How to Form a Partnership in Illinois
| Item | Details | Amount | Notes |
|---|---|---|---|
| Liability | Unlimited (all partners) | Unlimited (GP); limited (LP) | All members protected |
| Management | All partners manage | GP manages; LP passive | Flexible (member or manager) |
| State Filing | None required | Certificate required | Articles required ($150) |
| Formation Cost | Low/free | Check with SOS | $150 |
| Annual Report | Not required | Check with SOS | $75 fee required |
| Taxation | Pass-through (1065) | Pass-through (1065) | Pass-through (1065 or 1120-S) |
| Flexibility | Limited by statute | Limited by statute | Highly flexible |
| Professional Services | Available (LLP option) | Available | Available (PLLC) |
Choose a partnership if: You want a simple, informal structure with minimal filing requirements and low costs. General partnerships work well for small ventures where all partners are active and trust each other. Limited partnerships suit capital-raising scenarios where you want passive investors protected from liability.
Choose an LLC if: You want liability protection for all members, prefer a more formal structure, or anticipate needing to raise capital or admit new owners. LLCs offer greater flexibility and are easier to scale. An LLC costs $150 to form and requires a $75 annual report fee, but provides stronger liability protection and more operational flexibility than a general partnership.
If you are forming a professional service firm (law, accounting, medicine), both LLP (Limited Liability Partnership) and PLLC (Professional Limited Liability Company) are available in Illinois. An LLP requires filing an election with the Secretary of State; a PLLC requires registration with the Illinois Department of Financial and Professional Regulation at https://idfpr.illinois.gov/profs/pllc.html.
Dissolution and Winding Up
A partnership may dissolve voluntarily (by agreement of the partners) or involuntarily (by death, withdrawal, or bankruptcy of a partner, or by court order). Understanding the dissolution process helps you plan for transitions and protect remaining partners' interests.
Voluntary Dissolution
To dissolve a partnership voluntarily, partners must agree to wind up the partnership's affairs. Under 805 ILCS 206/, you can dissolve a general partnership by mutual agreement of all partners. For limited partnerships, check your partnership agreement for dissolution procedures, as the agreement may specify different requirements.
Winding up includes:
- Collecting partnership assets and converting them to cash
- Paying partnership debts and liabilities in order of priority (creditors first, then partners)
- Distributing remaining assets to partners according to their ownership interests or partnership agreement
File a Statement of Termination or Certificate of Cancellation with the Illinois Secretary of State once the partnership is wound up. The filing fee is $5.00. File online at **https://apps.ilsos.gov