Annual Filing Requirements for Illinois LLCs

Learn about the annual report and tax filing obligations for Illinois limited liability companies.

If you want to form and operate an Illinois limited liability corporation (LLC), you must prepare and submit a number of paperwork with the state. This article discusses the most significant continuing reporting and state tax filing obligations for Illinois limited liability companies.

The state of Illinois requires you to produce an annual report for your limited liability company. The annual report may be filed electronically at the SOS website or by mail using Form LLC-50.1. The report usually provides the same information as the articles of organization. Each year, the report is due by the first day of the month in which your LLC was formed. For example, if your LLC was formed on July 15, your report is required by July 1. The filing cost is now $75. Filing a report late (more than 60 days after the due date) results in a $300 penalty.

State Corporate Taxes

Most LLCs are pass-through tax corporations when it comes to income taxes. In other words, the burden for paying federal income taxes is passed via the LLC to the individual LLC members. LLCs do not pay federal income taxes by default; only its members do.

However, Illinois levies a separate state tax on LLCs. This is known as a personal property replacement tax in Illinois. The tax on normal LLCs (those that do not opt to be taxed as corporations) is 1.5% of net income. The Illinois Department of Revenue collects the tax (IDOR). To pay the tax, use Form IL-1065.

In certain situations, the owners of an LLC elect to have their firm taxed as if it were a corporation. This decision is made by submitting IRS Form 2553 to the IRS. (The form is available on the IRS website.) Corporation income is taxed in Illinois, as it is in practically every other state. The company income tax rate in Illinois is 5.25% of federal taxable income, subject to modifications. Furthermore, Illinois levies a personal property replacement tax of 2.5% of net revenue on companies.

Employer Taxes in the State

Do you have workers in your LLC? If this is the case, you must pay employer taxes. Some of these taxes are paid to the federal government (the IRS) and are not addressed in this section. (However, it is important to understand that federal employer tax duties begin with getting a federal employer identification number (EIN).) However, Illinois employers must additionally pay state taxes.

To begin, you must withhold and pay employee income taxes to IDOR. Begin by registering your company with IDOR, either online (through the MyTaxIllinois website) or in person (Form REG-1). After you’ve enrolled, you’ll need to submit withholding taxes on a regular basis (for example, monthly) using Form IL-501 or online. You must also submit Form IL-941 on a regular basis. Visit the IDOR website for further information, including on online filings.

You’ll also need to register to pay state unemployment insurance (UI) taxes. The Illinois Department of Employment Security is in charge of these taxes (IDES). These taxes may be registered for online using the IDES TaxNet website or by utilizing Form UI-1. Then, each quarter, complete Form UI-3/40 to record your earnings and pay your UI taxes.

Taxes on Sales and Use

If your LLC sells items to clients in Illinois, you must collect and remit sales tax. This implies you’ll need to register with the Illinois Department of Revenue for this reason and then make periodic sales tax payments for products sold. You may register online or by submitting Form REG-1 by mail. Then, on a regular basis, you must file sales tax returns with IDOR.

Other States Registration

If you want to do business in states other than Illinois, your LLC may need to be registered in any or all of those states. The exact states concerned will determine if you are needed to register: each state has its own regulations for what defines conducting business and whether registration is required. For registration reasons, having a physical presence (a business location) in a state, recruiting personnel in a state, or soliciting business in a state (through telephone, print advertisements, mail, or the Internet) are sometimes considered conducting business. Obtaining a certificate of authority or comparable document is normally required for registration.