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LexiState
costUpdated 2026-03-31

Does Illinois Have a Minimum Franchise Tax?

No. Illinois does not impose a franchise tax on LLCs or other business entities (35 ILCS 5/). The state levies income-based taxes and sales tax instead, but no franchise or entity-level tax exists regardless of your LLC's revenue or structure.

What Taxes Illinois LLCs Actually Owe

Income Tax. Illinois taxes business income based on federal tax classification. Single-member LLCs taxed as sole proprietorships pay individual income tax at 4.95% on net business income. Multi-member LLCs taxed as partnerships owe a 1.5% replacement tax on Illinois-taxable income (35 ILCS 5/). C corporations pay 7% income tax plus replacement tax. S corporations follow partnership rules.

Sales Tax. If your LLC sells taxable goods or services, you must register for and collect Illinois sales tax at 6.25% before local add-ons. Register at https://tax.illinois.gov/questionsandanswers/286.

No Gross Receipts Tax. Illinois does not impose a gross receipts tax.

Annual Compliance Requirements

While Illinois eliminates franchise tax burden, LLCs must file an Annual Report before the first day of their anniversary month each year (805 ILCS 180/50-1). The filing fee is $75.00.

Failure to file carries penalties. A $100 late fee applies if the report is not filed within 60 days after the due date. If the annual report remains unfiled 120 days from the original due date, the LLC faces administrative dissolution (805 ILCS 180/50-5). Reinstatement requires a $200 fee plus settlement of all delinquent filings and penalties.

Next Steps

  1. Register for sales tax if your business sells taxable products or services—this is mandatory.
  2. Confirm your tax classification with the Illinois Department of Revenue (https://tax.illinois.gov/) to determine your income tax obligations and estimated payment deadlines (April 15, June 15, September 15, January 15).
  3. File your Annual Report on time to maintain good standing and avoid penalties.
  4. Consider entity elections—electing S corporation or C corporation status may reduce your overall tax burden depending on your income level.

This is general information, not legal advice.