Many entrepreneurs are interested in LLC formation because of the tax benefits and the asset protection they provide. But before you file your LLC, there's a lot about the formation process and time frames that you need to know. In this guide, you'll learn about the economic state of Illinois, as well as how to form an LLC there, and the time frame for LLC formation in the state.
Discovering Illinois
The state’s nickname, “The Prairie State”, gives you a great idea of what you can expect in most of the state. The majority of the state is part of the Central Plains region, which consists of quite fertile soil. As a matter of fact, the southern tip of the state is home to the Gulf Coastal Plain, which people refer to as “Egypt” due to the fact that it resembles the fertile land of the Nile delta in Egypt. Its natural resource is its soil and the crops that are grown in it, like apples, corn and soybeans.
Economic Overview of Illinois
The GSP, or Gross State Product, of Illinois is $800.4 billion, and that has a growth rate of 23.9k% between 2018 and 2023. The industries that make the most money in Illinois are Drug, Cosmetic & Toiletry Wholesaling, Property, Casualty and Direct Insurance, Gasoline & Petroleum Wholesaling, Commercial Banking, and Hospitals. The companies that employ the most people in the state are the State of Illinois, Walmart Inc., the City of Chicago, Amazon.Com, Inc., and Cook County. And the sectors that play the biggest roles in the state’s GSP are Manufacturing, Real Estate and Rental and Leasing, Professional, Scientific and Technical Services, Finance and Insurance, and Wholesale Trade.
Business Environment in Illinois
According to Usnews.com, the economy in Illinois ranks #39 in the country, its business environment is #26, and growth is #40. That checks out because job growth in the state is -0.6%, while the national statistic is 0.2%, and net migration to the state is 0.6%, while it’s 0.1% on the national level.
It comes in at #35 in affordability and #29 in economic opportunity. This is because while the median household income is $72,205 which is slightly higher than the national average of $69,717, the cost of living index is 101.4 which is over the national statistic of 100. So while the median household income is higher than average, so is the cost of living, which brings that down a tick.
The fiscal stability of the state got an abysmal #50 ranking, overall, long-term and short-term all three. It’s long been known that Illinois has its share of fiscal troubles and that’s reflected in the business community. The governor recently predicted that the state would soon have a surplus of $1.7 billion, and it’s got a BBB+ bond rating. But prior to that, bonds in the state were ranked with the lowest possible investment grade. Also, the budget hasn’t been balanced since 2001, so a surplus would be good, but it’s no wonder that people are skeptical about doing business in the state.
State-Specific Regulations and Incentives for Forming an LLC in Illinois
There are a few laws and incentives in place in Illinois that are designed to help new business owners.
- Regulatory Flexibility Program: This is a program that was instituted by the Illinois Department of Commerce and Economic Opportunity to help small businesses find ways to meet financial obligations involved with regulation compliance. Staff from the IDCEO comb through the rules and regulations that are suggested by state agencies, and they take feedback from the business community and send it to a bi-partisan oversight committee called the Joint Committee on Administrative Rules (JCAR) so they can review the administrative rules and regulations.
- Chicago Transit Authority (CTA) Small Business Program: This is a program designed by the CTA to allow small businesses to compete with big businesses in the state for contracts. The program sets aside a number of contract projects specifically for small businesses.
- Illinois Economic Development for a Growing Economy (EDGE): The EDGE program gives businesses tax incentives for moving or expanding to Illinois if there was competition from other states for the business to locate there. The tax credit can add up to the amount of state income taxes withheld for each employee for which new jobs were created with your company.
- Illinois High Impact Business Program: This is a program that provides exemptions and credits for building materials to encourage large projects and economic development.
- Illinois Large Business Development Program: This is a program that supplies grants to businesses that are taking on major relocation or expansion projects that will generate a lot of private investment and create a substantial number of jobs in Illinois. The amount of the grants is dependent on things such as the amount of jobs created, the retention involved, and the amount of investment it generates.
Small Business Job Creation Tax Credit: This is a tax credit offered to small businesses for creating jobs in the state. Small businesses that have 50 or less employees, as well as those that draw employees from the “Put Illinois to Work” program, and small businesses seeking to expand their employment qualify for the credit.
Pros and Cons of Establishing an LLC in Illinois
One benefit of doing business in Illinois is that it’s home to a lot of big cities. Chicago itself has 2.7 million people, and it’s part of the 3rd-biggest metropolitan areas in the nation. And if you count the surrounding areas and suburbs, that brings the population count of Chicagoland all the way up to 9.5 million. Large markets are a boon to any business because they not only provide thousands of customers, but also a large pool of potential employees.
Because of its large population, Illinois has a big market full of skilled workers, and they have a diverse range of skills. You’re more likely to find people with obscure skill sets in this large market than you would be in a scant market. And they have a slightly-higher-than-average unemployment rate, which means there are a lot of people looking for work and available to work for your company.
There are lots of companies headquartered in Illinois, like Boeing, Walgreens, Kraft Heinz and Allstate. These big companies will give your startup a bit of legitimacy. If you can’t say “look we’ve got Boeing and Allstate in our state and they’re thriving” then investors and financial institutions won’t be as confident in providing you with capital.
The state recently legalized gambling and cannabis, which has bolstered the economy and made the state seem a little more trendy and innovative, making investors consider backing some of the new businesses in these industries, as well as others (like technology).
There are downsides, as well.
Illinois isn’t going to shake its reputation of being a state with big financial problems for a long time. They’ve previously had things like billion-dollar deficits, and shut down a lot of government-funded programs and services. And throughout the 2010’s the state government couldn’t find solutions to these issues, so the state’s credit rating took a tumble. It’s understandable that people are weary of doing business here, or investing in a business in the state.
Personal income tax rates in Illinois are great, coming in at a low 4.95%. So if your LLC is taxed as a pass-through business entity, this means you’ll enjoy low tax rates. Unfortunately, if it’s taxed as a corporation, then you’ll have to deal with a sky-high corporate tax rate of 9.5%. Furthermore, their sales taxes are 6.25%, and some local areas have started adding sales taxes too, driving that figure even higher. And the state’s Tax Freedom Day is April 24th, which means that Illinois taxpayers don’t earn enough money to pay off their taxes in full as fast as 44 other states.
Procedure of Establishing an LLC in Illinois
Before you can really understand the times and estimates involved with forming a Limited Liability Company in Illinois, you should learn about the formation process. In this section, I’ll guide you through LLC formation and all of its steps!
- Get Your Articles of Organization Form: This is the most important form in the entire LLC formation process! It’s basically the application for your LLC. You get your Articles of Organization form from the Illinois Secretary of State.
- Choose A Business Name: There are a lot of stipulations about your business name, for instance, most states require you to put “LLC” or “Limited Liability Company” or something similar on the end of your name if you own an LLC. It also isn’t allowed to be the same as another business in the state, or too similar. It’s easy to find out whether your business name is available, though. Just run a business name search on the Secretary of State Department of Business Services website.
- Designate a Registered Agent: A registered agent is a person or business who accepts mail from government agencies (like the Secretary of State) and service of process on behalf of your company. You can choose anyone you’d like to fill this role, as long as they meet the legal requirements (such as having a physical address). You can also hire a professional registered agent service if you’d rather have the peace of mind that comes from hiring a professional company.
- Choose Your Business Address: Your business’s address will appear on the public record, which isn’t ideal if you list your personal address. That means that everyone can access your home address and use it for whatever they want, and if you’ve spent any amount of time on the Reddit Let’s Not Meet forums, then you know that’s not good. So, what are your options? Some registered agents will allow you to use their address. But they can only accept official mail from government agencies and service of process. Your general mail can’t be sent there, so that’s not a total solution. You should look into a virtual address or office.
- Sign and File: We suggest that you review the information on your form several times to make sure it’s accurate first, but then it’s time to sign and file your Articles of Organization. Give careful consideration to who should sign the document. If you do this yourself, then your information is going to be on public record. You can hire an organizer, however, or an LLC formation service, to eliminate this problem. Once you’ve submitted your documents, then you’ll have to wait for the Secretary of State to get back to you about your filing.
Once you’ve submitted your documents, you need to do a few more things. You’ll need an EIN or Employer Identification Number to hire employees or open a business bank account. It’s simple and free to apply for one online from the IRS. You’ll likely need business licenses, which you can find through the Department of Commerce. And you’ll need to get set up with the Illinois Department of Revenue to collect sales tax. For more information about other LLC activities, read How to Start an LLC in Illinois.
Necessary Documentation for Filing an LLC in Illinois
Having all of your paperwork on hand can save you some time during filing. Here are some of the forms and applications you’ll need when forming an LLC in Illinois.
You’ll need an EIN (Employer Identification Number) from the IRS for tax reasons, as well as for things like opening a business bank account. You’ll need it along with a name reservation with your Articles of Organization form. You should also draft an Operating Agreement to submit along with these other documents. It’s not a legal requirement made by the state, but it’s a generally accepted rule that it’s important enough that you need it anyway.
You also need any forms you got when registering for taxes with the Department of Revenue, and all of your business licenses and permits, and your initial report.
Legal Requirements for Starting an LLC in Illinois
All LLCs in the state are required to file an annual report with the Secretary of State. This ensures that your business information remains current with the government. There’s an annual fee of $75 for LLCs. Your first one is called an initial report, and you’ll need to have it along with the rest of your documents when you start your LLC.
You’re also required by the state to have a registered agent. This can be a person you trust that meets the legal requirements (friend, family, co-worker), or you can hire a registered agent service.
Time Frame for Establishing an LLC in Illinois
In this part of our guide, we’ll break down everything you need to know about the time it takes to get an LLC in Illinois.
How Long Does the Initial Paperwork Take in the State of Illinois?
Depending on whether you choose the mail filing option or to file online, it could take between 4 days and 4 weeks.
Processing Times in the State of Illinois
Processing time for filing by mail is between 7-14 business days, while online filing processing time is 5-10 days. This doesn’t count approval time, which is the entire time it takes to receive approval for your LLC, including processing time. Processing time is simply the amount of time it takes for the appropriate government agency to review your forms and enter your information into their database.
Common Delays in the LLC Formation Process in Illinois
Here are some of the most common things that slow down the LLC formation process in Illinois.
- Filing Options: The overall approval time of your LLC is drastically impacted by the method you use to file. Online filing is a lot faster, as is expedited processing. If you file by mail, you have to deal with additional mail time.
- Document Issues: If you don’t provide the proper documents with your Articles of Organization, or if you don’t list the right information, then your application request could be rejected. If that happens then you’ll have to start the process all over again, which can delay the formation process significantly.
- Processing Errors: We all love technology- until it doesn’t work right! Things like equipment going wonky or websites going down can hold up the formation process, too.
Expedited Processing for LLC Formation in Illinois
It makes good sense that if you need to form your LLC quickly, an expedited option could help with that. It’s called “expedited” for a reason, right? Here’s all the details about expedited processing in Illinois.
What Are the Expedited Options Available?
Illinois has a 24-hour expedited processing option, which is faster than online or mail filing.
Additional Costs for Expedited Services in Illinois
The 24-hour expedited processing option is $100. You have to pay this fee in addition to the other filing fees, so it’s more accurate to read that as “$100 extra”.
Comparing LLC Formation Time Frame in Illinois with Other States
Comparing the formation process from state-to-state is good practice. Many business owners wouldn’t consider forming their business in one state without researching other states first. Even if you’re dead-set on forming your LLC in Illinois, it can be helpful to know how long it takes to form an LLC in other states, too.
Brief Comparison with Key States
In Illinois, processing times are 5-10 business days for online filing, and 7-14 business days for mail filing, with a 24-hour expedited processing option.
Here are a few states with faster processing times.
There’s a whole list of states with faster processing times. Alabama, Alaska, Colorado, Kansas, Kentucky, Minnesota, Missouri, New York, South Dakota, Tennessee, Wisconsin and Wyoming all have immediate online processing. Ohio and Kentucky have 1-day processing for mail filing, and Alabama, Massachusetts and South Dakota have mail processing times of 1-2 days. Several states have faster expedited processing times: Nevada, West Virginia, Delaware, Michigan and Montana all have 1-hour options, New York 2 hours, Louisiana 2-4 hours, and California has a 4 hour expedited processing option.
Likewise, Alaska, Arkansas, Idaho, Indiana, Kansas, Kentucky, Mississippi, Missouri, Nebraska, New Mexico, Oregon, Rhode Island, Tennessee, Vermont and Wyoming don’t offer expedited processing. Online processing in Maryland is 2 weeks, Arizona is 14-16 days, Texas is 13-15 days, and Washington is 12-14 days. When it comes to mail times, D.C. takes 2-4 weeks, Missouri and Nevada take 3-4 weeks, Oregon takes 4-6 weeks, Texas takes 4-8 weeks, Maryland takes 5-8 weeks, Washington takes 5-6 weeks, and New York takes 8 months.
We know we just threw a lot of numbers and data at you just there, so to summarize: Illinois has reasonable and average formation times.
Why is Illinois a Favorable Place for Forming an LLC?
Illinois can be a favorable place to form a Limited Liability Company because it’s home to big cities, like Chicago. This means that your business has access to thousands of potential customers, and employees. And those big cities mean that employees in the state have a diverse range of skills and education that you may not find in smaller markets. The unemployment rate in the state is a little high, which means that these diverse and skilled workers are looking for a place to work.
There are a lot of major companies with headquarters in Illinois, like Boeing and Walgreens. This will make it easier to obtain capital for your company because if these big companies trust the state, it adds a little bit of legitimacy and trust to your own business acumen.
And there are low rates on personal income taxes, which is great news for any LLC owner because of their pass-through tax structure. Because of this, it benefits LLC owners in the state to remain pass-through business entities rather than being taxed as corporations because corporations in the state have to deal with a corporate tax rate of 9.5%.
Plus, because gambling and cannabis have been legalized in Illinois, if you can find a way to market your business to cater to those industries, you’ll be able to benefit from their success, too!
