but those numbers aren’t even close to being the most expensive part!
For instance, getting an annual subscription for internet filing might seem like a good deal at first until you realize that it’s impossible to cancel it and keep your company name with somebody else.
Illinois LLC Formation Business Services
Limited liability division cost in Illinois is generally higher than it is for corporations. It can be formed through Zenbusiness because they offer a 60-day money-back guarantee and they make sure to keep your business name in their database for free.
However, you should only choose to use this service if you’re ready to get started because it can take up to 7 days to submit all of the necessary paperwork through Zenbusiness. In most cases, you should have an LLC after just one week but sometimes things don’t always work out as planned so you’ll have two opportunities within the first month of signing up!
All forms can be submitted directly through Zenbusiness which means that it’s impossible to mess anything up unless something goes wrong on their side (this never happens though). Most people choose this path too because it’s practically costless apart from your yearly renewal fee which is only $12.
Department of business services
The Illinois Department of business service is a state agency that offers a low-cost LLC formation service. For instance, the fee to form an LLC with the department is $500 and your business will be protected by limited liability.
How do I maintain my LLC?
Paying your yearly fee is the only requirement that you need to worry about when maintaining your LLC but there are other things that should be considered as well.
For example, all of your business activity must be reported every year on an Annual Report which needs to be submitted before March 1st along with a Franchise Tax Fee ($300 for corporations, $75 for LLCs).
- You will also receive a statement from the Franchise Tax Board around April or May so make sure to have it filled out properly if you want to avoid any expensive fines!
- Along with that, you’ll need to submit an Annual Statement for each member in your company every year before March 1st (this is also pretty simple). If you’re not sure when these dates are then just ask somebody else because there’s no way that you could miss them! In most cases, these forms will be sent directly from our site so setting up a direct deposit or checking account should be enough for us to receive everything on time.
Can I pay myself a salary from my LLC?
Most people don’t pay themselves any money from their company but there are some cases where it can be beneficial. For instance, if you’re trying to avoid paying taxes then it might make sense for you to file personal income taxes instead of corporate taxes when your company is an LLC.
By doing this, you’ll only have to pay about 15% in federal taxes each year but everything else will be considered personal income.
Also, all of the profits made by your LLC will be taxed at a much lower rate so you should definitely take advantage of this whenever possible!
Is an S corp better than an LLC?
There are a lot of different factors that will determine whether or not you should choose an S corp over an LLC but it primarily comes down to the number of shareholders.
For instance, an S corp is only allowed to have 100 shareholders while an LLC can have 1 million so this is why there’s typically more demand for people who want to set up their own business with others.
However, it really depends on your personal situation because there are plenty of benefits associated with choosing either entity!
And if you’re still having trouble deciding which one is better then just do some research at your local library and talk to somebody else who has experience in this area.
What’s better: sole proprietorship or LLC?
Both of these entity types are great for running your own business but there are some situations where one might be better than the other.
Generally speaking, this is related to how many people you want to include in your company because an LLC is only allowed to have 1 member whereas a sole proprietorship can have multiple owners.
For example, if you’re trying to set up an LLC with somebody else then it’ll probably make more sense for you to register as a corporation instead which has more benefits and fewer restrictions.
There’s no way that you could go wrong by choosing either entity type though because they both come with plenty of valuable perks!
What other options do I have if my LLC is not allowed?
If your company is denied as an LLC then there are plenty of other options that you can choose from. For example, a C corporation is very similar to an LLC and it also has more benefits than a sole proprietorship or partnership.
In addition, a Sub S corp will allow you to avoid the double taxation that currently exists for corporations so this should be one of your top choices if taxes are a big concern for you.
Keep in mind that each type of entity has its own advantages and disadvantages but those shouldn’t matter as much as the cost involved with establishing your company!
What penalties will I have to pay if I file my statement late?
The Franchise Tax Board will charge $800 for every month that you miss your filing deadline so this can be a huge problem if you aren’t careful. For example, let’s say that you only submit the annual statement by March 1st which would be 30 days later than what’s required by law.
In this case, the total cost of waiting an extra two months would be $8,640which works out to 2 years’ worth of fees at this rate!
If something like this has happened to you then just contact us as soon as possible and we’ll try our best to help.
In some cases, you might even get a penalty waiver from the government but there are no guarantees so you should always be prepared for the worst.
How do I know what my LLC business license fee will cost?
The fee that you’ll have to pay to set up your company in the state of Illinois is $300 which you can get back if you’re able to file and submit your statement on time each year.
However, there are different rules that apply to corporations and partnerships so make sure that you get all of this information from somebody who knows what they’re doing!
Also, remember that it’s very important for your business plan to outline all of the expenses involved with starting a new company because certain fees might go up or down based on how much work we need to put into helping your business succeed.
Can I change my business entity later on?
Yes, but it depends on why you want to make this change. There are some situations where it might not be possible for you to switch from one type of company to another unless the board allows for this request.
If your reasons are valid then you should be able to get what you’re asking for but don’t expect miracles if you plan on making a bunch of requests instead of just asking once!
Keep in mind that different types of companies have their own requirements so there’s no way that we can list everything here so feel free to ask us about the changes that you have in mind.
How to obtain a Certificate of Good Standing?
If you need a certificate of good standing in order to register your LLC with the state, the cost for this service through the department is $25. This certificate proves that your LLC is formed and authorized to do business.
With those prices in mind, now comes the task of figuring out which option makes the most sense for your company. If an online filing is best, go that route and budget accordingly to pay any necessary fees as they come up.
However, if a paper filing is what’s right for you, it’s important to line up a registered agent service at once or else risk penalties for not properly maintaining your entity with the Illinois Secretary of State.
Now that we’ve answered this question for you, you are ready to start an LLC in Illinois today!