How to Move an LLC to Illinois

There are many reasons why a business owner may want to move an LLC to Illinois. This article discusses the use of domestication, known in some states as LLC conversion, to transfer an LLC to Illinois.

What is Illinois LLC Domestication?

An Illinois LLC domestication is a process that changes an out-of-state (or foreign) LLC into an Illinois LLC.¹ The LLC is the same company before, during, and after a domestication.² The important change is that Illinois becomes the LLC’s official state of formation (or domicile). It becomes an Illinois LLC governed by the Illinois Limited Liability Company Act.

Some states use the name conversion for the legal process that changes an LLC’s state of formation to a different state. In Illinois, a conversion changes an existing business’s entity type.³ An Illinois LLC can become an Illinois corporation using the conversion process, for example. Illinois law also lets Illinois LLCs convert to out-of-state corporations (or vice versa).

An Illinois LLC cannot use the conversion process to become an out-of-state LLC. By definition, a conversion must change the business’s entity type. An Illinois LLC changes into an out-of-state LLC through a domestication.⁴

Why Transfer an LLC to Illinois?

A business might want to change its domicile for a variety of reasons. A domestication may have a business-related purpose, or it may be practical for the owners. Common reasons an out-of-state LLC might domesticate to Illinois include:

• Owner convenience. Owners who move to Illinois may find it more convenient for the company and its owners to have the same home state. For instance, government offices that the business deals with are more likely to be nearby, so face-to-face meetings are more practical. And the consistency helps avoid confusion over which state’s law governs in which scenarios.
• Greater selection when hiring professionals. An Illinois resident can more easily hire local accountants, lawyers, and other professionals with expertise in Illinois law. An Illinois LLC will have more qualified attorneys and accountants to choose from in Illinois.
• Reduced annual fees and reporting. Domestication sometimes reduces paperwork and filing fees. A company that does business in Illinois but is domiciled in another state must meet both states’ annual reporting and fee requirements. Domestication to Illinois may let an LLC avoid annual filing and fees in the original state if it does little or no business there.
• Avoiding taxation by multiple states. An LLC’s obligation to pay income taxes to a state requires a connection (or taxable nexus) between the business and the state. An LLC that domesticates to Illinois may avoid taxation by the original state if domestication ends the taxable nexus. This is especially true if the out-of-state LLC does most of its business in Illinois and little in its domicile state.
• Legal advantages. Domestication could be a good strategy if Illinois law is a better fit for the company’s business plan. The advantages might be in legal areas specific to the LLC’s field or in areas relevant to the administration and management of LLCs.

What are the Benefits of Illinois LLC Domestication?

There are alternative methods of moving an existing business to a new state. However, the domestication process (when available) is almost always the most efficient and least disruptive approach. Advantages of an Illinois LLC domestication include:

• It’s still the same company. An LLC that completes an Illinois domestication continues to be the same entity the entire time.⁵ It still uses the same Employer Identification Number (EIN), and its history as a taxpayer stays with the business. Keeping the same fundamental identity avoids unnecessary confusion and reduces the administrative burden involved in changing states.
• Day-to-day operations are unimpeded. An out-of-state LLC that domesticates to Illinois can continue its ordinary operations throughout the process. The business does not have to pause revenue-generating activities, and physical locations can stay open.
• Existing contracts survive domestication. An Illinois LLC domestication does not affect the company’s existing business contracts. There is no need to renegotiate or re-sign agreements because the current contracts are still valid and enforceable.⁶
• Employment relationships are intact. A domestication does not interfere with employer-employee relationships. Releasing and re-hiring staff is unnecessary.
• There’s no need for asset transfers. The Illinois LLC owns all the same property that the out-of-state LLC owned before the domestication.⁷ The company does not need to sign documents to transfer assets, so there’s less paperwork. The company can also keep all the same bank accounts—which avoids the extra legwork of closing accounts and opening new ones.
• Dissolution is not involved. An LLC domestication does not involve dissolving the company in the original state and reforming in Illinois.⁸ The procedure transfers the same company from the old state to the new state.

What LLCs Can Convert to Illinois LLCs?

Domestication to Illinois is not possible for every out-of-state LLC. First, the company must be currently in a state that allows LLC domestications.⁹ The name domestication is not essential. Some states call the process conversion. What matters is that the out-of-state LLC’s current state must have a statutory procedure that lets LLCs change their domiciles.

The company’s business also needs to be permissible for Illinois LLCs. Illinois law gives LLCs broad authority to engage in any lawful business except insurance.¹⁰ LLCs in some states cannot provide professional services—which generally means services that require a professional license or equivalent authority.¹¹

An Illinois LLC can provide professional services—but only if the company is formed as a professional limited liability company (PLLC).¹² An out-of-state LLC can domesticate to Illinois as long as it has all required licenses and otherwise complies with the Illinois Professional Limited Liability Company Act.¹³

How Much Does Illinois LLC Domestication Cost?

An LLC that domesticates to Illinois incurs domestication costs for labor, filing fees, and the cost of hiring a commercial registered agent (if the LLC chooses to hire one). The precise amounts vary by domestication and company.

• Labor Costs. The service provider the LLC hires to handle the domestication will charge for working on the project. The labor that goes into an LLC domestication includes communications with the business owner, gathering information, preparing documents, and filing the domestication documents with state agencies and any related communications. Providers may bill by the hour or charge a flat fee.
• Filing Fees. A domesticating LLC must pay the filing fees that state agencies charge for the domestication documents. The total fee amount for Illinois is $250.00 ($100.00 for the statement of domestication plus $150.00 for the articles of organization).¹⁴ Illinois recently reduced the articles of organization fee from $500.00. The LLC will also need to pay a filing fee to its current state for that state’s equivalent to the statement of domestication.
• Registered Agent Fees. LLCs that do business in Illinois must appoint a registered agent with authority to accept service of process for the company.¹⁵ The LLC’s articles of organization lists the registered agent’s name and address. Businesses sometimes hire a commercial resident agent to avoid listing an owner or employee’s personal information. Commercial resident agents also help keep service consistent, and the cost is relatively low (typically $50.00 – $150.00 per year in Illinois).

How Long Does Illinois LLC Domestication Take?

The LLC domestication process typically takes less time to implement than other methods of changing an LLC’s domicile. The length of the process depends on the parties’ timeframe to complete each step.

• The members’ or managers’ time to communicate the necessary information to the service provider;
• The service provider’s time to review information and prepare the domestication documents;
• The members’ or managers’ time to review and sign the domestication documents;
• The provider’s time to file the final documents with state agencies; and
• State agencies’ time to receive and process the documents.

The Illinois Secretary of State’s office estimates around ten business days for processing newly filed business documents.

What Laws Govern Illinois LLC Domestication?

An out-of-state LLC’s domestication to Illinois must satisfy Illinois law and with the current state’s law. Every aspect of the domestication should be carried out in compliance with any applicable provisions of either state. Illinois law specifically governs the filing requirements in Illinois and the legal effects of the domestication. The other state’s law specifically governs:

• Whether domestication is possible (the other state must allow domestication);¹⁶
• Whether a written plan of domestication is required and (if so) the minimum contents of the plan;
• The standard for approval of the plan of domestication by the members or managers;¹⁷ and
• The documents filed in the other state and what they must include.

What is the Illinois LLC Domestication Process?

The Illinois LLC domestication process consists of two components: document preparation and administrative tasks.

Document Preparation

A domesticating LLC needs to prepare multiple documents to accomplish the domestication. It is important that all domestication documents be prepared carefully to satisfy both states’ law.

• Plan of Domestication. A Plan of Domestication that is designed to comply with the requirements of both Illinois law and the law of the state that the LLC is moving from.
• Illinois Statement of Domestication. The Illinois Statement of Domestication with all information and any related documents needed for filing with the Department of Business Services of the Secretary of State.
• Domestication Document for Filing in Prior State. Depending on state law, this document may be called articles of domestication, statement of domestication, articles of conversion, certificate of conversion, statement of conversion, certificate of conversion, or a similar term.¹⁸
• Illinois Operating Agreement. A state-specific Operating Agreement to properly structure the LLC as a Illinois LLC, provide rules for profit distributions and decision-making, clarify the federal income tax classification, and help provide maximum liability protection.
• Resolution Authorizing Domestication. A resolution approving the transaction and adopting the Illinois organizational documents as the LLC’s governing documents.

Administrative Tasks

After preparing the necessary paperwork, the LLC must complete the administrative tasks necessary to implement the domestication.

• Conduct preliminary name search. Check the official records of Department of Business Services of the Secretary of State to determine whether the LLC’s name is available in Illinois. (If the name is unavailable, a slight name change may be required to complete the domestication.)
• Obtain signatures on the Statement of Domestication. The Statement of Domestication must be signed by the required parties. The Department of Business Services requires a manual (wet) signature on the Statement of Domestication (no e-signing).
• Obtain signatures on the Articles of Organization. The Articles of Organization must be signed by the required parties. The Department of Business Services allows the Articles of Organization to be e-signed.
• File the Statement of Domestication. File the Statement of Domestication with the Department of Business Services of the Secretary of State. The Department of Business Services of the Secretary of State requires the Statement of Domestication to be filed by mail or in person (no e-filing).
• File the Articles of Organization. File the Articles of Organization with the Department of Business Services. The Department of Business Services allows the Articles of Organization to be e-filed. However, Articles of Organization filed with a Statement of Domestication are typically submitted as an attachment to the Statement of Domestication—which is filed by mail or in person.
• File domestication documents with prior state. File the domestication documents with the Secretary of State or equivalent agency for the state that the LLC is moving from.

What is the Legal Effect of Illinois LLC Conversion?

An LLC that has completed an Illinois LLC domestication is still the same entity.¹⁹ The process is designed to minimize changes to the entity. Illinois law lists the following legal effects of a domestication to Illinois.

• Governance. After domestication, the formerly out-of-state LLC is an Illinois LLC. The Illinois Limited Liability Company Act primarily governs the company.²⁰ If the out-of-state LLC was authorized to do business in Illinois as a foreign LLC, the authorization is automatically cancelled (because the LLC is no longer foreign in Illinois).²¹ The LLC’s new Illinois articles of organization and operating agreement take effect at the same time as the domestication and become binding on the members.²²
• Property. All the out-of-state LLC’s property becomes property of the Illinois LLC. The company does not need to sign deeds or asset assignments.²³
• Liabilities. The company’s liabilities survive the domestication. Debts that the out-of-state LLC owed before domestication are now owed by the Illinois LLC.²⁴ Members have no liability for company debts for which they were not already liable before domestication.²⁵
• Contracts. Contracts involving the LLC remain valid and are not affected by the domestication. The company’s contractual rights and obligations survive the domestication.²⁶
• Legal proceedings. Domestication does not interrupt pending court cases or administrative proceedings involving the LLC. The Illinois LLC’s name—if different than the name before domestication—is swapped for the prior name.²⁷
• Ownership interests. Members’ ownership interests in the out-of-state LLC are converted to ownership interests in the Illinois LLC—unless the members agree to a different treatment of ownership interests in the plan of domestication.²⁸ Domestication does not affect members’ liability or rights of contribution.²⁹
• Dissolution. An Illinois LLC domestication is not considered a dissolution of the company, and there is no need for the LLC to wind up its affairs.³⁰ Domestication also does not trigger member, manager, or third-party rights that kick in if the LLC goes through dissolution, liquidation, or winding up.³¹

1. 805 ILCS 415/301(b).
2. 805 ILCS 415/306(a)(1)(B).
3. 805 ILCS 415/201.
4. 805 ILCS 415/301(a).
5. 805 ILCS 415/306(a)(1)(B).
6. 805 ILCS 415/306(a)(4).
7. 805 ILCS 415/306(a)(2).
8. 805 ILCS 415/306(g).
9. 805 ILCS 415/301(a).
10. 805 ILCS 180/1-25(a).
11. See 805 ILCS 185/13 (professional services in Illinois are services licensed by the Department of Financial and Professional Regulation and other listed services licensed by other authorities).
12. 805 ILCS 180/1-25(d).
13. 805 ILCS 185/1, et. seq.
14. 805 ILCs 415/401.
15. 805 ILCS 180/1-35.
16. 805 ILCS 415/301(a).
17. 805 ILCS 415/303(b).
18. Fourteen states use the term articles of domestication to refer to the document that must be filed with the state to approve the domestication: Iowa, Massachusetts, Minnesota, Nebraska, New Hampshire, New Jersey, North Dakota, South Dakota, Utah, Vermont, Virginia, Wisconsin, Wyoming, and Indiana. The corresponding document may be called a statement of domestication (Alaska, Arizona, Connecticut, Idaho, Illinois, Mississippi, and Pennsylvania); articles of conversion (Florida, Nevada, North Carolina, Oregon, and Washington) or certificate of conversion (California, Delaware, Georgia, Michigan, Ohio, and Texas). It may also be called a statement of conversion (Colorado, Maine), certificate of domestication (Kansas), request for conversion (Louisiana), or statement/plan of domestication (District of Columbia).
19. 805 ILCS 415/306(a)(1)(B).
20. 805 ILCS 415/306(a)(1)(A).
21. 805 ILCS 415/306(f).
22. 805 ILCS 415/306(a)(6)-(7).
23. 805 ILCS 415/306(a)(2).
24. 805 ILCS 415/306(a)(3).
25. 805 ILCS 415/306(c).
26. 805 ILCS 415/306(a)(4).
27. 805 ILCS 415/306(a)(5).
28. 805 ILCS 415/306(a)(8).
29. 805 ILCS 415/306(d).
30. 805 ILCS 415/306(g).
31. 805 ILCS 415/306(b).