What Taxes Does an LLC Pay in Illinois?
An Illinois LLC's tax obligations depend on federal classification. Single-member LLCs default to disregarded entity status (Schedule C); multi-member LLCs default to partnership status (Form 1065). Both pass income to owners' personal returns taxed at 4.95% individual income tax rate. Partnerships and S-corps owe 1.5% replacement tax on Illinois-taxable income under 35 ILCS 5/. C-corp elections trigger 7% corporate income tax plus replacement tax. All LLCs collecting sales must register and remit 6.25% state sales tax plus local add-ons.
Income Tax & Replacement Tax
Illinois does not tax LLC income directly. Instead, tax liability flows to owners based on federal classification.
Single-Member LLCs (Default: Disregarded Entity) Single-member LLCs are treated as sole proprietorships. The owner reports LLC income on Schedule C and pays 4.95% individual income tax plus self-employment tax. No separate LLC return is filed.
Multi-Member LLCs (Default: Partnership) Multi-member LLCs taxed as partnerships do not pay income tax. Instead, they owe 1.5% replacement tax on Illinois-taxable income (35 ILCS 5/). Members report their distributive share on personal returns and pay 4.95% individual income tax plus self-employment tax.
S-Corp & C-Corp Elections LLCs electing S-corp treatment pay 1.5% replacement tax. C-corp elections subject the LLC to 7% corporate income tax plus replacement tax (35 ILCS 5/). File Form 8832 (C-corp) or Form 2553 (S-corp) with the IRS to make these elections.
Sales Tax Registration
Illinois LLCs selling taxable goods or services must register for sales tax. The state imposes 6.25% sales tax before local add-ons apply. Register online at https://tax.illinois.gov/questionsandanswers/286 before collecting sales.
Estimated Tax Payments
LLCs with significant income must pay quarterly estimated taxes on April 15, June 15, September 15, and January 15.
Annual Reporting
File your annual report before the first day of your LLC's anniversary month each year (805 ILCS 180/50-1). The $75 filing fee is due with your report.
Next Steps
Contact the Illinois Department of Revenue at https://tax.illinois.gov/ for guidance specific to your LLC's structure and income level. Consult a CPA or tax attorney to optimize your federal classification choice.
This is general information, not legal advice.