A Limited Liability Company (LLC)is a legal entity and a business structure in Illinois and the United States that protects business owners from personal responsibility for their liabilities or debt. It is a hybrid entity that combines the benefits of a corporation with those of sole proprietorship or partnership.

Like any other business structure, setting up your business as a Limited Liability Company in Illinois can have both advantages and disadvantages. If the business owner fails to comply with the rules of maintaining the entity, the court can pierce the LLC’s veil in a lawsuit against the company, exposing the owner’s personal assets to court judgement. However, the benefits outweigh the disadvantages by far. The entity allows business owners and entrepreneurs to take risks in business because an LLC’s liabilities are contained within the business itself rather than you as the owner.

The Advantages  of a LLC in Illinois

1. Tax Flexibility.

Like a partnership or a sole proprietorship, the limited liability company is treated as a “pass-through” entity by default for federal tax purposes. An LLC is flexible in choosing how it will be taxed. For example, a single-member LLC can be taxed as a sole proprietorship, C Corporation or an S Corporation. A multi-member LLC can be taxed as an S corporation, C Corporation or a partnership, depending on the owner’s preference.

An LLC can only be taxed as an S or C Corporation if the owner elects that classification in the federal tax election.  In Illinois, the profits realized from an LLC are passed to the members(in an LLC, owners are called members). The members are then expected to pay federal self-employment tax, and state and federal income tax on the share of the profits.

2.  Registration Costs.

Forming a limited liability company in Illinois requires a business owner to file Articles of Organization with the Secretary of State. The process requires $150 as a registration fee and an annual franchise fee of $75. The total charges are approximately the same as those paid for limited partnerships and corporations.

Illinois also has a unique form of LLC called a Series LLC that allows several entities to be registered and operate under one umbrella. The Articles of Organization of this entity allow it to issue subsidiaries, or ‘series’ and for every series to operate as a separate entity with separate records and books of account, bank account, name, and most importantly, separate liability. Series LLCs allow owners to create separate ‘baskets’ for their precious eggs, so that if one investmentor business should fail, then the bad eggs cannot harm the other investments . The registration fee for a series LLC is $400, and a fee for each series. Electing S or C Corporations have tax advantages.

3.  Limitation of Liability.

LLC owners (members) are not liable for the liabilities or debts of the business, including the liabilities from lawsuits against the company. This feature of asset protection is the main reason that attracts most business owners in Illinois to set up an LLC. The liability risks are to the business only, thus giving the owner peace of mind to focus on business.

4.  Minimal Corporate Formalities.

Corporations have a three-tiered management structure comprising officers, shareholders, and a board of directors. In an LLC, the person in charge is called a ‘Manger’. Corporations must hold regular meetings with the shareholders and board of directors, keep corporate minutes, and file the annual reports with the state. In Illinois, an LLC can be managed by the member(s) themselves or by a manager hired by the members. This LLC entity has no requirements for the members to conduct annual meetings or keep minutes of the regular meetings, and, Illinois LLCs are thus much less ‘formal’ than corporations.

5.  Flexible Membership.

Unlike the S Corporation, which limits its membership to 100, an LLC has no restrictions on the number of members. The S Corporation also requires all shareholders to be citizens of the U.S. Any person, including corporations and other LLCs, may be a member of an Illinois LLC.

Are you considering setting up your Illinois business as an LLC? Libertyville, Illinois law firm, Johnston Tomei Lenczycki & Goldberg LLC, can help. We offer our clients various legal business services, from formation to litigation, real estate litigation and transactions, contract review, and more. Contact us today to schedule your free initial consultation, or visit our website for more business legal information.