As you consider how to organize your small business, you may realize that you have a series of business ventures that need to be treated individually yet are also linked. A Series Limited Liability Company (LLC) accounts for both the individual nature of each operation and the features common to all of them by providing certain legal protections. In this article, we’ll walk you through the steps to create a Series LLC in Illinois.
A Series LLC is a unique LLC structure that isn’t available in many states but is available in Illinois. It’s similar to a standard LLC as it separates a business owner’s personal assets from the assets of the business. By creating this separation, a Series LLC protects business owners just like an Illinois LLC in ways a sole proprietorship or partnership does not. A Series LLC also offers multiple tax options, simplified administration, and flexibility in management – benefits not available in a sole proprietorship.
Related: How to start a business in Illinois
What makes an Illinois Series LLC unique is that it allows a single “master LLC” to house and manage several separate LLCs, each with its own focus within the overall business. Each unit LLC in the series can operate as a separate business entity while still remaining within the scope of the overall business. For example, many property managers choose a Series LLC to manage individual rental properties under the umbrella of the management company. Illinois Series LLC Statutes were created under state law 805 ILCS 180 / Limited Liability Act.
Like a standard LLC, a Series LLC provides personal liability protection. Like a regular LLC, a Series LLC may also help some business owners save money on taxes.
Steps To Start A Series LLC In Illinois
The steps to start a Series LLC are similar to those of the regular LLC in Illinois.
Step 1: Choose Names for the Series LLC and Unit LLCs
It’s easiest to begin by naming the umbrella or parent company in the Series LLC. This name must be distinct from the names of other corporations and limited liability companies in Illinois. Use the Illinois Corporate & LLC name search tool to determine whether the name you choose is available for use.
In addition to checking with the state of Illinois, consider checking whether an Internet domain name is available to match the name of your planned Series LLC. A matching domain name can make it easier for customers to find you online.
No matter which name you choose, Illinois law requires that the business name be followed by one of the following designators:
- Limited Liability Company
The name may not include the terms “Corporation,” “Corp.”, “Incorporated,” “Inc.,” “Ltd.,” “Co.”, “Limited Partnership,” or “L.P.” These terms designate other types of business structures.
Once you’ve chosen a name for the Series LLC’s umbrella LLC, create names for each of the unit LLCs. Names for unit LLCs must:
- Include the name of the parent company. If your parent LLC is named “Foxglove Fine Rentals LLC,” for instance, your unit LLCs might be named “Foxglove Fine Rentals 123 Main Street LLC” or “Foxglove Fine Rentals on Main LLC,” for instance.
- Include the LLC, Limited Liability Company, or related designators. Limited Liability Company, LLC, and L.L.C. are all acceptable – but at least one must be included in each unit LLC’s name.
- Account for specific rules for certain LLCs. If the name of either the umbrella or unit LLCs include words like “Bank” or “Attorney,” you may need to file additional paperwork to demonstrate that at least one member is licensed in the named field.
Check to make sure that unit LLC names do not currently match a name in the Illinois registry as well.
Step 2: Appoint an Illinois Registered Agent
Once you have your LLC name, it’s time to choose a registered agent. A registered agent must have a physical address in the state of Illinois.
An LLC’s registered agent is its official contact person for legal purposes. The registered agent is responsible for accepting service of process, official documents sent by the state or federal government, and other essential paperwork.
In a Series LLC, you may name one registered agent for the umbrella LLC and separate registered agents for each of the unit LLCs. You may also decide to name the same registered agent for all LLCs.
Whether you name yourself the registered agent, choose another member of the LLC, or designate a third party, such as an attorney, ensure that you’re choosing someone who will maintain an address in Illinois and can be trusted with paperwork.
Related: What is an Illinois registered agent?
Step 3: File the Required Illinois Series LLC Documentation
Illinois requires two filings to establish a Series LLC: the Articles of Organization and the Certificate of Designation.
The Articles of Organization provide basic information about your umbrella or parent LLC, including its name, its registered agent, and the purposes for which it is created. This document establishes the umbrella LLC as a legal entity.
The required form is Form LLC-5.5(S), which is available online.
When filing a Series LLC on the Illinois Secretary of State website, choose the second option: “I wish to form a limited liability company with the ability to establish series.” The website will walk you through the information required to complete the articles of organization. It also provides a way to pay online.
The Certificate of Designation establishes each unit LLC within the series. A pdf version of the form is available online from the Illinois Secretary of State. When the form is filed with the required fees, it establishes each unit LLC as a legal entity.
What to Do After Starting a Series LLC in Illinois
Once the Articles of Organization and Certificate of Designations are filed, the Series LLC – both its umbrella LLC and its unit LLCs – exist as legal business entities in Illinois. Yet these LLCs need additional work to support your business.
Prepare an Illinois Series LLC Operating Agreement
A Series LLC Operating Agreement serves as the “constitution” for your Series LLC. In the Operating Agreement, you can:
- Establish the general structure for the company,
- Identify the owner or owners,
- Specify the type and scope of powers held by each owner,
- Define how capital contributions will be made and distributions made,
- Determine how owners might leave the LLC or how the LLC might end, and
- Address other essential business matters, like how to handle bookkeeping.
Illinois does not require a Series LLC to file its operating agreement with the state. Nonetheless, such an agreement can provide guidelines for your business. It can also forestall or minimize arguments in the future. It is worthwhile to take the time to create a clear, thorough, and legally compliant Articles of Organization.
Obtain an EIN
An Employer Identification Number (EIN) identifies your LLCs as unique entities for tax purposes. It functions similarly to a Social Security Number (SSN) for individuals.
Apply for an EIN online with the Internal Revenue Service (IRS). Each unit LLC, as well as the umbrella LLC, will need an EIN.
When filing for an EIN:
- Have your own taxpayer number handy. The person applying for the EIN must have a valid taxpayer number, such as a Social Security number. For EINs for unit LLCs, the valid taxpayer number can be the umbrella company’s EIN.
- Be prepared to finish the online application in one sitting. The IRS website does not allow you to save an EIN application and return to it. The system will also log you out after 15 minutes of inactivity.
- Plan for your unit LLCs to take time. The IRS limits applicants to one EIN per “responsible party” per day. If you have several unit LLCs, you will need to schedule time to apply for each unit LLC’s EIN over several days.
Once the online application is complete, the IRS generates an EIN immediately. You can download, print, and save your EIN confirmation notice. We recommend making both paper and electronic copies of the notice and storing them in secure locations.
How much does it cost to get an EIN in Illinois?
The IRS does not charge for EINs. Obtaining one is free if you fill out the IRS application yourself. If you choose to hire someone else to obtain your EIN, however, you may be required to pay that person a fee for their assistance.
Related: How to register for an EIN
Open a Bank Account for the Series LLC
Once your umbrella LLC and each of its unit LLCs have an EIN, you can open bank accounts for each LLC. Each LLC should have its own bank account and maintain its own set of financial records.
To open a bank account for each LLC, you will need:
- A banking resolution, drafted and signed by the LLC members that authorizes the opening of a bank account belonging to the LLC.
- Copies of your Articles of Organization and, for the unit LLCs, each unit’s Certificate of Designation.
- Driver’s licenses or other photo IDs for the LLC members (ask the bank for a list of acceptable IDs if needed).
Some banks may also require an Illinois Certificate of Good Standing, demonstrating the LLC is active and in good standing with the state. This requirement generally does not apply to newly-created Series LLCs.
Apply for Business Licenses and Permits
Once you have bank accounts prepared for the umbrella LLC and its unit LLCs, you can start applying for any necessary business licenses or permits. Common licenses and permits required in Illinois include:
- Business license: Some Illinois cities require businesses to have a local business license before they begin offering goods or services to customers. Make sure each unit LLC has a business license for each locale in which it operates. Also, make sure the umbrella LLC has the necessary business licenses.
- Professional licenses: Many Illinois businesses must have a license from the state to practice a particular trade or profession. Examples include licenses for hairdressers, athletic trainers, and locksmiths. Check the website of the Illinois Department of Financial and Professional Regulation (IDFPR) for licensing requirements and to apply for or renew a license online.
- Sales tax permits: These permits allow a business to sell products (and some services) and to collect required sales taxes.
- Zoning and building permits: These permits allow a business to perform certain activities on certain pieces of property, from running certain types of machinery to building new structures.
Because a Series LLC is comprised of units, it’s important to ensure that each unit LLC has the licenses and permits it requires. For instance, if your Series LLC manages several rental properties, each with its own unit LLC, you will need to make sure each property has the correct zoning permits and other needed licenses.
The Illinois Secretary of State requires LLCs to file an annual report. Annual reports can be filed with the Secretary of State online in most cases. The Secretary of State’s website also includes instructions for what to do if you cannot file online.
Your annual report is due before the first day of the month in which the LLC was created. For example, if you created your LLC on August 10, 2023, your first annual report is due no later than August 1, 2024.
Annual reports must be filed both for the umbrella LLC and each unit LLC in the series. Since these annual reports can add up, it’s important to schedule enough time each year to ensure all annual reports are completed.
Illinois Series LLC FAQs
How much does it cost to form a Series LLC in Illinois?
The cost to form a Series LLC in Illinois is $400. This fee is paid directly to the Illinois Secretary of State.
Is there a yearly fee for a Series LLC in Illinois?
In addition to the initial filing fee, a Series LLC must pay a $75 fee each year for the master series and an additional $50 for each additional active series.
How long does it take for a Series LLC to be approved in Illinois?
Typically, a single LLC requires 7 to 10 business days for approval if filed online and three to four weeks if filed on paper forms. For a Series LLC, these times may be extended if there are several unit LLCs.
One-day business processing is also available from the Secretary of State for an additional fee.
Can you be your own registered agent for a Series LLC in Illinois?
Anyone may be a registered agent for a Series LLC in Illinois if they are:
-18 years of age or older,
– A resident of Illinois with a permanent physical address in the state, and
– Generally available to receive service or postal mail during normal business hours.
You may be your own registered agent for your umbrella LLC, your unit LLCs, or both, as long as you meet the above requirements.
Does a Series LLC need a business license in Illinois?
In many cases yes. An LLC and a business license are not the same things.
Your LLC paperwork establishes the LLC as a legal entity. A business license gives that legal entity permission to conduct business in the state of Illinois or within a particular city in Illinois.
The business licenses your Series LLC needs will depend on where each unit or the umbrella LLC are located and what they do.
Is a Series LLC the same as an LLC?
Both a Series LLC and an LLC are limited liability companies. However, a single LLC is one business. It has one set of officers and manages one set of assets it uses in its business ventures.
A Series LLC is a group of LLCs. It consists of one umbrella or parent LLC, which oversees each individual unit LLC in the group.
Series LLCs are often used when a business has several distinct, yet related ventures. For instance, property managers may use a Series LLC. Each rental unit may be a unit LLC in the series, while the umbrella LLC oversees all the unit LLCs.
Is a Series LLC the same as a corporation?
Series LLCs and corporations are similar in that both are legal entities that may shield their owners, directors, managers, or members from personal liability for business losses. However, LLCs and corporations differ in several key ways.
Should I use an LLC formation service or do it myself?
The Illinois Secretary of State, the IRS, and other government agencies make it relatively simple to set up a Series LLC. Many necessary documents can be obtained by applying online.