Benefits of an LLC in Illinois

Discover the unique advantages of forming an Illinois LLC, from its flexible management structure to tax benefits, and learn how this business entity can be the key to unlocking your entrepreneurial potential.

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If you’re considering starting a business in the Land of Lincoln, then odds are you’re evaluating the drawbacks and benefits of an LLC in Illinois. Is starting an LLC worth the effort? Would another business type be a better fit? Or should you start a business somewhere else?

In this guide, we’ll help you answer all those questions by covering the essential benefits of an LLC in Illinois. Between business-friendly infrastructure, limited liability protection, low fees, and more, it’s no surprise that LLCs are a popular business structure.

Lower Startup Costs

In some states, it can be pricey to start a limited liability company (LLC); some charge $300 or more for the Articles of Organization. But in Illinois, LLC business filing fees for LLCs are more manageable. The Articles of Organization costs just $150. Illinois doesn’t have a bunch of additional filing requirements like an initial report or publication certificate, either.

Annual fees are pretty affordable, too. Every LLC will need to file an annual report which costs just $75. From there, annual compliance fees vary. If your LLC needs a local business license or industry-specific permit, you’ll probably have to keep those up-to-date. But by and large, the startup costs and maintenance costs are affordable.

If you start your Illinois LLC with ZenBusiness, we’ll help you keep your Illinois LLC filing cheap.

Tax Benefits of an LLC in Illinois

By default, an LLC is considered a pass-through entity, so it’s subject to pass-through taxation. That means that the LLC itself doesn’t file a tax return; the members report their share of the business profits on their personal income tax returns and pay taxes accordingly. 

Pass-through taxation differs from the “double taxation” of a typical corporation, in which the company’s profits are taxed at the business level and then again on the tax returns of the individual shareholders.

That said, an LLC can elect how it wants to be taxed. In some cases, it’s more beneficial for an LLC to be taxed as a C corporation or S corporation. A C corporation is subject to double taxation, but it also has the widest range of tax deductions. An S corporation also has pass-through taxation, but it can lower the self-employment tax burden for many LLC members. Some LLCs can benefit from these tax structures. The true luxury of an LLC is that you get to pick what works best for your unique business.

Illinois Tax Rates

Illinois charges a flat rate for both its personal and corporate income taxes: 4.95% and 7% respectively. Then there’s the state sales tax (6.25%), which many LLCs will have to collect and pay. LLCs taxed as corporations are also subject to the state’s franchise tax.

Taxes are complicated, and no two businesses are the same. We recommend consulting with an Illinois tax professional to fully understand your business taxes.

Personal Asset Protection

A key advantage to forming an LLC is limited liability protection. That’s not available to unregistered business owners like sole proprietors or general partners. In the eyes of the law, your LLC is a separate legal entity from you as a person. Generally speaking, the LLC is liable for its own debts and contractual obligations; it has a corporate veil that shields the members from personal liability.

As a result, if something goes wrong with your LLC — you run into financial troubles or encounter a lawsuit — only the LLC will pay up from its business assets. Creditors typically can’t come after your personal assets, like your home or car. This personal liability protection is one of the primary reasons some small business owners decide they need an LLC.

Flexible Ownership and Management Structure

Illinois LLCs are notoriously simple to run and maintain, especially compared to corporations. State law doesn’t require an LLC to hold regular meetings, draft bylaws, or keep detailed records. You don’t even have to draft your own operating agreement (although that’s highly recommended).

An Illinois LLC can also be a single-member LLC or a multi-member LLC, depending on what you need. You can also establish whether your limited liability company will be member-managed or manager-managed (run by the members or appointing someone to run the business). And unlike a partnership, which must split profits 50/50, an LLC allows you to split profits the way you want. Basically, you can customize an LLC to fit your needs.

All of these terms should be dictated by your LLC’s operating agreement. Our operating agreement template makes it easy to write one.

Central Location and Transportation Infrastructure

Illinois boasts a central location to the entire country — and it has the infrastructure to prove it. With one of the largest airports in the nation, large shipping hubs, and access to the country’s railways, Chicago is an enviable location. If your business needs access to a wide variety of supplies and services, you’re likely to find them in Illinois.

Human resources are also quite accessible. For starters, portions of Illinois are very population-dense. And with a large number of universities and colleges, Illinois also produces a myriad of well-trained, qualified workers. Illinois businesses can often hire top talent as a result.

We can help!

There’s one last benefit to an Illinois LLC that we didn’t mention: you don’t have to do it alone. ZenBusiness can help. Whether you need help starting your LLC, getting a registered agent, staying compliant every year, or anything in between, we’ve got your back. With our help, you can focus on what really matters: making your business thrive.

Benefits of an LLC in Illinois FAQs

  • The tax rates for Illinois LLCs vary depending on your taxation structure. Generally speaking, though, LLC members will pay 4.95% on the income received from the business. LLCs taxed as corporations pay 7% at the business level, and the members will pay 4.95% on the profits they receive from the company.

    Your business might also be subject to state sales tax or other miscellaneous fees. We highly recommend consulting with a licensed accountant to discuss your taxes.

  • Each year, every LLC is required to file an annual report, which has a $153 filing fee. Some LLCs might also be subject to annual license fees, but those vary depending on your industry.

  • Illinois does not administer a general business license on the state level. Some cities and counties may require one, though. And depending on your industry, you might have other permits to get.

    The most common “business license” that applies to LLCs is the seller’s permit. Registering for it is free, but it allows you to collect and pay sales taxes compliantly.

  • It’s one thing to know why you might create an LLC, but knowing when you’re ready can be tougher. Ultimately, only you can decide that. But technically, as long as you have a registered agent picked out and a business name created, you’re ready to start the process. You can use our LLC checklist to keep yourself on track while you create your LLC.

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Written by Team ZenBusiness

Start Your LLC in Illinois