Start a Property Management Company in Illinois | 2024 Guide

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Illinois Property Management Company

Are you considering starting a property management company in Illinois? Property management is an excellent business opportunity for individuals with a passion for real estate who are detail-oriented and can effectively manage multiple tasks simultaneously. The demand for property managers continues to grow, making it an attractive and lucrative Limited Liability Company in Illinois.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before Starting a Property Management Company in Illinois, all the steps in this article must guide you.

How to Start a Property Management Company in Illinois

What is a Property Management Company?

A property management company in Illinois is a professional firm that handles the administration of residential, commercial, or industrial real estate. Such companies deal with all aspects of managing a property, from finding and vetting tenants to repairing and maintaining the property, collecting rent, and handling tenant issues. These companies are an asset for property owners who may not have the time or expertise to manage their properties effectively and efficiently.

Forming a Limited Liability Company (LLC) can be a strategic decision for those considering starting a property management company in Illinois. Starting an LLC provides several benefits, including the protection of personal assets. In an LLC, the owner’s assets are protected in case of any litigation or debt incurred by the company. It also offers greater credibility and potential tax advantages and allows for an easy ownership transfer. Starting an LLC involves filing the necessary paperwork with the Illinois Secretary of State and paying an initial filing fee.

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How to Start a Property Management Company in Illinois

Starting a property management company in Illinois can be a lucrative and rewarding business venture especially if you are in Springfield. With the right planning, resources, and dedication, you can create a successful company that caters to the needs of property owners and investors in your area. Here is the step-by-step guide to launching a property management company in Illinois.

Step 1: Understand Property Management

Property management oversees and operates real estate properties, including residential, commercial, and industrial properties. The role of a property manager is to manage the day-to-day activities of properties, ensuring that they are well-maintained and that rent is collected on time. Property managers also deal with tenant issues, repairs and maintenance, and marketing vacant properties.

Step 2: Evaluate The Market

Before starting a property management company in Illinois, you need to evaluate the local market to determine if there is a demand for your services. Here are some factors to consider:

  • Type of Properties: Determine the properties in Illinois, such as single-family homes, multi-family buildings, commercial properties, or vacation rentals.
  • Competition: Identify other property management companies and analyze their services, pricing structures, and market share.
  • Market Trends: Research the local real estate market trends, including rental rates, vacancy rates, and property values.
  • Potential Clientele: Determine the number of property owners and investors in your target area who may require property management services.

Step 3: Create a Business Plan

A solid business plan is crucial for the success of your property management company. Your business plan should include the following elements:

  • Executive Summary: A brief overview of your Illinois property management company, including its mission statement, goals, and objectives.
  • Market Analysis: A detailed analysis of the local real estate market, competition, and potential clients.
  • Services: Describe the property management services you plan to offer, such as tenant screening, rent collection, property maintenance, and marketing.
  • Marketing Strategy: Outline your marketing plan, including your target audience, marketing channels, and budget.
  • Financial Projections: Provide financial projections for your property management company, including revenue, expenses, and projected profits.

Step 4: Register Your Business and Obtain Licenses

To start a property management company in Illinois, you must register your business and obtain the necessary licenses and permits. Here are the steps to follow:

Choose a Business Structure

For starting a property management company, several business structures are available in Illinois. Each structure has its benefits and drawbacks, depending on your business goals, financial situation, and personal preferences. The common business structures you can choose from are:

  • Sole Proprietorship: This is the simplest business structure, which involves a single individual owning and operating the property management company. The owner has complete control over the business and is personally responsible for all debts and liabilities. There is no formal registration process for a sole proprietorship, but you may still need to obtain licenses and permits specific to property management.
  • Partnership: A partnership is a business structure where two or more people share ownership of the property management company. Partnerships can be general, limited, or Illinois Limited Liability Partnerships (LLP). Each partner contributes to the business and shares in profits and losses. Partnerships must file a partnership agreement with the Illinois Secretary of State and obtain necessary licenses and permits.
  • Limited Liability Company (LLC): An LLC is a hybrid entity that combines a partnership’s flexibility with a corporation’s limited liability protection. Owners, known as members, are not personally responsible for the company’s debts and liabilities. To form an LLC in Illinois, you must file the Articles of Organization with the Illinois Secretary of State and comply with any licensing and permitting requirements.
  • Corporation: A corporation is a separate legal entity from its owners, known as shareholders. Corporations offer limited liability protection and can issue stock to raise capital. There are two types of corporations: C Corporations and S Corporations. Forming a corporation in Illinois requires filing the Articles of Incorporation with the Illinois Secretary of State.
  • Professional Corporation (PC): This type of corporation is designed specifically for licensed professionals, such as real estate brokers, who wish to form a corporation for their property management company. Professional Corporation offers limited liability protection and must comply with all state regulations for the specific profession. To form a Professional Corporation in Illinois, you must file the Articles of Incorporation with the Illinois Secretary of State and adhere to any licensing and permitting requirements.

Before choosing a business structure for your property management company in Illinois, consult with a Business Attorney in Illinois to discuss the best option for your situation. Remember that each structure has its tax implications and requirements, so it is essential to understand your choice’s financial and legal ramifications.

Choose a Business Name

Choosing a business name for your Illinois property management company is important to establish your brand identity and attract potential clients. Here are a few suggestions to consider:

  1. Illinois Premier Property Management
  2. Illinois HomeGuard Property Services
  3. Illinois Nexus Property Management
  4. Illinois BlueSky Property Solutions
  5. Illinois KeyPoint Property Management

Remember to check the availability of your chosen business name with the Illinois Secretary of State Corporation/LLC Search and ensure it’s not already in use by another company. There is a complete guide on Illinois Business Name Search for you to have a property management company name. You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for Illinois DBA (doing business as). 

However, before filing a DBA, you should know that you need to renew your DBA every Indefinite, which costs $50.

Once you’ve settled on a unique name, you can hire a Registered Agent and obtain the required licenses and permits.

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Hire a Registered Agent

A Registered Agent is a person or entity designated to receive important legal documents and correspondence for your business. In Illinois, every business entity, such as an LLC or a corporation, must have a Registered Agent with a physical address within Illinois. The Registered Agent’s primary role is to ensure that your business complies with state regulations and be available to receive any legal notices or official government correspondence.

In Illinois, the cost of having a Registered Agent ranges from $50 – $200. However, suppose you are still wondering how to hire a Registered Agent. In that case, you can also serve as your Registered Agent, appoint a friend or family member, or hire the Best Illinois Registered Agent Services.

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File For Articles of Organization or Articles of Incorporation

If you form an LLC for your Illinois property management company, you must file the Illinois Articles of Organization, which costs $150. However, you must file the Articles of Incorporation if you form a Corporation for your Illinois property management company. The Articles of Incorporation filing fee costs $150 for filing in-person and by mail. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

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Obtain an Employer Identification Number

You must first obtain an Employer identification number (EIN) in Illinois from the IRS if you will open a bank account or hire an employee for your Illinois property management company. 

The application of an EIN in Illinois can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

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Get the Necessary License and Permits

When starting a property management company in Illinois, you must obtain legal licenses and permits. Here are some common licenses and permits you may need:

  • Business License: Illinois requires businesses to obtain a Business License to operate legally. The business license fee in Illinois ranges from $50 – $300.
  • Real Estate Broker License: In many states, property management companies must have a licensed real estate broker or designate a licensed broker to oversee the business operations. Check with your Illinois Real Estate Commission or similar governing body for the requirements and application process.
  • Salesperson License (if applicable): If your Illinois property management company also engages in leasing or renting properties, you may need to have a licensed salesperson working under the supervision of a licensed broker.
  • State Tax Registration: Register with the Illinois Department of Revenue to collect and remit sales and use taxes and other applicable state taxes.
  • Local Zoning and Land Use Permits: Depending on the nature of your Illinois property management services and the location of your office, you may need to obtain zoning and land use permits. 
  • Workers’ Compensation Insurance: If you have employees, you’ll likely need to obtain workers’ compensation insurance by Illinois’s laws.
  • Professional Liability Insurance: Illinois property management companies should consider obtaining professional liability insurance (errors and omissions insurance) to protect against potential legal claims related to business operations.

Before starting your property management company, consult a Business Attorney in Illinois to ensure you obtain all the necessary legal permits and licenses. Failing to do so can result in fines, penalties, and even the closure of your Illinois business.

Step 5: Set Up Your Office

While starting a property management company without a physical office is possible, having a dedicated workspace can help establish your credibility and professionalism. Select a location that is convenient for both you and your clients. This may be a home office, a co-working space, or a commercial office space. Also, you will need basic office equipment such as a computer, printer, phone, and filing system.

Step 6: Market Your Property Management Company

Effective marketing is crucial for attracting clients and growing your Illinois property management business. Usually, the best way to market your property management company is to advertise in local newspapers, real estate magazines, and direct mail campaigns.

Step 7: Build a Team

As your property management company grows in Illinois, you may need additional staff to help manage your workload. Consider hiring property managers, administrative assistants, maintenance technicians, and marketing professionals. Ensure your team is knowledgeable, professional, and committed to providing excellent customer service. However, before hiring an employee for your Illinois property management company, you should obtain an EIN and open a bank account.

Benefits of Starting a Property Management Company

There are several benefits of starting a property management company in Illinois:

  • Steady Income: Property management is a growing industry in Illinois, and there is always a demand for qualified professionals to manage properties. This means starting an LLC property management company can provide a steady income stream.
  • Low Startup Costs: Starting a property management company requires minimal investment, as you do not need to purchase any property. You can start with just a few clients and gradually increase your portfolio.
  • Flexible Work Schedule: Property management companies offer flexible work schedules, allowing you to work around other commitments such as family and other business ventures.
  • Growth Opportunities: With the right marketing strategies, you can rapidly grow your property management company and increase your client base.
  • Diverse Client Base: Property management companies cater to a diverse range of clients, including landlords, tenants, and property owners. This means that there is always a demand for your services.

FAQs

Where can I find the requirements to start a property management company in Illinois?
Information about the specific requirements to start a property management company in Illinois can be found on the Illinois Department of Financial and Professional Regulation website.
Do I need to have a real estate license to start a property management company in Illinois?
Yes, in Illinois, anyone who will be involved in leasing apartments or handling tenant deposits must have a real estate broker’s license.
What type of company should I choose when starting a property management company in Illinois?
You can choose to set up your property management company as a sole proprietorship, partnership, LLC, or corporation.
Do I need to have insurance when starting a property management company in Illinois?
Yes, in Illinois, it is suggested that you get multiple insurances, including property insurance, liability insurance, and workers’ compensation insurance.
Is there a specific bond requirement to start a property management company in Illinois?
Yes, in Illinois, a property management company must purchase a $20,000 surety bond.
How long does it take to receive a property management license in Illinois?
It can take anywhere between several weeks to a couple of months to receive a property management license in Illinois.
Can I work as a property manager without being licensed in Illinois?
No, in Illinois, all individuals involved in real estate brokerage activities must have a valid real estate broker’s license.
Does Illinois have a license reciprocity with other states for property management?
No, in Illinois, there is no license reciprocity with other states for property management.
Is there a requirement to take a property management course before starting a company in Illinois?
There is no requirement to take a property management course before starting a company in Illinois but continuing education courses can help keep up to date with the current information on the process specific to business location.
How much does it cost to get a real estate broker’s license in Illinois?
It costs around $1,800 to get a real estate broker’s license in Illinois.
Is there an age requirement to get a real estate broker’s license in Illinois?
No, there is no age requirement to get a real estate broker’s license in Illinois.
How many years of experience is required to get a real estate broker’s license in Illinois?
To get a real estate broker’s license in Illinois, at least 21 years of experience and 75 hours of pre-license coursework must be completed at an approved real estate school.
Is there a property tax on rental income in Illinois?
Yes, in Illinois, there is a property tax on rental income using the net income method.
Can I manage properties on behalf of my relatives or friends without getting a real estate broker’s license in Illinois?
No, In Illinois, to receive payment to leases of others, one must be licensed with the state countering compensation received for performing services that are within a property manager’s scope of work.
Are there any zoning requirements for a property management company in Illinois?
Zoning regulations vary locally in terms of underlying land use or development patterns, not a huge obstacle for property management firms.
Is a business registration required before starting a property management company in Illinois?
To become a property management company in Illinois, you’ll need to register the business with the Illinois Secretary of State.
Are there any special finance requirements to start a property management company in Illinois?
Any type of loan requirements may vary by region, and recommended consolidations depend on what loan brings about most value in terms of the properties being serviced. You might also have fewer loan options due to the bond requirement.
What are the most common mistakes that companies make while entering the property management field in Illinois?
Starting without proper licensing, not having adequate coverage, failing to manage and control deposits or misunderstandings regarding collection rates.
Are property management services in Illinois subject to sales tax or additional taxes?
No sales tax applies to a total service agreement, similar to a contracted general service.
Can an Illinois property management company provide its services across state lines?
Yes, Illinois-based companies can provide its services across multiple states but make compliance necessary for each state.
Do I have to maintain trust accounts while operating an Illinois property management company?
Accounts operating within the property owner’s role are not trust accounts for Illinois property management law purposes. Though specific regional details for the company vary on the scenario.
What are the primary factors to consider while setting prices for Chicago properties?
Various factors shape the outcome of leasing rates for properties in Illinois and different factors need to be considered for each region.
Are there any ethical considerations that property managers must follow in Illinois?
Licensed Illinois property managers are held to high ethical standards to avoid legal enforcement actions to protect consumers.
Is creating a website necessary for an Illinois Property management startup?
Yes, having modern-day awareness, updated to amenities, unit availabilities, and personalized approach unique to an Illinois property management company.
What skills should a successful property management company have in order to succeed in Illinois?
Illinois-area property management companies should have skills or resources to stand up and keep pace in local advertising, formal compliance and technological advancement deliver more agile and desired work.
Do large property management companies operate in Illinois?
Companies like Green Square Properties, EBG Properties, and Multifamily Property Management manage local properties.
What are the licensing requirements for starting a property management company in Illinois?
To start a property management company in Illinois, you need to obtain a managing broker’s license.
What are the qualifications for obtaining a managing broker’s license in Illinois?
You need to be at least 21 years old, have a high school diploma or equivalent education, complete 75 hours of coursework, and have at least two years of experience as a real estate broker in Illinois.
Can I run a property management company in Illinois without a broker’s license?
No, you need a managing broker’s license to operate a property management company in Illinois.
How long does it take to obtain a managing broker’s license in Illinois?
It takes approximately six months to complete the coursework and pass the licensing exam to obtain a managing broker’s license in Illinois.
Do I need a business license to start a property management company in Illinois?
Yes, you need a business license from the Illinois Secretary of State’s Office to legally operate a property management company in Illinois.
How do I register my property management company in Illinois?
You register your company with the Illinois Secretary of State’s Office by filing the Articles of Incorporation or Articles of Organization, depending on the type of business structure.
What is the difference between an LLC and a corporation?
An LLC is a type of business structure that combines the flexibility of a partnership with the liability protection of a corporation while a corporation is a separate legal entity from its owners.
What are the tax implications for starting a property management company in Illinois?
You will need to register for an Employer Identification Number (EIN), and you may be subject to federal, state, and local taxes.
Can I start a property management company in Illinois with a partner?
Yes, you can start a property management company with a partner, and it may help you to share the workload and startup costs.
What are the common expenses for starting a property management company in Illinois?
The common expenses for starting a property management company in Illinois include licensing fees, rent for an office space, software and equipment costs, marketing expenses, and employee salaries.
How do I price my property management services in Illinois?
You can price your property management services in Illinois based on the size and location of the property, the number of units, and the level of services required.
What are the essential tools and platforms for managing a property management company in Illinois?
The essential tools and platforms for managing a property management company in Illinois include property management software, financial management software, digital marketing tools, and communication tools.
Can I offer furnishing services as part of my property management services in Illinois?
Yes, you can offer furnishing services as part of your property management services in Illinois, but you will need to comply with the state’s laws and regulations.
What are the maintenance requirements for properties managed by a property management company in Illinois?
The maintenance requirements for properties managed by a property management company in Illinois include regular inspections, timely response to maintenance requests, repairs in a timely manner, implementing Systems of surveys that enable to verify instruments about places like Roof at the Building.
What are the landlord-tenant laws in Illinois that affect property management companies?
The landlord-tenant laws in Illinois that affect property management companies include security deposit rules, notice requirements, and lease termination laws.
Do I need liability insurance to start a property management company in Illinois?
Yes, liability insurance protects a property management company from any claims of financial loss due to errors or mismanagement.
How many employees does a property management company in Illinois need?
The number of employees a property management company in Illinois needs depend on the size of the company and its portfolio management.
What are the benefits of using a property management company in Illinois?
The benefits of using a property management company in Illinois include end-to-end management of properties, compliance with legal requirements, reduce instances of rent arrears and driving revenue of property, tenant vetting, and access to a tenant database
Do I need a website for my property management company in Illinois?
Yes, a website for your property management company is a digital window that will provide potential clients with much-needed information about your services.
What are the risks involved in starting a property management company in Illinois?
Some of the risks involved in starting a property management company in Illinois include high initial costs, legal risks, and property damage risks.
How do I find clients for my property management company in Illinois?
You can find clients for your property management company in Illinois by word of mouth recommendations, digital marketing, a good PR job, incentives promotion among clients, etc.
How do I choose a pricing model for my property management company in Illinois?
choose a client-based pricing model it means setting a consistent rate per property while basing it on the size, model and review feedback to stay relevant with Customer’s preferences.
How can I minimize expenses for my property management company in Illinois?
You can minimize your property management company’s expenses in Illinois when starting the business of practicing cost control, finding the best software out there, have alignment with alliance companies that can offer alternative services to indirect earnings.
Is it possible to provide property management services for multi-state portfolios in Illinois?
Yes, but compliance with regulation varies in all states must be equally conduct HR offices, monitor well the Remote employees and keep adjusting goals to enforce boundaries for such buildings according to organization preference wise.
What tax deductions can I claim as a property management firm in Illinois?
Your property management company in Illinois can claim several tax deductions, inquire such deductions through partners organizations or tax accountant assistance.
Can you do property management legally without a license in Illinois?
No, a person without a broker managing license cannot legally practice property management services.
How can you tell the difference between a good and bad property manager in Illinois?
The quality of a property manager in Illinois historically should be measured in how they apply their market research, attention on firm financing, disposal process to recover global closure in profits and capital evaluation, strategic management appraisal, implementing focus routine monitoring and upkeep good standing operating income priorities of the firm.
How important is tenant screening in Illinois?
Tenant screening is important regardless of leasing number, adequate scrutiny should have benchmarks during the hiring process base on income, previous tenancy deposit, documents verification code.
How can an individual practice remote property management practice in Illinois?
Remote property management proves a process embraced to a broader claim, providing leasing standpoint based on legal refutability clauses established by the State can mitigate high risk over prospective tenants.

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Conclusion

Starting a property management company in Illinois can be rewarding and profitable. By following the steps outlined in this guide, you can launch a successful property management business that meets the needs of property owners and investors in your area. Remember to stay up-to-date on industry trends and continually refine your services, marketing strategies, and customer service to ensure the long-term success of your property management company.

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