Tax

Illinois Franchise Tax

By Finaloop Team
January 31, 2021

For eCommerce businesses operating out of Illinois, the franchise tax obligations for your business will depend on whether your business entity is formed as a limited liability company (i.e., LLC), partnership or corporation. Below we outline the 411 on Illinois franchise taxes for your business.

Note that the due dates we included are for calendar year taxpayers and may not apply to you if your business has a tax year that does not end on December 31. In addition, the information below refers only to franchise or net worth tax and does not include registration fees or other regulatory payments that may be due by your business.

For more information on Franchise taxes, check out the following Blog.

LLC and Limited Partnerships – Due Date: First day of your business’ anniversary month

What Online Sellers Need to Know

  • The State of Illinois requires an Illinois LLC or partnership to file an annual report with the Illinois Secretary of State due before the first day of your business’ anniversary month a. For example, if you were formed on July 15, 2020, your annual report is due July 1 2021.
    b. If you don’t recall in which month your business was formed, you can easily find that information by searching the Illinois Business Database.
  • While the filing of the annual report comes with an annual registration fee, no actual Franchise tax applies to an LLC or partnership (unless treated as a corporation for tax purposes).

Corporations – Due Date: First day of your business’ anniversary month

What Online Sellers Need to Know

• The State of Illinois requires an Illinois corporation to file an annual report with the Illinois Secretary of State due before the first day of your business’ anniversary month

a. For example, if you were formed on July 15, 2020, your annual report is due July 1 2021.
b. If you don’t recall in which month your business was formed, you can easily find that information by searching the Illinois Business Database.
c. A filing registration fee is also required to be paid in addition to the franchise tax calculated.

• There are 2 ways of calculating your total franchise tax: A business should choose the method that results in the smallest amount due. Here’s a quick breakdown of both options:

  1. The Allocation Factor: You will need to determine your corporation’s total gross assets and revenue. To calculate the franchise tax:
    A. Take the total value of property owned in Illinois + total gross assets earned from business conducted in Illinois during the previous fiscal year
    B. Take the total value of property owned (anywhere) + total gross assets earned during the previous fiscal year (all locations).
    C. Calculate A divided by B = your franchise tax
  2. Paid-in-Capital: This method is based on the amount of money your business earns from its shareholders in exchange for stock.
    A. The first year, you’ll pay 0.15% of your total paid in capital. Afterwards, you’ll pay 0.1%.

• The Franchise tax in Illinois is not all bad news. The good news is that as of January 2020, the state of Illinois began the process of eliminating the franchise tax.

• What this means is that every year until 2024, there is an exemption amount that can be used to reduce (or eliminate) your franchise tax due. By 2024, the franchise tax obligation in Illinois should be eliminated completely!

• For this year’s filing, after you calculate the amount due, you can reduce it by $1,000.
So in 2021, if either calculation method (allocation or paid in capital) results in an amount less than $1,000, then your total franchise tax due will be $0.




The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only. Readers are advised to consult with their attorney or accountant with any questions or concerns.

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