How Do I Convert My LLC to an S-Corp in Illinois?

You don't convert your LLC structure—you elect S-Corp tax treatment federally. File Form 2553 (Election by a Small Business Corporation) with the IRS within 2 months and 15 days of your tax year start. Your Illinois LLC remains an LLC under state law (805 ILCS 180/) but is taxed as an S-Corp by the IRS. Illinois applies 1.5% replacement tax on S-Corp income (35 ILCS 5/). Continue filing annual reports with Illinois as an LLC.

The Election Process

An S-Corp election is a federal tax classification only—not a legal entity change. File Form 2553 with the IRS, not Illinois. Your LLC structure stays unchanged under state law.

Eligibility requirements:

All members must be U.S. citizens or residents
Maximum 100 shareholders
One class of stock

Timing: File Form 2553 by the earlier of (1) 2 months and 15 days after your tax year begins, or (2) your original tax return due date. Missing this deadline requires requesting late election relief from the IRS.

Illinois Compliance Obligations

Your LLC filing requirements remain unchanged under 805 ILCS 180/50-1 and 805 ILCS 180/50-5:

File an annual report before your LLC's anniversary month ($75 fee)
Report your LLC legal name, file number, principal place of business, manager/member names, and registered agent
Late penalty: $100 if filed more than 60 days late; administrative dissolution risk after 120 days delinquency

Continue reporting as an LLC with the Illinois Secretary of State. Only your federal tax return changes to Form 1120-S.

Tax Impact

Illinois taxes your S-Corp at 1.5% replacement tax on Illinois-taxable income (35 ILCS 5/), not the standard partnership rate. You'll owe estimated taxes quarterly (April 15, June 15, September 15, January 15).

As an S-Corp, you must pay yourself reasonable W-2 wages as an employee, subject to payroll taxes. Distributions above wages avoid self-employment tax, which may reduce your overall tax burden depending on your income level.

Action Items

Confirm all members are U.S. citizens/residents and you have ≤100 shareholders
Obtain an EIN from the IRS if you lack one
File Form 2553 with the IRS before the deadline
Continue filing Illinois annual reports on schedule
Register for Illinois replacement tax at https://tax.illinois.gov/

Consult a CPA to confirm S-Corp status reduces your tax liability before filing.

This is general information, not legal advice.