I had set a deadline for myself to form an LLC by December 17th, 2005. It’s now the 20th, but I’ve finally learned presumably all of the information I needed to know. I didn’t think that starting a business should be something that requires lawyers and accountants, and so I wanted to learn what I needed to do. I figured that the government would be happy to provide such information and make it easy for anyone to know what is legally expected. While the government websites could be helpful for general information, they weren’t helpful in my particular case.
I don’t plan to partner up with anyone or hire employees; I’ll be working for and by myself. Limited Liability Companies were restricted to multiple members, but this past summer a change to the Illinois Limited Liability Act allowed single-member LLCs. A single-member LLC would be perfect for my needs, but it is hard to find information on them. LLCs are still new, and single-member LLCs even more so, and so most articles and government help are still geared towards incorporation. I ended up consulting an accountant to determine the main things I needed to worry about.
Note: I am not a lawyer. I am providing this information in the hope that it can be useful to someone, but it can’t be considered legal advice. Your mileage may vary, and so you should ask a CPA or lawyer about your own circumstances if you are not sure about anything.
To form a single-member LLC in Illinois, you need to file Articles of Organization with the Secretary of State and send along a check for $500.
Once I place the filing in the mail, Once the Secretary of State files the paperwork, I have officially formed an LLC. This part I knew, but what I was concerned about was what I was obligated to do afterwards. What forms, taxes, fees, or family members am I required to provide to stay within the law?
According to the IRS, since I’m not hiring anyone or operating my business as a corporation or partnership, I don’t need an Employer ID Number. My CPA still suggested that I get one. It seems pretty easy to apply for one.
He also talked about the lack of a need to apply for an Illinois Business Tax number. I’m going to be reading more about this topic…
If you look at the list of LLC forms on the Illinois Secretary of State’s website, you’ll see one form called Domestic Limited Liability Company Annual Report. Out of all of my research, I found only one reference to the $250 yearly fee, and it didn’t even mention that the fee goes with this report.
It turns out, it does. As I understand it, the state will send me this already filled-out form. I just need to sign it, attach the $250 check, and I’m fine. The report is simple restating that I’m in charge of the company, so there is no need to submit a balance sheet or profit-and-loss statement.
The final thing to worry about: taxes. It turns out that I just need to file my 1040 along with Schedule C, and I’ll cover my Social Security and Medicare tax obligations.
Once again, in summary:
- File Articles of Organization with Secretary of State along with $500.
- Request Federal ID Number from IRS.
- Pay annual fee by submitting $250 with signed annual report.
- Submit Schedule C with 1040 when I pay my own taxes at the end of the year.
That’s it! It sounds easy…a little too easy. Of course, there is the issue of the federal tax, which is supposed to be pay-as-you-go. When you’re self-employed, you’re required to estimate your income and submit your tax obligations quarterly. David Michael wrote about his simple tax plan, which doesn’t sound too different from what a friend of mine does.
Hopefully this information helps someone. I’m also about to read “Your Limited Liability Company and You: An Operating Manual” by Anthony Mancuso. It was suggested to me by someone on the Association of Shareware Professional‘s newsgroup. If I learn anything new, I’ll try to post it here.
The best part? I feel confident enough to form the company without worrying about a huge backlash from any government agency or law. Now I can jump in and start making mistakes quicker. Faster mistakes means faster learning. B-)