Incorporator The Journal of U.S. Formation
Start Free Quiz
Editorial 10 MIN READ

Illinois in mid-2021: the $150 LLC is three and a half years old, and it held

Articles of Organization $150, the annual report $75, and the replacement tax still doing the real revenue work behind both

The Editors
Staff, Incorporator.org
10 min read Updated
Contents 6 sections
  1. What the 2021 fee schedule actually says
  2. How a $500 fee became a $150 fee
  3. The series LLC at $400
  4. The replacement tax is still the tax you forget
  5. Who the Illinois fee schedule actually fits in 2021
  6. Sources

he Illinois LLC fee schedule in mid-2021 is a different document than the one a first-time filer encountered four years ago. Articles of Organization cost $150, the annual report costs $75, and both numbers are the product of the December 2017 rewrite that took Illinois off the short list of states where a routine formation ran into four figures.

This is a fee-focused review written in July 2021, halfway through the fourth full filing year under the reduced schedule. It is meant to sit next to the longer Illinois formation guide from May 2017, which was written in the last months of the old $500 regime and which remains the better starting point on series LLC mechanics and the replacement tax. The statute references here are the same; the dollar figures are not.

What the 2021 fee schedule actually says

The Illinois Secretary of State's Department of Business Services publishes the current LLC fee schedule on ilsos.gov. Articles of Organization under 805 ILCS 180/5-5 cost $150, whether filed on paper at the Springfield office or electronically through the LLC filing portal. A series LLC formed under 805 ILCS 180/37-40 costs $400. Both figures are down from their pre-2018 levels of $500 and $750 respectively, and both have been stable since Public Act 100-0571 (Senate Bill 867 of the 100th General Assembly) took effect on December 20, 2017.

The annual report under 805 ILCS 180/50-1 costs $75, due on the first day of the anniversary month of formation. That number replaced the prior $250 annual fee in the same 2017 rewrite. A company formed July 15, 2020 owes its first annual report by July 1, 2021. The Secretary of State sends a postcard reminder to the registered agent roughly sixty days before the due date; it is a single-page form that fits on a sticky note and is easy to lose in a commercial-agent mail feed if no one is calendaring for it.

Expedited counter service remains available at the Springfield office at an extra $100 for same-day processing on most filings. Name reservations cost $25 and hold a proposed name for 90 days. A certificate of good standing runs $25 through the portal. An amendment to the Articles of Organization costs $50. A foreign qualification, which registers an out-of-state LLC to do business in Illinois under 805 ILCS 180/45-5, runs $150 to match the domestic formation fee. Voluntary dissolution under 805 ILCS 180/35-4 runs $5. None of these are the numbers that attract attention on the schedule; the two that matter are the $150 formation and the $75 annual report.

The effect of the 2017 rewrite is that Illinois now sits near the middle of the national fee distribution rather than at the top. The $150 formation is the same as California's LLC-1 fee and a dollar more than Wisconsin's online rate. The $75 annual report is below the national median for states that charge one. Illinois is no longer the tie-for-most expensive state to form an LLC in; Massachusetts now holds that spot alone at $500, with Tennessee's variable minimum of $300 close behind.

How a $500 fee became a $150 fee

The political story behind the current schedule is worth knowing because it explains why the numbers are what they are and why they have not moved since. For most of the 2010s, reform bills that would have cut the Illinois LLC fees surfaced every session and died in committee. The Secretary of State's office supported reduction in principle; the General Assembly, operating through a prolonged budget impasse, did not have the appetite to give up any revenue line, however small.

Senate Bill 867, introduced in the 100th General Assembly by Senator Don Harmon, did three things in a single package. It cut the LLC filing fee from $500 to $150. It cut the annual report from $250 to $75. It cut the series LLC formation from $750 to $400. The fiscal note on the bill estimated the fee reductions at about $22 million a year against the Secretary of State's general-revenue collections, with an offsetting increase in formation volume expected to recover a portion of that over time. Governor Bruce Rauner signed it into law on December 20, 2017 as Public Act 100-0571, and the rates took effect on signature. The Secretary of State pushed the revised schedule onto the filings portal within the same week.

The immediate result was a spike in formation filings through the first quarter of 2018, as filings that had been deferred through December under the old schedule came through at the new rate. The ongoing result, visible in the Secretary of State's annual reports through 2020, is a formation count that now runs meaningfully above the pre-2017 baseline. Filings that might have been done in Wyoming or Indiana or simply done nowhere are now being done in Illinois because the cost of doing them in Illinois no longer penalizes the decision.

The schedule has held through two budget cycles and one change of Secretary of State. Jesse White, who ran the office through the 2017 reduction and who has signaled he will not seek another term, has not advanced a bill to raise the fees back. Neither has the General Assembly. For an operator deciding this quarter, the working assumption is that the $150 and the $75 are the numbers for the remainder of the current general assembly, which runs through January 2023.

The series LLC at $400

Illinois has permitted the series LLC since 2005 and remains one of the earlier states to have adopted the form. Articles of Organization for a series LLC are filed on Form LLC-5.5(S) under 805 ILCS 180/37-40, at $400 rather than the $150 domestic rate. Each series may hold separate assets, have separate members or managers, and enjoy a liability shield from the debts of any other series provided the master operating agreement and the Articles meet the statutory formalities in subsection (b) of the section. Each additional series designated under the master is $50 on its own designation filing.

The 2017 rewrite cut this number along with the others, from $750 to $400, without touching the substantive series statute. The result is that the per-series economics now pencil in situations that did not previously. A real-estate portfolio with four rental properties, each appropriately shielded from the others, costs $400 for the master plus three additional series at $50 each for a total of $550 at formation, against four separate standalone LLCs at $150 each for a total of $600. The series structure is now cheaper at formation than the parallel structure, for the first time in the statute's history in Illinois.

That said, the series LLC remains a structure to pick with advice, not a structure to pick on price. Illinois case law interpreting the internal-shields statute is still thin, tax treatment at the federal and state level for individual series remains a question the IRS has addressed only through the proposed regulations that have been pending since 2010, and lenders and title insurers continue to treat individual series unevenly. For an operator with a single Illinois rental property, a standalone LLC at $150 is still the right answer. For a portfolio of five or more, the series math gets interesting, and the $400 number makes it cheap enough to get wrong without catastrophic exposure.

The replacement tax is still the tax you forget

The line item the Illinois fee schedule does not disclose and that new filers consistently fail to anticipate is the Illinois Personal Property Replacement Tax. The tax is imposed under 35 ILCS 5/201(c) and (d) on the net income of partnerships, trusts, and S corporations, which includes any LLC taxed under those federal classifications, at 1.5%. C-corporations (including LLCs that have elected corporate taxation) pay at 2.5%. The tax is computed at the entity level, reported on Form IL-1065 for partnerships (and LLCs taxed as partnerships) or Form IL-1120-ST for S-corporations (and LLCs taxed as S-corps), and due the 15th day of the fourth month after year-end.

A multi-member LLC taxed as a partnership with $400,000 of Illinois net income owes $6,000 of replacement tax at the entity level before any member sees a K-1. That $6,000 is on top of the individual income tax that flows through to the members at the 4.95% Illinois personal rate under 35 ILCS 5/201(b)(5.4), plus whatever federal tax applies. The replacement tax is deductible for federal purposes; the personal income tax on the member's share is not, above the $10,000 SALT cap, which is the reason Illinois enacted its pass-through entity tax election for tax years beginning on or after January 1, 2021, under Public Act 102-0658.

None of this shows up on the Secretary of State's fee page, and a filer working only from the formation schedule will not see it coming. The $150 fee is real; it is also, for an operating LLC with actual net income, about two percent of the total annual cost of the entity. The other ninety-eight percent lives at the Department of Revenue.

Who the Illinois fee schedule actually fits in 2021

The shape of the guidance has not changed between the old schedule and the new; only the weight has. Form in Illinois if the business lives in Illinois. An operating LLC with Illinois customers, Illinois property, Illinois payroll, or an Illinois professional licensing requirement should form here, pay the $150, and get on with it. The alternative of forming in Wyoming or Delaware and foreign-qualifying into Illinois at $150 now costs more on the registered-agent side and the multi-state compliance side than it saves, if it saves anything at all, and the operating state's law still governs the operation.

Form elsewhere if the business is genuinely mobile. A remote professional services LLC with no Illinois nexus has no reason to pick Illinois over Wyoming or the operator's home state. A holding entity whose only purpose is to own intellectual property licensed to a Delaware operating company has no reason either.

The series LLC now reads as genuinely competitive for real-estate portfolios of any scale, where under the old $750 schedule it read as a lawyer's structure priced for lawyers' clients. The $400 master plus $50 per additional series prices the wrapper below the cost of four standalone LLCs at the second property and below eight at the fifth. Delaware's series LLC statute, more recent and still under-litigated, now costs more at formation than Illinois's, which is a sentence that would have read as a typo before December 2017.

The replacement tax is the sleeper and remains uncorrected by the fee reduction. Any advisory work with an Illinois LLC needs to include it in the first conversation, not the first tax return. A founder who read the old $500 schedule and was braced for pain and who now sees a $150 schedule and reads it as forgiveness has misread the document. Illinois reduced the cost of getting in. It did not reduce the cost of operating once you are there.

The next date on the calendar is the end of the 102nd General Assembly in January 2023. Nothing in the current session moves the Secretary of State's fee schedule, nothing in the Governor's fiscal year 2022 budget proposes to touch it, and the office's own public statements treat the 2017 rates as the settled posture. For a filer deciding this quarter, the $150 and the $75 are the numbers to plan on.

Sources

Keep reading

More from the journal.