Forming an L3C in Illinois

Effective as of January 1, 2010, the Illinois Limited Liability Company Act, 805 ILL. COMP. STAT. ANN. 180/1-1 to 60-1 (West 2010), authorizes the formation of L3Cs. Here is an outline of the steps you need to follow in order to form an L3C in Illinois. The process is very similar to the one for forming an LLC in Illinois. You should also read the general section on forming an L3C for information that is applicable in any state.

1. Choose a business name for the L3C and check for availability.

2. Prepare and file articles of organization with the Secretary of State.

  • If your L3C has no more than 8 managers, you can file your articles of organization online. The fee for filing online is $600, including a basic $500 filing fee and a $100 fee for expedited service. The Secretary of State's website has a simple, fill-in-the-blank form for the articles of organization. Be sure to include the following statements in the definition of your business purpose (Article 5 on the form):
1. The company intends to qualify as a low-profit limited liability company pursuant to Section 1-26 of the Limited Liability Company Act and shall at all times significantly further the accomplishment of one or more charitable or educational purposes within the meaning of Section 170(c)(2)(B) of the Internal Revenue Code of 1986, or its successor, and would not have been formed but for the relationship to the accomplishment of such charitable or educational purposes.
2. No significant purpose of the company is the production of income or the appreciation of property.
3. No purpose of the company is to accomplish one or more political or legislative purposes within the meaning of Section 170(c)(2)(D) of the Internal Revenue Code of 1986.
For general information on articles of organization, see the section on forming an L3C and the Articles of Organization section of this Guide.
  • If you are converting an Illinois LLC in good standing to an L3C, you can file a simple, fill-in-the-blank form for your restated articles of organization. Be sure to include the abbreviation "L3C" in the new entity's name (Article 1 on the form) and the following statements in the definition of your business purpose (Article 6 on the form):
1. The company intends to qualify as a low-profit limited liability company pursuant to Section 1-26 of the Limited Liability Company Act and shall at all times significantly further the accomplishment of one or more charitable or educational purposes within the meaning of Section 170(c)(2)(B) of the Internal Revenue Code of 1986, or its successor, and would not have been formed but for the relationship to the accomplishment of such charitable or educational purposes.
2. No significant purpose of the company is the production of income or the appreciation of property.
3. No purpose of the company is to accomplish one or more political or legislative purposes within the meaning of Section 170(c)(2)(D) of the Internal Revenue Code of 1986.

Restated articles of organization cannot be filed online, and the filing fee is $500.

3. Negotiate and execute an operating agreement.

  • Illinois does not require an operating agreement in order to form an L3C, but executing one is highly advisable. Please see the section on forming an L3C in this Guide for details. The operating agreement does not need to be filed with the state.

4. File an annual report with the Department of Business Services.

  • An Illinois L3C needs to file an annual report with the Department of Business Services. If your L3C has no more than 8 managers, you can file your annual report online (scroll all the way down). The fee for filing the report online is $300, including a basic $250 filing fee and a $50 fee for expedited service.

5. Obtain any required local licenses.

6. Determine what tax and other regulatory obligations the L3C has, and take care of any necessary registrations.

  • Consult with an attorney to ensure that the L3C is fulfilling its tax obligations and the necessary tax and registration paperwork is properly filed. For general information on the tax treatment of L3Cs, see the L3C section of this guide.

7. Open a bank account for your business.

  • It is a good idea to keep your business's finances separate from your personal accounts. You may want to do this early on by opening a bank account for your business.

8. Other Notable Requirements for Maintaining an L3C in Illinois

  • Illinois requires certain documents to be kept at an L3C's principal place of business. A list of the required documents is located in 805 Ill. Comp. Stat. 180/1-40.

 

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