How to Form an Illinois Professional LLC

What is an Illinois Professional LLC?

The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. A PLLC in Illinois is a limited liability company that is formed to provide professional services that require a license from the Illinois Department of Financial and Professional Regulation. The managers and members of PLLCs formed to perform certain professional services, such as dentistry, medicine, social work, and real estate, among others, must also meet certain other licensing requirements under Illinois law.

The Illinois PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.

PLLCs in Illinois have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.

An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.

Forming a PLLC in Illinois (in 6 Steps)

Step One: Choose a PLLC Name

Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:

Legalities

The names of professional limited liability companies in Illinois are required to include the terms “professional limited liability company,” “P.L.L.C.,” or “PLLC.” You may not include terms such as “corporation, “ “incorporated,” or “limited partnership” that indicate another entity type or any word or phrase that implies your PLLC is authorized to be in the business of a corporate fiduciary unless permitted by the Secretary of Financial and Professional Regulation under Illinois law.

Explanatory Naming

Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”

Do You Like It?

At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.

Name Availability

The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. You can search the Illinois Secretary of State’s Corporations/LLC Database to check if a name is available. To ensure no one else registers your chosen name before you file your Articles of Organization as described below in step three, you can reserve your name for 90 days for a fee of $25 by submitting an Application to Reserve a Name to the Secretary of State.

Step Two: Designate a Registered Agent

Every PLLC in Illinois is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.

Your registered agent must reside in Illinois, and if the agent is an entity, it must be authorized to act as an agent in Illinois. Your registered agent must also have a street address within the state of Illinois, which will be the address of your PLLC’s registered office. Your PLLC is not permitted to act as its own registered agent.

Without a registered agent, you could lose your good standing with the state of Illinois, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.

Our Recommendation

At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.

Step Three: File Formation Documents with the State

Once you are ready to form your Illinois professional limited liability company, you will fill out the Articles of Organization.

This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:

• Name of your business
• Address of your PLLC’s principal place of business
• Effectiveness date of the Articles of Organization
• Registered agent’s name and registered office address
• Purpose of your PLLC, including the specific professional service or related professional services to be rendered by your PLLC
• Name and business address of the managers and any member with the authority of a manager
• Other provisions regulating the internal affairs of your PLLC, if any
• Name, address, and signature of the organizer(s)

To file your Articles of Organization, you must mail your completed documents to the Illinois Secretary of State along with the filing fee. Note that your PLLC will also need to register with the Illinois Department of Financial and Professional Regulation.

Cost to Form a PLLC

The filing fee for the Articles of Organization is $150. The fee for expedited processing is an additional $100.

Processing Time

Filings are typically reviewed within 10 days of receipt. An expedited filing will be reviewed within 24 hours, excluding weekends and holidays.

Step Four: Create an Operating Agreement

After you register a PLLC in Illinois, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.

When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.

An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:

• Individual members’ ownership percentages
• Rights and responsibilities
• Voting powers and meeting guidelines
• Allocation of profits and losses
• Management rules for the PLLC
• Provisions for buying a member owner out, or transferring their shares in the case of illness or death

Step Five: Handle Taxation Requirements

Federal Requirements

The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.

For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.

State Requirements

Your PLLC may or may not be subject to state income tax, depending on how you elect to treat your PLLC for tax purposes. Your PLLC may also be subject to sales tax or other state-level taxes. You can contact the Illinois Department of Revenue, Income Tax Division or visit its website for more information on the taxes that may apply to your business. Once you’ve determined your PLLC’s tax obligations, you can use the MyTax Illinois website to file and pay taxes online, manage your tax account, and more.

Local Requirements

Depending on where in Illinois your business is located, you may also need to pay some local taxes. You should contact your local revenue department to confirm if any additional taxes apply to your PLLC’s business activities. Business information for the four largest cities in Illinois can be found at the following links: Chicago, Aurora, Rockford, and Joliet.

Step Six: Obtain Business Licenses and Permits

Most professions in Illinois are licensed by the Illinois Department of Financial and Professional Regulation. You should review the list of regulated professions on their website and apply for any that are required for your business. You will likely need at least one of these licenses given the nature of the a PLLC. You must obtain any required licenses prior to conducting any business.

Note that Illinois also requires those who conduct business within the state to register with the Illinois Department of Revenue by submitting an Illinois Business Registration Application. You can submit this form either online through MyTax Illinois or by mailing a paper form.

Would You Prefer a Professional Form Your PLLC?

If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.

Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.

Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.

Next Steps: What to Do After Creating a PLLC in Illinois

Open a business bank account

We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.

Business insurance

Businesses with employees are generally required to either obtain workers’ compensation insurance or apply for approval as a self-insurer. See the Illinois Workers’ Compensation Commission’s Handbook on Workers’ Compensation and Occupational Diseases for more information on workers’ compensation insurance in Illinois. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.

Understand income reporting

Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.

Income tax forms that you may need to report your PLLC’s income are available on the Illinois Department of Revenue’s website.

Understand annual reporting

The Illinois Secretary of States requires entities to file an Annual Report in order to maintain its existence. This report ensures your PLLC’s information on file is current. You must file the Annual Report every year prior to the first day of the month in which your PLLC was organized.

Find an accountant

We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.