Illinois has specific guidelines when it comes to forming a limited liability company within the state. In addition to the legal requirements, there are certain best practices to consider as well, such as creating an operating agreement. In this article, we’ll go over the basics of forming an LLC in the state of Illinois.
New Issues to Consider—The Illinois LLC Act
First off, the Illinois Limited Liability Company Act that went into effect last year made some changes to state law with respect to how LLCs operate. Some of these changes have an impact on the formation of your company, often allowing more leeway.
The first step you take to form an LLC is to choose a name. The state has a few regulations on how to name your company. For instance, it may not include the following:
- Limited Partnership, LP, or L.P.
- Corporation or Corp.
- Incorporated or Inc.
On the other hand, the name must contain the words “limited liability company,” “LLC,” or “L.L.C.” Certain restricted words, such as “Bank” and “Attorney” require additional paperwork, so it’s important to keep that in mind.
Finally, the name needs to be distinct from names already on file with the Secretary of State and may not contain words that would lead people to confuse it with a federal entity.
State law requires LLCs to name a registered agent who will receive and send legal papers on your behalf. In other words, if you get sued, they are the ones who will handle the paperwork. Your registered agent may be a member of the organization, another company, or even yourself, but it may not be the LLC itself.
Your registered agent must also either be an Illinois resident or be authorized to do business within state boundaries.
Articles of Organization
Once you have a name and registered agent selected, you will need to file your Articles of Organization. This is done by filling out Form LLC-5.5. On the form, you must include the following:
- Name and address of the LLC
- Name and address of your registered agent
- The purpose of your LLC
- Whether the company is manager-managed or member-managed
- The names and addresses of all managers and/or members who have management authority
- Names and addresses of the organizers
Once you have filled out your form, you must file it with the Illinois Secretary of State Department of Business Services. This includes a fee, which is $600 to file online or $500 for paper filing.
While not strictly required by state law, it is strongly encouraged that you draft an operating agreement. This agreement essentially sets forth the rules and regulations your LLC will follow with respect to financial and functional operations. Under the new Illinois LLC Act, this may be oral or implied, but you will still be better off with a formal document.
Finally, you need to take certain measures to ensure regulatory compliance:
- Obtaining an EIN (Employer Identification Number) if your LLC has more than one member
- Obtain all necessary business licenses
- Register with the Illinois Department of Revenue if you collect sales tax or have employees
- File annual reports with the Secretary of State
Throughout the process, you will benefit highly from the assistance of an attorney. For the legal counsel you need to form and operate an LLC safely within the state, contact Hart David Carson, LLP, today.