Illinois LLC Taxes
With its large urban centers like Chicago, Illinois is a popular place to start a business in the United States. Still, each state has its own business laws and regulations that can make creating a new venture feel overwhelming.
Regardless of the size of your business, if you operate a limited liability company (LLC) in Illinois, you’ll need to stay up to date on your finances and pay federal, state, and local taxes. Our guide will help you understand which taxes you must pay for your Illinois LLC.
Recommended: Schedule a free consultation with an accountant to stay on top of your taxes.
Illinois LLC Taxes Owed
LLCs benefit from pass-through taxation, which means the business’s profits pass through to its members’ individual tax returns. As a result, your LLC itself doesn’t pay taxes to the federal government or the state of Illinois. Instead, LLC owners must pay taxes on their portion of the income generated by the LLC.
In Illinois, LLC owners can expect to pay the following taxes:
Federal Taxes
Regardless of where your business is located, if you have an LLC within the United States, you will have to pay federal income taxes and federal self-employment taxes. These taxes are reported on your Form 1040.
Federal Self-Employment Taxes
It doesn’t matter if your LLC is a single-member LLC or a multi-member LLC; all LLC members must pay self-employment taxes on their share of the LLC’s profits. The self-employment tax rate is 15.3%.
Federal Income Taxes
Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets, as well as the percent owed, will change each year.
Illinois State Taxes
As mentioned above, every state has its own laws dictating how it taxes individuals and businesses. Here are some state-level taxes applicable to your Illinois LLC.
Illinois Income Taxes
The income tax rate in Illinois is 4.95%. While that’s not too low when compared to the rest of the country, it’s a little below the average.
Illinois Sales and Use Tax
Illinois has a state sales tax rate of 6.25%. You also may have to pay a local sales tax on top of that when making purchases in certain cities and counties. The average local sales tax rate is 2.56%, which makes the combined rate 8.81%.
While 6.25% isn’t the highest sales tax rate in the nation, a combined state and local sales tax of 8.81% can seem like a hefty rate when purchasing something in an area of Illinois that imposes a local sales tax.
Register for an Illinois Sales Tax License
If your business sells taxable goods or services, you must register with the Illinois Department of Revenue to receive a sales tax license. This license will enable your business to file a Sales and Use Tax Return each year.
You can register for this license when you register your business during the LLC formation process, which means there are no additional steps. Just make sure to file your Sales and Use Tax Return each year to avoid issues with the state.
Visit the MyTaxIllinois portal to register your business and the Illinois Department of Revenue website to learn more about the state’s sales and use taxes.
Additional State Taxes
The Illinois Department of Revenue oversees the collection of various state-specific taxes that businesses may have to pay, depending on their location, industry, and number of employees. Some examples of these additional taxes include:
- Charitable Games Tax
- Cigarette Tax
- Hotel Operators' Occupation Tax
- Liquor Gallonage Tax
- Motor Fuel Taxes
For more information about these taxes and others that may apply to your LLC, visit the Illinois Department of Revenue website.
Illinois Local Taxes
The local laws and ordinances in one Illinois city or county likely will differ from those of another. Regardless of where you live in Illinois, we recommend you check with your local jurisdiction to ensure your business obtains the proper local permits and follows any local regulations that may impact its operations.
Illinois LLC Compliance
You must obey Illinois state and local laws in order to maintain your business in good standing. While LLCs in Illinois technically don’t file taxes with the state, they must still file an annual report each year.
Illinois LLC Annual Report
All LLCs in Illinois need to file an annual report before the first day of their anniversary month. Your LLC’s anniversary month is the month in which the Illinois Secretary of State approved its operation within the state. The filing fee is $75, and you can file by mail or online.
For more information, check out our Illinois LLC Annual Report guide.
LLC taxes are complex. While our guide can provide you with important information, we recommend you schedule a free consultation with an accountant to ensure you handle your business taxes correctly.