How to Form an LLC in Illinois (2026 Guide)

This guide covers LLC formation end-to-end, plus the corporate-side tax picture every founder considering Illinois should understand.

Quick facts

Item	Detail
Filing office	Illinois Secretary of State
Formation document	Articles of Organization (Form LLC-5.5)
Filing fee	$150
Annual report fee	$75
Annual report due	First day of the anniversary month
LLC replacement tax	1.5% of net income (pass-through entities)
Corporate tax	7% income tax + 2.5% personal property replacement tax
Franchise tax	Phased out — fully eliminated for corps as of January 1, 2024
Processing time	10 business days online; expedited $100 for 24-hour

Step 1 — Name your Illinois LLC

Your name must contain "Limited Liability Company," "LLC," or "L.L.C." and must be distinguishable from existing entities. Search the Illinois business entity search before you commit.

Illinois allows name reservations for 90 days for $25 if you need time to file.

Step 2 — Appoint a registered agent

Illinois requires every LLC to designate a registered agent with a physical Illinois street address (no P.O. boxes). The agent can be an Illinois resident or a commercial registered agent authorized to do business in the state.

For non-Illinois founders, a commercial agent is effectively mandatory. Expect $100–$200 per year.

Step 3 — File the Articles of Organization

File Form LLC-5.5 with the Illinois Secretary of State. Filing options:

• Online through CyberDriveIllinois — $150, 10-business-day processing
• By mail — $150, slower
• Expedited 24-hour service — $100 extra

The Articles require:

• LLC name
• Principal place of business
• Registered agent name and Illinois street address
• Effective date (filing date or specified later date)
• Purpose
• Member- or manager-managed
• Names and addresses of initial members or managers
• Organizer signature

Step 4 — Get an EIN

Apply free through the IRS EIN application. You will need it to open a business bank account and file Illinois tax returns.

Step 5 — Register for Illinois taxes

Register with the Illinois Department of Revenue through MyTax Illinois if any of these apply:

• You will have employees (withholding and unemployment insurance)
• You will collect sales tax (Retailers' Occupation Tax)
• Your LLC is taxed as a partnership or S-corp (you owe the personal property replacement tax)
• You are a corporation for federal tax purposes

The key Illinois-specific tax for LLCs: the personal property replacement tax, a 1.5% flat tax on pass-through entity net income. This is on top of each member paying personal income tax on their distributive share. Every multi-member Illinois LLC pays it.

Step 6 — The franchise tax phase-out (corporations)

Until recently, Illinois corporations paid an annual franchise tax based on paid-in capital. This tax is now fully eliminated as of January 1, 2024. If you search older guides you will see references to it, but it no longer applies.

Why this matters for entity choice. The franchise tax used to be a meaningful reason to form an LLC instead of a C-corp in Illinois. That friction is gone. You can now compare LLC vs. C-corp in Illinois on tax and operational merits alone — ownership structure, investor preferences, equity plans — without franchise-tax bias.

Note that the 2.5% personal property replacement tax on C-corp net income is still in effect, on top of the 7% corporate income tax. So Illinois C-corps still face a combined effective rate around 9.5% at the state level.

Step 7 — File your annual report

Every Illinois LLC files an annual report by the first day of its anniversary month. The fee is $75 and must be filed online through CyberDriveIllinois.

File after the due date and you owe a $100 late penalty. Miss it entirely and the SOS administratively dissolves the entity after the following anniversary.

Step 8 — Operating agreement and federal tax election

Illinois does not require a written operating agreement, but do not skip it. Illinois courts have pierced LLC veils for commingling and poor recordkeeping; a signed operating agreement plus clean books is the standard defense.

By default, single-member LLCs are disregarded entities and multi-member LLCs are partnerships for federal tax. Elect corporate taxation with Form 8832 or S-corp treatment with Form 2553 if it makes sense.

Common mistakes

• Forgetting the 1.5% personal property replacement tax. Pass-through LLCs often miss it because they are not used to owing entity-level state tax.
• Following old guides on the franchise tax. The franchise tax is gone — corporations do not owe it. Check the date on any source before you plan around it.
• Missing the anniversary-month deadline. Illinois sends reminders but not reliably. Put it on the calendar yourself.

Should you form in Illinois if you do not live there?

Rarely. The $150 filing fee + $75 annual report + 1.5% replacement tax (or 9.5% combined corporate rate) is not competitive with Wyoming, Delaware, or your home state for remote businesses. Form in Illinois when your business operates here — employees, offices, customers, warehousing.

If you are a remote SaaS or consulting founder, Illinois's main advantage (the franchise tax phase-out) only matters if you were going to form here anyway.

Next steps

• Open a business bank account with your stamped Articles and EIN
• Register on MyTax Illinois if you have employees or sales tax obligations
• Calendar the anniversary-month annual report
• If you have members, get the operating agreement signed — before you take distributions

Illinois is friendlier in 2026 than it was three years ago. The franchise tax is gone. The LLC is still mainstream. For Illinois-based businesses, formation here is a reasonable default.