How much does it cost to form an Illinois LLC or Corporation?

Illinois LLC or Corporation

Entrepreneurs find Illinois a favorable state to form, operate, and grow their business. The state offers several advantages as well as resources to a new company. You can choose from a wide variety of entity structures although the most popular are a C Corporation and limited liability company (LLC). It is quite important to choose the right entity structure as it will determine the future of the company as the cost to form Illinois Corporation may be lower or higher than other types of entities. Similarly, there are other aspects to also consider like tax consequences, legal advantages, asset protection, documentation, and annual maintenance. There will be a cost associated with each of these and this may eventually impact the operational and financial side of your company.

Which business entity should I choose for Illinois business?

One of the most important decisions that entrepreneurs need to make before starting a company is choosing the type of entity structure. It needs to be a well thought out decision as the type of business entity chosen will have major implications in the short and long-term survival and success of that entity. As an example, if you choose to form an LLC then you will need to consider the cost to form an Illinois LLC. When you choose an entity structure, there will be a financial implication, which will vary according to the entity chosen. There will also be an annual maintenance cost of Illinois Corporation or LLC. Hence, it is integral to identify the finer aspects of entity structures. You need to look for the following –

• Tax Treatment – One of the factors that drives decision making when choosing an entity structure is the tax treatment desired by you. Ideally, a business can choose to be a flow-through entity where the tax passes onto the owners or members. Such entity structures include LLC, S Corporation, Sole Proprietorship, and Partnership. Alternatively, there is also non flow-through business like a C Corporation. Hence, it becomes important to choose an efficient entity structure for tax planning purposes. This will also impact the overall cost of forming an Illinois Corporation or LLC.
• Liability Protection – Personal liability protection is the need of the hour for most entrepreneurs and first-time business owners. Certain entity structures protect owners’ assets against legal claims or business liabilities. Other structures, like sole proprietorships, do not offer any protection at all.
• Startup costs – Startup and recurring costs – Every new business has startup and recurring costs. This is an integral component of the Illinois LLC cost per year or that of corporations. The startup costs include company registration, business name reservation, licensing and permits, annual reports, and sales tax registration.

Pros and Cons of Forming an LLC or Corporation in Illinois

Whatever entity structure you choose will impact your company’s cost and operational aspects. The cost of forming an Illinois LLC or corporation is one such area that you need to focus on. Simultaneously, considering the long-term advantages of your chosen entity structure is also recommended. So, let us quickly look at the pros and cons of conducting an LLC vs Corporation in Illinois comparative analysis.

Pros of an LLC or Corporation

• You can start a Limited Liability Company with a single member
• An LLC or a C corporation can choose to be taxed as an S Corporation
• A traditional corporation has the power to raise funds by issuing stock
• Corporations can find various funding options like through Venture capitalist (VC) firms as compared to other entity structures
• An LLC enjoys a lot of flexibility when it comes to management
• The initial documentation for an LLC is comparatively lesser than certain other structures
• If you look at an LLC vs Corporation in Illinois, an LLC enjoys pass-through taxation on profits
• Limited liability protection for your assets is offered by both LLC’s and corporations
• A Corporation enjoys perpetual life

Cons of an LLC or Corporation

• The overall cost to form an Illinois Corporation may be higher than the cost to form any other entity
• It is difficult for an LLC to raise funds as compared to a corporation
• A limited liability company doesn’t enjoy perpetual existence
• A corporation, unlike other entities, undergoes double taxation on profits earned by the company
• A comparative analysis of LLC vs Corporation in Illinois reveals higher annual report fee for corporations
• Unlike other entities, corporations need to hold an annual shareholder meeting each year
• Corporations may have higher operational costs

Illinois LLC Cost

A Limited Liability Company is among first-time business owners’ most favored entity structures. This is due to the numerous advantages it offers. If you want to register your startup as an LLC, understanding the cost of forming an Illinois LLC is integral to smooth operations. There are various types of costs involved. The costs taken into account are from the registration and operation stages, including Illinois LLC’s annual fee. Let us take a look at the various expenses that you may incur.

Cost for forming an Illinois LLC

The cost of forming an Illinois LLC considers one-time fees and recurring costs. These are:

• The LLC registration process and fees differ from those of other entity structures. The first step towards registration is to file the Application to Reserve a Name (Form LLC-1.15) in compliance with 805 ILCS 180/1-10 (2023). The fee is $300.
• According to state laws, you must hire and maintain a registered agent to service the process. The Illinois LLC cost per year for this may vary depending on the RA service you choose.
• Submitting the company registration document is the third and most important cost of forming an Illinois LLC. You will have to file an Article of Organization along with a $150 filing fee. An additional fee is charged if you want to expedite the process.

Annual maintenance cost for Illinois LLC

Once you register your limited-liability company in Illinois, it is important to ensure that your company complies with all state requirements. This is known as fulfilling state annual maintenance requirements. There is an Illinois LLC cost per year that includes different fees. The costs involved are:

• Annual Report – An Illinois limited liability company must file an Annual Report. This report must be filed each year by the end of the month prior to the LLC registration month. The fee is $75 plus a transaction fee of $1.69.
• Taxes – One of the components considered in the cost of forming an Illinois LLC is taxes. This is the annual variable cost. Since an LLC is deemed a “Pass-through Entity,” the company doesn’t need to file any taxes. Instead, the members must file taxes on their share of profits. You may also be required to file other state and local taxes. The expenses related to Illinois taxes will vary according to the tax rates applicable to your company.
• Business Licenses – Every new and existing business needs to apply for licenses and permits in this state. This is an integral part of the Illinois LLC cost per year, as licenses and permits have to be renewed each year. The fee for licenses will vary according to the type of license and the number of licenses or permits required by an LLC.

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Illinois Corporation Cost

One entity structure considered the best option if you are looking to generate capital is a C corporation. This form of company is the traditional corporation with a rooted history dating back to the early 1600s when joint-stock companies existed. If you want to incorporate in Illinois, you will need to consider several aspects. The most important aspect is the cost to form an Illinois Corporation. Let us delve deeper into the costs of forming and operating this type of structure.

Cost of Forming Corporation in Illinois

The cost of forming an Illinois Corporation will be dependent on several factors. One of the important cost determinants is whether you want to form a domestic entity or incorporate a foreign company. There are several other cost categories related to incorporation in this state, and they are:

• One of the first cost elements is that of corporate name reservation. You must choose a company name following business name guidelines governed by Illinois Compiled Statutes – 805 ILCS 105/104.05. Once you have chosen a name, conduct a name availability search. If the chosen name is available, reserve it using the Application for Reservation of Name (Form BCA-4.10). A filing fee of $25 is a part of the cost to form an Illinois Corporation.
• The next important forming cost for Illinois Corporation is hiring a registered agent. According to Illinois Compiled Statutes—805 ILCS 105/Art. 5 heading, you will need to hire and maintain a registered agent for the service of process. The cost or fee would vary according to the RA service you chose.
• Finally, after the above processes are over, you must incorporate them in Illinois. You must file the Articles of Incorporation according to Illinois Compiled Statutes – Chapter 805 – 805 ILCS 5/Art.-2 heading. A filing fee of $150 is a part of the cost to form an Illinois Corporation. You may also be required to file franchise tax (a minimum of $25).

Annual maintenance cost for Illinois Corporation

The second category of costs applicable is known as the annual maintenance cost of Illinois Corporation. These are yearly costs associated with fulfillment of state requirements. They can be one-time or recurring in nature. The cost components are –

• Annual Report – A corporation formed in the state of Illinois will be required to file an annual report pursuant to 805 ILCS 5/Art. 14 heading. There is a fee of $75 for both domestic and foreign entities along with a transaction fee of $1.69. Apart from this, there would also be a variable franchise tax cost. These are taken into account as a component of the total cost to form an Illinois Corporation.
• Taxes – Once you incorporate in Illinois, you will need to be compliant with state annual requirements. This helps create a good standing. Hence, the annual maintenance cost of an Illinois Corporation is also associated with the filing of taxes. You will be required to file corporate income tax at a rate of 9.5 percent. Your company may be required to file other taxes like state sales tax and withholding tax.
• Business Licenses – Registering a business and making it operational are two different processes and have different requirements and costs. A corporation is considered to be operational when you have obtained the necessary licenses or permits. This is an integral component of the annual maintenance cost of an Illinois Corporation. This is a recurring cost as licenses or permits have to be renewed each year or as specified by the state.

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Need any Assistance in Forming Your Illinois LLC or Corporation

You can choose to register any type of entity structure as the options are varied in this state. Yet, most entrepreneurs prefer to either start their new business as an LLC or a corporation. This is owing to the many advantages and benefits these structures offer. The cost to form an Illinois LLC or corporation will also vary for domestic and foreign entities. We, at IncParadise can provide valuable assistance by handling requirements pertaining to new business formation or incorporation in the state.