Illinois

Illinois Franchise Tax Guide for LLCs

Complete 2026 guide to Illinoisfranchise tax — rates, due dates, filing forms, exemptions, and how to minimize your LLC's state tax burden.

Does Illinois have franchise tax on LLCs?

Yes — $75/yr annual report

Illinois Franchise Tax Structure

How it's calculated

Illinois Replacement Tax: 1.5% of net income for S-corps and trusts. Standard LLCs taxed as partnerships don't pay this.

Due date

Annual report by first day of anniversary month

Filing form

Annual Report + Replacement Tax Return (IL-1065 or IL-1120-ST)

Key Things to Know About Illinois Franchise Tax

Replacement tax hits S-corp LLCs harder than default pass-through LLCs
PTET election available to convert this to a deductible entity-level tax
Chicago Personal Property Lease Transaction Tax also applies to some business leases

Possible Exemptions

LLCs taxed as partnerships (default) are exempt from replacement tax on operations

Verify eligibility with a CPA or the Illinois Department of Revenue before claiming an exemption.

FAQ

Does my LLC owe franchise tax in Illinois?

Yes. Illinois imposes franchise tax or equivalent: Illinois Replacement Tax: 1.5% of net income for S-corps and trusts. Standard LLCs taxed as partnerships don't pay this.

When is Illinois franchise tax due?

Annual report by first day of anniversary month. Missed deadlines typically trigger penalties, interest, and loss of good standing. Always mark your calendar or use FormifyAI's compliance reminder service.

How do I file franchise tax in Illinois?

Annual Report + Replacement Tax Return (IL-1065 or IL-1120-ST). Most states now offer online filing through their Department of Revenue or Secretary of State portal. Payment can usually be made by ACH, credit card, or check.

What happens if I don't pay Illinois franchise tax?

Failure to pay triggers: monetary penalties + interest on unpaid amounts, loss of good standing with the state, inability to file lawsuits or enforce contracts, and eventual administrative dissolution of the LLC. Administrative dissolution can retroactively pierce liability protection.

Can I avoid Illinois franchise tax by forming elsewhere?

Generally no. If your LLC operates in Illinois (has employees, office, or significant activity there), you'll owe Illinois state taxes regardless of formation state. Forming in Delaware or Wyoming to "avoid" Illinois taxes typically costs MORE (both states' fees) while providing no real tax benefit.

Are there exemptions from Illinois franchise tax?

Possible exemptions: LLCs taxed as partnerships (default) are exempt from replacement tax on operations. Consult a CPA familiar with Illinois tax law for your specific situation.

Stay compliant with Illinois franchise tax

FormifyAI tracks your Illinois compliance deadlines and sends reminders so you never miss a franchise tax filing. Plus EIN, operating agreement, registered agent, and BOI report all bundled.

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