Illinois Franchise Tax

January 31, 2021

Here's how to calculate & pay your Illinois Franchise tax.

Illinois Franchise Tax

For eCommerce businesses operating out of Illinois, the franchise tax obligations for your business will depend on the form of your business - is it an 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.

  • For example, if you were formed on July 15, 2021, your annual report is due June 30, 2022.
  • 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

  • For example, if you were formed on July 15, 2021, your annual report is due June 30, 2022.
  • If you don’t recall in which month your business was formed, you can easily find that information by searching the Illinois Business Database.
  • A filing registration fee is also required to be paid in addition to the franchise tax calculated.

How Do You Calculate Your Franchise Tax?

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 and paid-in capital. You'll also need the corporation's assets and revenue within Illinois for the reporting period.

To calculate the franchise tax:

  1. Take the total value of property owned in Illinois + total gross assets earned from business conducted in Illinois during the previous fiscal year.
  2. Take the total value of property owned (anywhere) + total gross assets earned during the previous fiscal year (all locations).
  3. Calculate 1 divided by 2 to get your allocation factor.
  4. Multiply the allocation factor by your total paid-in capital and the result is your Illinois capital.
  5. Multiply your Illinois capital by .001 (.01%) to get your franchise tax due.

2. Paid-in-Capital

This method is based on your total paid-in capital.

  1. The first year, multiply your total paid-in capital by .0015 (.15%) to get your franchise tax due.
  2. Afterwards, multiply your total paid-in capital by .001 (.01%) to get your franchise tax due.

The Franchise tax in Illinois is not all bad news - every year you can reduce your franchise tax liability by $1,000. This means that if either calculation method (allocation or paid in capital) results in an amount of 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.*

Finaloop logo
Excited to do your bookkeeping? Didn't think so.

That’s what we’re here for.
Accurate ecommerce books, done for you.

100% accurate ecommerce books, available 24/7.

Finally, you can focus on everything else.

Get started
14-Day Free Trial
No Credit Card Required