State Comparison

Delaware vs Illinois LLC

Side-by-side comparison of forming an LLC in Delaware vs Illinois — fees, processing times, taxes, and decision factors to help you choose the right state for your business.

Delaware

Filing fee$90

Processing3–5 days

Annual report$300

State income taxNone on out-of-state income for pass-through LLCs

$300 flat annual franchise tax

Illinois

Filing fee$150

Processing5–10 days

Annual report$75

State income tax4.95% flat

1.5% replacement tax on S-corp net income

Lower state fees:

Illinois — $225 total 1st-year state fees

Excludes franchise tax, registered agent, and other compliance costs

Pros and Cons

Delaware (DE)

Pros

Most developed LLC/corporate case law in the US
Court of Chancery resolves business disputes faster than any other state
No state income tax on LLCs not doing Delaware business
Preferred by VCs and institutional investors
Strong privacy — member names not required on public filings

Cons

$300 annual franchise tax regardless of revenue
Foreign qualification required in your home state if operating elsewhere
Annual registered agent fee ~$100-$300

Illinois (IL)

Pros

PTET election available to work around SALT cap
Strong Midwest economy centered on Chicago
Moderate state filing fees

Cons

1.5% replacement tax on S-corp net income
Annual report deadlines trigger loss of good standing if missed
Relatively high state income tax (4.95% flat)

Side-by-Side Comparison

Feature	Delaware	Illinois
LLC filing fee	$90	$150
Corporation filing fee	$89	$150
Annual report fee	$300	$75
Processing time	3–5 days	5–10 days
State income tax	None on out-of-state income for pass-through LLCs	4.95% flat
Franchise / entity tax	$300 flat annual franchise tax	1.5% replacement tax on S-corp net income
Popular formation state?	Yes	No

Which Should You Choose?

Choose Delaware if...

• Ideal for VC-backed startups and multi-state operations

• Overkill for single-state small businesses

• You live or operate primarily in Delaware — forming locally avoids foreign qualification costs and compliance in multiple states.

Choose Illinois if...

• PTET is a meaningful SALT-cap workaround for high earners

• Consider if operating in Chicago metro

• You live or operate primarily in Illinois — forming locally avoids foreign qualification costs and compliance in multiple states.

FAQ

Is it cheaper to form an LLC in Delaware or Illinois?

Delaware charges $90 filing + $300 annual report. Illinois charges $150 filing + $75 annual report. Illinois is the cheaper option on state fees alone, though franchise tax and other compliance costs also matter.

Should I form my LLC in Delaware or Illinois?

For most businesses, form in the state where you actually operate. Delaware (None on out-of-state income for pass-through LLCs state income tax) and Illinois (4.95% flat state income tax) each have their specific characteristics. If you physically operate in one of these states, form there. Forming in Delaware while operating in Illinois (or vice versa) means paying fees in both states.

Can I form my LLC in Delaware and operate in Illinois?

Yes, but you'll need to "foreign qualify" in Illinois, which means paying a registration fee in Illinois plus ongoing compliance in both states. You'll also typically owe Illinois state taxes on income earned there regardless of where the LLC is formed. Forming in a single state (usually your home state) is typically cleaner and cheaper for small businesses.

What are the annual costs for an LLC in Delaware vs Illinois?

Delaware: $300 flat annual franchise tax — plus $100-$300/yr for a registered agent. Illinois: 1.5% replacement tax on S-corp net income — plus $100-$300/yr for a registered agent. Budget an additional $500-$2,000/yr for accounting, bookkeeping, and business license renewals regardless of state.

Which state has better asset protection — Delaware or Illinois?

Asset protection varies by state statute. States like Wyoming, Nevada, and Delaware have the strongest charging-order-exclusive doctrines for LLC members. Delaware and Illinois both offer LLC liability protection, but consult an attorney for state-specific asset protection planning if you have significant personal assets to shield.

Delaware resources

Illinois resources

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Pros and Cons

Delaware (DE)

Pros

Most developed LLC/corporate case law in the US
Court of Chancery resolves business disputes faster than any other state
No state income tax on LLCs not doing Delaware business
Preferred by VCs and institutional investors
Strong privacy — member names not required on public filings

Cons

$300 annual franchise tax regardless of revenue
Foreign qualification required in your home state if operating elsewhere
Annual registered agent fee ~$100-$300

Illinois (IL)

Pros

PTET election available to work around SALT cap
Strong Midwest economy centered on Chicago
Moderate state filing fees

Cons

1.5% replacement tax on S-corp net income
Annual report deadlines trigger loss of good standing if missed
Relatively high state income tax (4.95% flat)

Side-by-Side Comparison

Feature	Delaware	Illinois
LLC filing fee	$90	$150
Corporation filing fee	$89	$150
Annual report fee	$300	$75
Processing time	3–5 days	5–10 days
State income tax	None on out-of-state income for pass-through LLCs	4.95% flat
Franchise / entity tax	$300 flat annual franchise tax	1.5% replacement tax on S-corp net income
Popular formation state?	Yes	No

Which Should You Choose?

Choose Delaware if...

• Ideal for VC-backed startups and multi-state operations

• Overkill for single-state small businesses

• You live or operate primarily in Delaware — forming locally avoids foreign qualification costs and compliance in multiple states.

Choose Illinois if...

• PTET is a meaningful SALT-cap workaround for high earners

• Consider if operating in Chicago metro

• You live or operate primarily in Illinois — forming locally avoids foreign qualification costs and compliance in multiple states.