Illinois LLC Operating AgreementThe Illinois LLC Act, anniversary-month annual reports, and the series option
The Illinois LLC Act in Brief
The Illinois Limited Liability Company Act sits at 805 ILCS 180. After the 2017 RULLCA adoption, the operating agreement (defined at 805 ILCS 180/15-5) governs the relations among members, the rights and duties of managers, the activities and affairs of the LLC, and the means of amending the agreement. The agreement may be written, oral, or implied, although written form is universal practice.
The Illinois Secretary of State Department of Business Services administers LLC filings. The Articles of Organization (Form LLC-5.5) is the formation document and costs $150 to file. Series LLCs use Form LLC-5.5(S) and cost $400. After formation, the LLC maintains its existence by filing an annual report each year before the first day of the LLC's anniversary month, with a $75 fee.
Illinois income tax treatment follows the federal classification. Pass-through income flows to Illinois resident members and is taxed at the flat 4.95% individual rate. The Illinois Department of Revenue also imposes a 1.5% personal property replacement tax on partnership LLCs and a 2.5% replacement tax on corporate-elected LLCs, in addition to the standard 7% corporate income tax.
Default Rules Under 805 ILCS 180
If the operating agreement is silent, the Illinois LLC Act defaults govern. After the 2017 RULLCA adoption, Illinois moved to standard RULLCA defaults, including per-capita allocation and per-capita voting.
| Topic | Default Rule | Statute |
|---|---|---|
| Profit allocation | Per-capita (equal among members) | 805 ILCS 180/25-15 |
| Voting | Per-capita (one vote per member) | 805 ILCS 180/15-1 |
| Management | Member-managed unless Articles state manager-managed | 805 ILCS 180/15-1 |
| Member admission | Unanimous consent of existing members | 805 ILCS 180/10-30 |
| Distributions | Equal among members; on member demand | 805 ILCS 180/25-30 |
| Member dissociation | Permitted; withdrawing member loses management rights | 805 ILCS 180/35-45 |
| Dissolution | Two-thirds in interest unless agreement provides otherwise | 805 ILCS 180/35-1 |
The per-capita allocation default under 805 ILCS 180/25-15 splits profits and losses equally among members regardless of capital. With unequal capital contributions, capital-weighted allocation must be expressly written into the operating agreement.
Anniversary-Month Annual Reports
Illinois uses an anniversary-month system rather than a fixed calendar deadline. The annual report is due before the first day of the month in which the Articles of Organization were originally filed. An LLC formed on 15 March must file its first annual report before 1 March of the following year. This system spreads the filing load across the year for the Secretary of State but creates calendar-management complexity for owners who may forget the anniversary month.
The annual report fee is $75. Late filing triggers a $300 penalty and eventually administrative dissolution. The Secretary of State sends reminders to the LLC's registered agent; if the agent address is stale, reminders are missed and the LLC ends up dissolved. The simplest mitigation is to set a calendar reminder for the 1st of each anniversary month, every year.
Sample Illinois-Specific Clauses
Forming an Illinois LLC: The Five Steps
- Choose and check a name. Search the Cyberdrive Illinois business name database. Names must include "Limited Liability Company", "LLC", or "L.L.C."
- Appoint a registered agent. Required under 805 ILCS 180/1-35. Must have an Illinois physical street address.
- File Articles of Organization (Form LLC-5.5). $150 fee. Filed online via Cyberdrive Illinois. Series LLCs use Form LLC-5.5(S) at $400.
- Adopt the operating agreement. Not legally required but standard practice. Sign and retain in company records.
- Obtain EIN and calendar the first annual report. EIN free from the IRS. First annual report due before the 1st of the anniversary month, one year after formation.
Five Illinois-Specific Mistakes
The Illinois anniversary-month system causes more missed deadlines than fixed-date systems. Calendar the 1st of the formation month, every year.
$400 formation fee for a series LLC versus $150 standard. Each series must maintain separate records to keep the liability shield.
Illinois imposes a 1.5% replacement tax on partnership LLCs in addition to pass-through income tax. Single-member LLCs taxed as disregarded entities also owe the replacement tax on Illinois business income.
After 2017 RULLCA adoption, Illinois defaults to per-capita allocation and per-capita voting. With unequal contributions, capital-weighted treatment must be expressly written in.
Registered agent must have an Illinois physical street address. Out-of-state agents and PO boxes are rejected.
Statutory Sources
- Illinois Limited Liability Company Act, 805 ILCS 180, official text
- Illinois Secretary of State business filings, LLC forms and fees
- Illinois Department of Revenue, income tax and replacement tax