You have run the business in your own name for a while. Customers pay you. Suppliers bill you. Then something changes. You hire your first worker. A partner wants in. A customer gets hurt at a job. Or your CPA says the words S corp.
Most of the LLC pages on my site are written for landlords. A rental LLC holds one building and does little else. An operating company does much more. It signs contracts and pays wages. It holds licenses and may collect sales tax. This page covers what changes when the LLC runs a business.
I form an Illinois LLC for an operating business for a $750 flat fee. The $150 state filing fee is included. So are the operating agreement and the EIN.
The filing is the easy part. An operating business needs four more things:
- Licenses issued in the LLC's name, where your trade or city requires them.
- Tax registrations with the Illinois Department of Revenue.
- Employer accounts, once you hire.
- An operating agreement that says how working owners get paid and how they leave.
The LLC protects you from the company's debts. It does not protect you from your own wrongful acts (805 ILCS 180/10-10(a-5)). So you still need insurance.
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What Does the $750 Include?
The $750 flat fee covers the whole formation. It is one price, not a base rate with add-ons. The fee covers four things.
- I draft and file the Articles of Organization with the Illinois Secretary of State.
- The $150 state filing fee is included. The fee is set by 805 ILCS 180/50-10(b)(1).
- I draft the operating agreement for the way your business runs.
- I obtain the EIN from the IRS.
The $750 covers a single-owner LLC or one with several partners. It covers the buy-sell, deadlock, and member pay terms described below.
Banks often ask for the EIN and the operating agreement when you open the business account. Lenders ask too. In October 2026, a lender refused a client's refinance because the LLC had no operating agreement. I tell that story on my DIY versus attorney page.
Maybe you work alone, sell no goods, and hire nobody. Maybe no license is involved. Then file the LLC yourself on the Secretary of State portal. The state fee is $150, and the portal takes about 20 minutes. You can add an operating agreement later. My pitch starts when there is a partner, a payroll, or a license.
How Is a Business LLC Different From a Rental LLC?
The filing is identical. The risks and the paperwork are not. This table shows where the two jobs split.
| Issue | Rental LLC | Operating Business LLC |
|---|---|---|
| Key first task | Deed the building in | License the LLC itself |
| Income type | Rent, no self-employment tax | Active, self-employment tax applies |
| Operating agreement focus | Lender and title | Pay, deadlock, exit |
| S corp election | Rarely helps | Worth a CPA review |
The income row comes from the Internal Revenue Code. IRC 1402(a)(1) excludes rentals from real estate from self-employment earnings. Active business income has no such exclusion.
Does My License Go in the LLC's Name?
Often, yes. A license can belong to the company, not to you. Roofing is the clearest Illinois example.
The Illinois Roofing Industry Licensing Act covers roofing contractors. When an LLC applies, the license issues in the company name. The LLC names one qualifying party. That person takes the exam and works in the business day to day (225 ILCS 335/3(1)). The application must also show four things (225 ILCS 335/3(2)):
- Public liability and property damage insurance.
- Workers' compensation insurance for your employees.
- An unemployment insurance account number from the Illinois Department of Employment Security (IDES).
- A continuous bond: $10,000 for a limited license, $25,000 for an unlimited license.
The roofing Act requires the qualifying party to be a paid employee. The company must withhold payroll taxes for that person. The qualifying party cannot receive a Form 1099 (225 ILCS 335/3(3.5)). Plan this before you form the LLC. An owner is often not on the payroll. A single-member owner or a partner-taxed member usually takes draws instead. An S corp election is one route. Plan it with me and your CPA.
Chicago adds its own layer. The Municipal Code makes it unlawful to run a business that needs a City license without that license. Each location needs its own license. The fine is $500 to $1,000 per offense, and each day counts as a new offense (Chicago Municipal Code 4-4-010).
Other trades and food businesses carry their own license rules. Ask me about your trade on the formation call.
Form the LLC before you apply. Then put the licenses, insurance, and tax accounts in the LLC's name.
Which Tax and Employer Registrations Does the LLC Need?
A rental LLC usually needs an EIN and a bank account. An operating business needs more. Work through this list in order.
- EIN. The IRS issues it for free. My office obtains it as part of the $750.
- Sales tax. Illinois requires a certificate of registration from the Department of Revenue. Without it, selling tangible personal property at retail is unlawful. Since January 1, 2025, leasing counts as selling (35 ILCS 120/2a). For an LLC, the application lists each manager and member by name, Social Security number, and FEIN. Contractors and service firms follow different tax rules. Ask me how they apply to your work.
- Illinois withholding. Once the LLC pays wages, it withholds Illinois income tax. It files a return each quarter, due the last day of the month after the quarter ends (35 ILCS 5/704A(b)).
- Unemployment insurance. Employers owe contributions to IDES on wages. The contributions are due each quarter, by the last day of the month after the quarter ends (820 ILCS 405/1400).
- Workers' compensation. Employers covered by the Workers' Compensation Act must insure their liability or qualify to self-insure (820 ILCS 305/4(a)).
Do not spend the sales tax or the withholding you collect. Illinois calls a tax you collect or withhold from another person a trust tax (35 ILCS 735/3-7(f)). The state can hold the responsible person personally liable for it. The penalty reaches an officer or employee who controls the filing and payment. For an LLC, that includes a member or a manager (35 ILCS 735/3-7(e)). If that person wilfully fails to pay, the penalty equals the unpaid tax, plus interest and penalties (35 ILCS 735/3-7(a)).
What Should the Operating Agreement Say When the Owners Work in the Business?
A rental operating agreement answers the lender. A business operating agreement answers the partners. Start with what Illinois law does if you write nothing.
- The LLC is member-managed unless the operating agreement says otherwise (805 ILCS 180/15-1(a)).
- Each member has equal management rights. A majority of the members decides most matters (805 ILCS 180/15-1(b)).
- Some decisions need every member. These include admitting a new member, redeeming an interest, and selling substantially all the company's property (805 ILCS 180/15-1(d)).
Now do the arithmetic for two equal partners. Two members cannot form a majority if they disagree. One no vote stops the company. That is a deadlock, and the statute does not break it. Your operating agreement must.
Buy-Sell Terms
Write down what ends a membership. Death, disability, quitting, and being fired are the usual triggers. Pick one valuation method. Say how the buyout gets paid and over how long. I defended a family business where the agreement defined value two different ways. I tell that story as An Agreement That Fought Itself.
Deadlock Terms
Pick the tie-breaker before you need it. Common choices are a neutral advisor, mediation, or a buyout that one partner can trigger. For valuation disputes, I usually name a neutral CPA as the decision maker.
Pay for Members Who Work
Say which members work in the business and what each one does. Say how each working member gets paid before profits are split. Say what happens to the membership if a working member stops working.
Tax law shapes this section. A member of an LLC taxed as a partnership is usually not a W-2 employee. Pay for that member's work is usually a guaranteed payment. Your CPA sets the numbers. My operating agreement guide covers the rest of the document.
"The filing takes 20 minutes. The partnership takes years. Write the rules first."
$750 Flat Fee. State Fee and Operating Agreement Included.
Tell me what your business does and who owns it. I will tell you which licenses and registrations come next. Then I file the Articles, draft the operating agreement, and obtain the EIN.
All consultations are confidential.
Does the LLC Replace Insurance?
No. The LLC and the insurance policy protect against different things.
The LLC protects you from the company's debts. Under 805 ILCS 180/10-10(a), a member is not personally liable for a company debt just by being a member. But subsection (a-5) took effect on January 1, 2025. It keeps a member liable for the member's own wrongful acts. That holds even when the member acts for the LLC.
So picture an owner who does the work personally. A customer is hurt by that work. The customer can sue the LLC. The customer can also try to reach the owner. The LLC wall does not stop that second claim. A general liability policy is the layer that pays covered claims. Ask your broker what the policy excludes. Then put the LLC's name on the policy.
Run every business dollar through the LLC's own bank account. Keep personal bills off it. My LLC versus umbrella insurance page explains how the two layers work together.
When Does an S Corp Election Matter?
An S corp is a tax election, not a new kind of company. The LLC stays an LLC under Illinois law. The election changes how the IRS taxes it.
For a landlord, the election rarely helps. Rent is not self-employment income, so there is nothing to save. For an operating business, the math can change. Active profit carries self-employment tax. An S corp pays each working owner a reasonable salary through payroll. Profit above that salary is not subject to self-employment tax. In exchange, you run payroll and file a separate return every year.
Form the LLC now. Elect S corp status only after your CPA shows the tax savings beat the added payroll and return costs. I draft the documents. Your CPA runs the numbers.
My LLC versus S corp comparison walks through the cost side. If you hold a roofing license, read the payroll warning above first. The qualifying party rule can push the decision.
What Does It Cost to Keep the LLC Running?
The state charges a fee for each filing. The fees below come from 805 ILCS 180/50-10(b).
| Filing | State Fee | With My Office |
|---|---|---|
| Articles of Organization | $150 | $750 flat, fee included |
| Annual report, every year | $75 | $200 flat, fee included |
| Reinstatement application | $200 | Quoted after a call |
A late annual report adds a penalty. If you miss it long enough, the state dissolves the LLC. Then reinstatement costs far more than the report did. My annual report filing service covers the deadline and the late rules.
Formation is the first job, not the last. I also handle contracts, commercial leases, and the eventual sale of the business. Those services and their prices are on my small business attorney page. If your LLC will hold a rental building instead, start with my rental property LLC page. If you are launching an app, read my guide for software founders.
Frequently Asked Questions
Sources
- 805 ILCS 180/50-10 (Secretary of State fees), 180/15-1 (management), 180/10-10 (liability of members and managers, as amended by P.A. 103-920, eff. January 1, 2025)
- 225 ILCS 335/3 (roofing contractor license application)
- 35 ILCS 120/2a (registration of retailers); 35 ILCS 5/704A (employer withholding returns); 35 ILCS 735/3-7 (personal liability penalty)
- 820 ILCS 405/1400 (unemployment insurance contributions); 820 ILCS 305/4 (workers' compensation insurance)
- Chicago Municipal Code 4-4-010 (business license required)
- 26 U.S.C. 1402(a)(1) (rentals excluded from self-employment earnings)
Further Reading
Ready to Put the Business in an LLC?
$750 flat covers the Articles, the operating agreement, the EIN, and the $150 state fee. I map your licenses and registrations on the first call.