Illinois LLC remove member

Last updated on November 15, 2022

If you want to remove a member from an Illinois LLC, refer to your operating agreement for details. After that, you can update the state of Illinois.

What is an LLC?

Limited Liability Company

LLC is a business entity in the U.S that provides limited liability to its members. It has characteristics from both corporation and sole proprietorship. LLCs are permitted under State statutes of each US state.

Limited liability

Personal assets are protected for people with limited liability when they are sued.

Corporation

A business entity that can issue shares and give limited liability to shareholders.

Members

Owners of an LLC are referred to as members. They own membership interest in the LLC.

Sole proprietorship

Where an individual engages in business activity without formal organization.

Types of LLC

Depends on the number of members and whether it has elected to change its IRS classification.

Single-member LLC

Has only a single member. IRS considers it as a sole proprietorship for tax purposes.

LLC as C-corp

Owners of an LLC are referred to as members. They own membership interest in the LLC.

Multi-member LLC

Has two members. IRS considers it as a partnership for tax purposes.

LLC as S-corp

A special election for a maximum of 100 US shareholders.

Action

Here are step-by-step instructions:

How to remove a Illinois LLC member?

Follow these 5 steps:

1. Check your operating agreement

If you have an operating agreement, check the procedure for removing a member. Follow that for the voting and transfer procedures.

2. Default Illinois provisions

If you do not have an operating agreement, you will have to follow the Illinois’ default rules as mentioned in Illinois Compiled Statutes (§ 805 ILCS 180/35-45)

According to the default provisions, a member of an LLC can voluntarily withdraw or can be removed if all other members consent under other special circumstances. Read the § 805 ILCS 180/35-45 (Events causing member's dissociation) for all the details.

3. File Articles of Amendment

To update the current list of members, you must submit your articles of amendment by mailing Form LLC-5.25 it to the SOS. You cannot do this online.

Filing fees

$50

Address

Secretary of State


Department of Business Services


Limited Liability Division


501 S. Second St., Rm. 351
Springfield, IL 62756

4. Inform IRS

If the removed member was the responsible party with the IRS, then you will have to update the IRS with a new responsible party. In that case, you need to file Form 8822-B. You will have to notify IRS about the change in the responsible party within 60 days.

Notify within

60 days

If you are moving from a multi-member LLC to a single-member LLC, the way IRS treats you changes from a partnership to a disregarded entity. You will have to file Form 8832 to inform IRS about the change in classification

5. Update your operating agreement

Amend your operating agreement to update the names and details of the current members.

Entity name

Every LLC should have a unique name in Illinois. Illinois maintains a list of names of entities in the state. Go through it to check if your chosen name is available.

Search for names

Go to the official website of the Illinois corporation & llc search tool to see if the name you want is available.

Searching fee

Free

Reservation

You can reserve a name for your LLC for a specific duration by paying reservation fees to the Illinois business services. You will have to file your LLC formation documents within this period to keep the name. Alternatively, you can directly go ahead with the LLC formation without any reservation. That's fine too.

Reservation fee

$40

Reservation period

90 days

LLC naming guidelines

The name you choose for your LLC must the official naming guidelines.

Here are some of the guidelines in simple language:

  • 1

    Shall contain the terms "limited liability company", "L.L.C.", or "LLC".

  • 2

    Don’t include terms that indicate that you are doing an activity that you are not authorised to do.

  • 3

    Your name should be ‘distinguishable’ in the Secretary of State records. Adding a punctuation or ‘the’ does not make it distinguishable.

  • 4

    Don’t use words that makes it seems like you are a governmental entity or has an affiliation.

Articles of Organization

In Illinois, Articles of Organization is the form you file with the Secretary of State to form an LLC. It contains the articles of formation for the LLC.

Filing Articles of Organization

There are a couple of ways to file

  • File it online on website

    Visit

  • Mail a form to the state department

    PDF

Address

Department of Business Services

Limited Liability Division

501 S. Second St., Rm. 351

Springfield, IL 62746

Online fee

$150

Online processing time

10 days

Mailing fee

$150

Mail processing time

10 days

Operating agreement

Operating agreement is an internal business document that outlines the general rules and policies of the LLC.

Importance

It is not a legally mandatory document. However, it is recommended to have one since many courts, banks and financial institutions use it for verification. It is also nice to clearly outline the duties and relations between multiple members of an LLC—so you avoid any confusion in the future.

Format

There is no ‘required’ format for an operating agreement. You can include anything reasonable in it. In general, it has the following sections:

Basic Business information

Contains name, address, names and details of members, purpose

Member relationship

Contains membership interest, decision making process, powers, duties.

Membership transfer

Contains details on how to add or remove members and managers.

Accounting and tax

Contains details on how company records and distributions are maintained.

Dissolution

How to dissolve, wind up and terminate, due process to follow and exceptions.

Frequently asked questions

Business entities in Illinois

LLC is a flexible choice for small businesses in Illinois. However, in order to issue various classes of shares and have more investors, C-corporations are better suited than LLCs.

Illinois LLC

Illinois business search

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