Forming an LLC in Illinois is not as difficult as it is in other states, especially if you have a registered agent to help you maintain it all. Here are some things to keep in mind when forming your LLC.
Protecting your limited liability
One of the key reasons for forming an LLC over other business types is its limited liability, but it can be hard to maintain sometimes. To keep the liability intact, we recommend opening a separate business bank, and using a business credit card: these will help to keep your home and business funds entirely separate from each other, which reduces the risk of losing your limited liability.
Flexible tax treatment
For federal tax purposes, an LLC can choose to be taxed as either a sole proprietorship, partnership, S corp or a C corp. LLC taxes in Illinois depend upon the LLC’s federal tax election. So, unless an LLC elects to be taxed as a C corp, all Illinois LLC profits are passed through to the members, on which they will pay Illinois and federal income tax, and federal self employment tax, on their share of the profits.
For LLCs choosing to be taxed as a C corp, life is not so easy. It has to pay corporate taxes on its profits too, as well as each member paying state and federal income taxes on any profits that they get. Not only this, but in Illinois all LLCs have to pay a personal property replacement tax, and for an LLC that’s taxed like a corporation, it is 1% higher than an LLC taxed like a partnership or a sole proprietorship.
Registration costs
When you form an LLC in Illinois, you have to file articles of organisation with the Secretary of State, and then pay a registration fee of $150 for doing so. Then, there is a regular annual fee of $75 to keep it up – but if this payment is even a day late, you could be asked to pay up to $300 late fee, that is, if they let you keep your LLC. This annual fee is cheaper than what you’d pay for an LLP, which is $100 per partner, each year. So the fee isn’t too bad, as long as you stay up to date on these things, which can easily be done with a registered agent.
Another good thing about Illinois is what is called a ‘Series LLC’. This allows several distinct entities under one umbrella LLC, and the registration fee for this is $400. In the long run this can work out cheaper for you, but it will ideally need to be done with other businesses you see yourself getting on with.
Very little formalities
One of the great things about LLCs, not just in Illinois, is their lack of needing to be formal. Corporations have lots of things to worry about, like shareholders, a board of directors and officers. On the other hand, an LLC in Illinois can be managed by its members, or the members can select managers to run daily operations for them. As well as this, unlike with corporations there is no need to hold board meetings, annual meetings, or to keep minutes at meetings. It’s much more flexible and you are free to choose what you want to do.
Keeping up to date
This can be hard for some, as taxes need to be filed and annual reports handed in. However, it can be made much easier to do with the help of a registered agent, and these don’t have to cost a lot – you can get them as cheap as $40 per year in Illinois. If you have a registered agent, they make life a lot easier by making sure you do not miss deadlines and can even help you with things like forming your LLC, as well as some being able to provide you legal services too. Registered agents help you have less on your plate to worry about.
TRUiC has a very detailed step-by-step process on how to set up an LLC in Illinois. Visit their site to see more.
