An Illinois LLC pays a flat 4.95% state income tax on its pass-through profit, plus a 1.5% replacement tax on LLCs taxed as partnerships. The IRS default treatment is pass-through: a single-member LLC is a disregarded entity and a multi-member LLC is a partnership, with no federal entity-level tax. An S-corporation election saves self-employment tax once net income clears the $40,000-$60,000 range. Non-resident owners of a foreign-owned single-member LLC file Form 5472 with a pro-forma Form 1120 each year. This page covers every Illinois LLC tax obligation in full.
By default the IRS taxes an Illinois LLC as a pass-through entity. A single-member LLC is a disregarded entity taxed on Schedule C of the owner's 1040; a multi-member LLC is a partnership that files Form 1065 and issues K-1s to members. Neither structure pays a federal entity-level income tax. Profit passes through to the owners' personal returns and is taxed at their individual rates. This default holds unless the LLC elects corporate treatment by filing IRS Form 2553 for S-corporation status or Form 8832 for C-corporation status. The pass-through default is the reason most small Illinois LLCs keep the standard tax classification.
An Illinois LLC pays a flat 4.95% personal income tax on its pass-through profit, plus a 1.5% replacement tax on LLCs taxed as partnerships. The 4.95% rate is flat across all income levels in Illinois. The 4.95% applies to the owner's share of pass-through profit on the Illinois personal return. The 1.5% replacement tax is an entity-level charge on LLCs taxed as partnerships, paid on top of the personal income tax. A single-member LLC taxed as a disregarded entity reports its income on the owner's personal return and pays the 4.95% rate on that profit.
The Illinois replacement tax is a 1.5% personal property replacement tax charged on LLCs taxed as partnerships, on top of the flat 4.95% state income tax. It funds local governments that lost personal property tax revenue. The replacement tax applies at the entity level to the LLC's pass-through profit when the LLC is classified as a partnership. A single-member LLC taxed as a disregarded entity reports income on the owner's personal return and does not pay the partnership replacement tax in that classification. The 1.5% is calculated on the LLC's Illinois net income and paid alongside the partnership return.
An S-corporation election becomes worthwhile once an Illinois LLC's net income clears the $40,000-$60,000 range. Below that threshold the payroll compliance cost outweighs the self-employment tax savings. The LLC elects S-corp status by filing IRS Form 2553. The owner then pays a reasonable salary subject to payroll tax and takes the remaining profit as distributions that avoid the 15.3% self-employment charge. The election adds payroll filings and a formal salary requirement, which is why it pays off only above the threshold. The Illinois 4.95% income tax still applies to the pass-through profit under an S-corp election.
Default LLC owners pay 15.3% self-employment tax on net business income: 12.4% Social Security up to $168,600 plus 2.9% Medicare. Electing S-corp status with Form 2553 lets the owner take part of the profit as distributions that avoid the 15.3% charge. Under an S-corp election the owner pays a reasonable salary subject to payroll tax and takes the remaining profit as distributions free of self-employment tax. The saving grows with income, which is why the election pays off once net income clears $40,000 to $60,000. The trade-off is payroll compliance: quarterly filings, a formal salary, and additional bookkeeping.
A non-resident's US tax on an Illinois LLC depends on Effectively Connected Income. An LLC without US-source effectively connected income files Form 5472 as an information return but owes no US income tax on foreign-earned profit. A foreign-owned single-member LLC treated as a disregarded entity files Form 5472 with a pro-forma Form 1120 each year. A multi-member LLC files Form 1065 and issues K-1s. An ITIN may be needed for the owner's personal tax filing. Anonymousllc.co partners with US tax preparers familiar with non-resident filings so the annual returns are prepared correctly.
Form 5472 is a US information return required for any US disregarded entity with 25% or more foreign ownership. Most non-resident-owned single-member Illinois LLCs must file it annually alongside a pro-forma Form 1120. The form reports transactions between the LLC and its foreign owner, such as capital contributions and distributions. It is an information return, not an income tax return, so filing it does not by itself create a US income tax bill. Missing it carries a substantial penalty, which is why non-resident owners file it every year even when the LLC owes no US income tax.
A single-member Illinois LLC is a disregarded entity by default, taxed on Schedule C of the owner's personal 1040 with no federal entity-level tax. At the state level it pays the flat 4.95% Illinois income tax on that profit. The 1.5% replacement tax applies to LLCs taxed as partnerships, so a single-member LLC in the default disregarded classification reports income on the owner's return rather than filing a partnership return. A foreign-owned single-member LLC still files Form 5472 with a pro-forma Form 1120 each year. The owner can elect S-corp status once net income clears $40,000 to $60,000.
An Illinois LLC files a federal return matching its classification and an Illinois state return each year. A single-member LLC reports on Schedule C of the owner's 1040; a partnership files Form 1065 with K-1s; an S-corp election files Form 1120-S. At the state level, the LLC files the Illinois income tax return for the 4.95% rate, and a partnership also files for the 1.5% replacement tax. A foreign-owned single-member LLC adds Form 5472 with a pro-forma Form 1120. These federal and state filings are separate from the $75 Illinois annual report, which goes to the Secretary of State rather than a tax authority.
Under the March 21, 2025 FinCEN interim final rule, domestic reporting companies are exempt from beneficial ownership reporting. Most Illinois LLCs are formed in the United States, so they are domestic reporting companies and currently file nothing with FinCEN. Foreign reporting companies formed outside the US remain obligated to file BOI reports. BOI reporting is separate from income tax and from the Illinois annual report. Anonymousllc.co monitors the rule on its BOI status tracker so clients know when a foreign-reporting-company obligation applies to their structure.
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