A limited liability company (LLC for short) is a way to legally structure a business. It combines the limited liability of a corporation with the flexibility and lack of formalities provided by a partnership or sole proprietorship. Any business owner who seeks to limit his or her personal liability for business debts and lawsuits should consider forming an LLC. For more information on how to form an LLC in any state, see Nolo's article How to Form an LLC.

1. Choose a Name for Your LLC

Under Illinois law, an LLC name must contain as the last words, "limited liability company," "L.L.C.," or "LLC." The abbreviations "Ltd." and "Co." are not allowed in Illinois. The name must also not include the words "Corporation," "Corp.," "Incorporated," "Inc.," "Ltd.," "Co.," "Limited Partnership," or "L.P."

Your LLC's name must be recognizably different from the names of other business entities already on file with the Illinois Secretary of State. Names may be checked for availability by searching the Secretary of State Business Services name database. You may reserve a name for up to 90 days by filing an Application to Reserve a Name (Form LLC-1.15). The filing fee is $25.

2. Appoint a Registered Agent

Every Illinois LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on the LLC's behalf if it is sued. A registered agent may be an individual who resides in Illinois, or a domestic or foreign corporation authorized to do business in Illinois. If it's a corporation, its articles must authorize it to act as an agent. The registered agent must have a physical street address in Illinois.

3. File Articles of Organization

An Illinois LLC is created by filing Articles of Organization, Form LLC-5.5 with the Illinois Secretary of State Department of Business Services. The articles must include:

• the LLC's name
• the address of the LLC's principal place of business
• when the Articles become effective (upon filing or a later date)
• the name and address of the LLC's registered agent
• the purpose(s) for which the LLC is organized
• a statement regarding the LLC's duration (perpetual or for a specified period)
• the names and addresses of the initial manager(s) if manager-managed; the names and addresses of initial member(s) if member-managed
• and the name, address, and signatures of the organizer(s).

The filing fee is $150. The articles may be filed online or by mail. Online filings are handled on an expedited basis within 24 hours.

4. Prepare an Operating Agreement

An LLC operating agreement is not required in Illinois, but is highly advisable. This is an internal document that establishes how your LLC will be run. It sets out the rights and responsibilities of the members and managers, including how the LLC will be managed. It can also help preserve your limited liability by showing that your LLC is truly a separate business entity. In the absence of an operating agreement, state LLC law will govern how your LLC operates.

For help creating an LLC operating agreement, see Form Your Own Limited Liability Company, by Anthony Mancuso (Nolo) or use Nolo's Online LLC. If an operating agreement is created, it need not be filed with the Articles of Organization.

5. Obtain an EIN

If your LLC has more than one member, it must obtain its own IRS Employer Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you must obtain an EIN for it only if it will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online application on the IRS website. There is no filing fee.

6. File Annual Reports

All LLCs doing business in Illinois must file an annual report with the Secretary of State. The report is due each year prior to the first day of the LLC's anniversary month (the month in which it was organized). For example, if your LLC was created on July 15 then your report would be due by July 1. The report can be filed online or by mail with Form LLC-50.1. The filing fee is $75. Filing a report late (more than 60 days after due date) incurs an additional $100 penalty. For more information on Illinois LLC annual reports, see Nolo's article Illinois LLC Annual Filing Requirements.