Illinois
Taxes and business formation • USA 2025–2026
LLC in Illinois
Corporation in Illinois
State income tax — 2026
Illinois has a flat income tax rate of 4.95% for 2026 — no brackets, no progression. The same percentage on $30,000 and on $300,000 of annual income. Source: Illinois Department of Revenue, Form IL-1040.
Tax system of Illinois
Income Tax
Illinois imposes a flat personal income tax of 4.95% on all income levels.
Sales Tax
Illinois's base sales tax rate is 6.25%. In some areas, local taxes can push this rate up to 11%. The tax applies to sales of goods and certain services.
Use Tax (Out-of-State Purchases)
If you buy goods online or outside Illinois without paying sales tax, you are required to pay Use Tax, which is charged at the same rate — 6.25%. Determining the taxable base and the applicable rate can be complex and requires a professional approach. We provide services for obtaining a Sales Tax Certificate and for preparing and filing the Sales and Use Tax Return. We advise business owners on registration, calculation, and reporting.
Property Tax
Illinois's average property tax rate is 2.11% of home value, one of the highest rates in the country.
Business Taxes
Companies in Illinois are subject to a Corporate Income Tax of 9.5%, made up of: 7.0% — state corporate income tax and 2.5% — Personal Property Replacement Tax (PPRT). This is one of the highest combined rates among all states. It applies to C-corporations, and partially to S-corporations and LLCs through the PPRT. A franchise tax is also imposed on corporations, which is being phased out entirely by 2027 but currently still applies in part. Corporations and LLCs are required to file an Annual Report. If you have difficulty filing the Annual Report or Franchise Tax, we provide services for preparing and filing these reports.
Excise Taxes
Illinois levies excise taxes on items such as alcohol, tobacco, and fuel. These charges vary depending on the category of goods.
Forming an LLC in Illinois — step-by-step guide
The full path from choosing a name to your first Annual Report. You can do it yourself or have us handle it — saving 2-3 weeks and making sure you don't miss state-specific requirements.
- 1
Choosing an LLC Name
The name must contain “LLC,” “L.L.C.,” or “Limited Liability Company” and be unique within the state. You can check uniqueness through the Illinois Secretary of State business search (apps.ilsos.gov/businessentitysearch). Name reservation for 90 days — $25.
- 2
Registering a Registered Agent
Mandatory for all IL LLCs. This is a person or company with a physical address in Illinois (not a P.O. Box) that accepts legal documents during business hours. You can use a commercial agent ($100-200/year) or yourself if you have an IL address. Without an agent, an LLC won't be registered.
- 3
Filing the Articles of Organization (Form LLC-5.5)
Filed online through the Illinois Secretary of State (apps.ilsos.gov/llcarticles). The cost is $150. Online filing is processed in 1-2 business days (paper — 10-15 days). You need to specify: the LLC name, the address of the principal place of business, the registered agent, the purpose of activity (you can use “any lawful purpose”), and the management structure (member-managed or manager-managed).
- 4
Obtaining an EIN from the IRS
Free, through IRS.gov — it takes ~10 minutes for US persons. For non-residents without an SSN — by fax/mail with Form SS-4 (4-6 weeks standard). Without an EIN, you can't open a business account at a bank. I help obtain an EIN in 1-2 weeks through the CAA channel.
- 5
Operating Agreement
In Illinois, it is not required by law (unlike in NY), but it is strongly recommended even for a single-member LLC. It governs management, the distribution of stakes, buyout rights, and the order of liquidation. Without it, the default rules of the Illinois LLC Act apply, which may not match the actual structure of the business.
- 6
Registering with the Illinois Department of Revenue
Through MyTax Illinois (mytax.illinois.gov). You receive an Account ID for filing business tax returns. If you plan to hire employees — also a Withholding Tax Account. For filing a personal IL-1040, your SSN/ITIN automatically creates an account at the first filing.
- 7
Sales Tax Registration (if selling)
If you sell goods or taxable services, you need an Illinois Business Authorization through MyTax Illinois. Free, done online in 5-10 business days. Without it, you can't legally sell. It includes registration for Sales Tax (ST-1) and Use Tax.
- 8
Opening a Bank Account
Chase, Bank of America, and BMO Harris (popular in Chicago) require in-person presence. Mercury, Wise, Relay, and Brex — for non-residents and remote owners, are opened entirely online with an EIN, a passport, and LLC documents. Approval time: 1-3 business days.
- 9
Local Licenses (if you work in Chicago)
Chicago requires a Business License through city.chicago.gov for most businesses. The cost is $250-1,500 per 2 years depending on the type (general retail, restaurant, professional services). Zoning restrictions — some business types require specific zoning. Suburban Cook County and DuPage County are usually simpler — only county-level requirements.
- 10
Annual Report — First Filing
12 months after registration (then annually in the anniversary month) — $75. Filed online through the Illinois Secretary of State (apps.ilsos.gov/llcarpt). Being more than 60 days late — a $300 penalty. If not filed within 6 months — the LLC is automatically dissolved (status “cancelled”). After dissolution, reinstatement is possible but more expensive.
Frequently asked questions
Can I, as a non-US resident, open an LLC in Illinois?+
Yes. Illinois does not require LLC owners to have US citizenship, residency, or an SSN. You'll need: a passport, an EIN from the IRS (obtained via SS-4 without an SSN — I help as a CAA), a Registered Agent with an IL address (commercial $100-200/year), and ideally a US bank account (Mercury/Wise/Relay open remotely). I help with full turnkey registration — from filing the Articles to the first Annual Report.
How much does it cost to open and maintain an IL LLC in the first year?+
First-year expenses: • Articles of Organization: $150 • Registered Agent (commercial): $100-200 • EIN: free • Operating Agreement (through a professional): $150-300 • Annual Report (after a year): $75 Total: $325-525 in the first year. Illinois is significantly cheaper than New York (no publication requirement, which costs $1500-2500 in NYC). From the second year on — only the $75 Annual Report + Registered Agent.
Does my Illinois LLC pay the 9.5% corporate tax?+
By default, no. A single-member LLC = a disregarded entity, multi-member = a partnership: the 9.5% corporate tax does not apply, and income passes through to the owners via personal returns (4.95% IL income tax + federal). The 9.5% applies only if the LLC elects C-Corp status through Form 8832 — usually not advantageous for a small business. The PPRT of 1.5% applies to pass-through entities (multi-member LLCs and S-Corps) under certain conditions — the amount is usually nominal.
When should the Annual Report be filed in Illinois?+
The Annual Report is filed in the anniversary month of registration each year. For example, an LLC registered on March 5, 2025 — the next reports are due by March 31, 2026, 2027, and so on. The cost is $75. Being more than 60 days late = a $300 penalty. If not filed within 6 months — the LLC is automatically dissolved (status “cancelled”). After cancellation, reinstatement is possible through a reinstatement application + all pending fees + penalties — usually $400-800.
Which is better — opening an LLC in Illinois or in Wyoming/Delaware?+
If your business physically operates in Illinois (a store, office, warehouse, employees, regular sales in IL) — definitely an IL LLC. An LLC from Wyoming or Delaware would still need to be registered as a Foreign LLC in Illinois (Form LLC-45.5, $150 + Annual Report $75/year). This doubles the obligations — reporting in both states. Wyoming/Delaware make sense only for a purely online business with no physical presence in IL and no IL customers, or for anonymity purposes (Wyoming does not publish the names of members). For most Russian-speaking entrepreneurs in Chicago — an IL LLC is simpler and cheaper.
Do I need to obtain an ITIN if I own an Illinois LLC?+
An ITIN is needed when you personally have US-source income that requires filing a personal tax return. If the LLC is profitable and you are its non-resident owner — yes, it's needed for the federal IRS Form 1040-NR + the IL Form IL-1040. As a CAA (Certified Acceptance Agent, IRS-authorized), I submit the ITIN request (W-7) together with the first return — saving you a separate trip to an IRS Taxpayer Assistance Center and speeding up the whole process to 6-8 weeks instead of 11+ through the standard channel.
What are the important deadlines for an IL LLC and Corp?+
The main deadlines: • IL Annual Report (LLC and Corp): the anniversary month of registration, $75 • Personal income tax (IL-1040): April 15 • LLC partnership return (IL-1065): March 15 • C-Corp return (IL-1120): April 15 • PPRT return: March 15 (for partnerships) / April 15 (for corps) • Sales tax (ST-1): monthly by the 20th of the following month (if annual liability >$200/month), quarterly/annually for smaller amounts • Withholding tax (if there's payroll): monthly by the 15th If needed — an automatic 6-month extension via Form IL-505-I (personal) or IL-505-B (business).
Neighboring states
Compare conditions with neighboring states — sometimes registering nearby is more advantageous, especially if you operate multi-state.
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