If you want to start and run an Illinois limited liability company (LLC), you'll need to prepare and file various documents with the state. This article covers the most important ongoing reporting and state tax filing requirements for Illinois LLCs.
The State of Illinois requires you to file an annual report for your LLC. You can file the annual report online at the SOS website or by mail using Form LLC-50.1. The report contains mainly some of the same information as the articles of organization. The report is due each year by the first day of the month in which your LLC was created. For example, if your LLC was created on July 15 then your report would be due by July 1. The current filing fee is $75. Filing a report late (more than 60 days after due date) incurs an additional $300 penalty.
When it comes to income taxes, most LLCs are so-called pass-through tax entities. In other words, the responsibility for paying federal income taxes passes through the LLC itself and falls on the individual LLC members. By default, LLCs themselves do not pay federal income taxes, only their members do.
Illinois, however, imposes a separate state tax directly on LLCs. Illinois more specifically calls this a personal property replacement tax. For typical LLCs (those not electing to be taxed as corporations) the tax is 1.5% of net income. The tax is payable to the Illinois Department of Revenue (IDOR). Use Form IL-1065 to pay the tax.
In some cases, the owners of an LLC choose to have their business treated like a corporation for tax purposes. This choice is made by filing IRS Form 2553 with the IRS. (See the IRS website for the form.) The State of Illinois, like almost every other state, taxes corporation income. In Illinois, the corporation income tax rate is a flat 5.25% of federal taxable income with adjustments. In addition, Illinois charges corporations the personal property replacement tax at a rate of 2.5% of net income. For more details, check Nolo’s article, 50-State Guide to Business Income Tax, or the IDOR website.
Does your LLC have employees? If so, you'll need to pay employer taxes. Some of these taxes are paid to the federal government (the IRS) and are not covered here. (But note that federal employer tax obligations start with obtaining a federal employer identification number (EIN).) However, Illinois employers also must pay taxes to the state.
First, you'll need to withhold and pay employee income taxes to IDOR. Begin by registering your business with IDOR either online (through the MyTaxIllinois website) or on paper (Form REG-1). Once you've registered, you'll need to file withholding taxes on a periodic basis (for example monthly) either online or using Form IL-501. You'll also need to periodically file Form IL-941. For more information, including regarding online filings, check the IDOR website.
In addition, you'll probably need to register to pay state unemployment insurance (UI) taxes. These taxes are handled through the Illinois Department of Employment Security (IDES). You can register for these taxes onlinethrough the IDES TaxNet website or by using Form UI-1. Then, each quarter, use Form UI-3/40 to report on wages and pay the UI taxes. For more information, including regarding online filings, check the IDES website.
If your LLC will sell goods to customers in Illinois, you will need to collect and pay sales tax. This means you'll have to register for this purpose with the Illinois Department of Revenue and then make periodic sales tax payments for goods sold. You can register online or mail in Form REG-1. Then, on a periodic basis, you must submit sales tax returns to IDOR. You can do this on paper (Form ST-1) or online (at the MyTaxIllinois website). For more information, check the IDOR website.
If you will be doing business in states other than Illinois, you may need to register your LLC in some or all of those states. Whether you're required to register will depend on the specific states involved: each state has its own rules for what constitutes doing business and whether registration is necessary. Often activities such as having a physical presence (a business location) in a state, hiring employees in a state, or soliciting business in a state (such as by telephone, print ads, mail, or the Internet) will be considered doing business for registration purposes. Registration usually involves obtaining a certificate of authority or similar document.
For more information on the requirements for forming and operating an LLC in Illinois, see Nolo’s article, 50-State Guide to Forming an LLC, and other articles on LLCs in the LLC section of the Nolo website.