Taxes and Fees for Your Illinois Corporation
Here’s a breakdown of the likely taxes and fees you’ll incur when you start and run a corporation in Illinois.
Illinois Corporation Fees
- Turnaround times for forming a corporation in Illinois: You will normally have the option of a “Standard” turnaround time and an “Expedited” turnaround time for forming your corporation. You can learn about those times here.
- Fees for forming a corporation in Illinois: Learn about standard filing costs here.
- Illinois State Annual Report Fee: A yearly fee when you file your annual report.
- Illinois Permits and Licenses: Various fees for renewing your licenses and permits on a regular basis. These depend on the type of business you are operating and where you are located. They vary from city to city and industry to industry. We have a service that will tell you what permits and licenses you need.
The way that S Corporations and C Corporations pay tax is different. We’ll take each one separately.
Taxes You and Your Corporation Need to Pay
Taxes Payable by All Corporations
Your corporation will need to pay employer payroll tax on salaries paid to employees.
Illinois State Income Tax
You will pay Illinois state income tax on your earnings. Find out more here.
Illinois State Sales/Use Tax
If you’re selling products or services in Illinois you may need to pay a state sales tax. You can register and pay state sales tax here.
Illinois Other Taxes
You may need to pay other taxes and fees, depending on the type of business you run. Learn about other Illinois taxes.
Employee Insurance and Taxes
If you employ others, you will need to pay insurance and taxes to the state for each employee. Here’s how to register for the various employee taxes, insurance and other costs.
Taxes Payable by All Individuals Working for Corporations
Federal Income Tax on Earnings, Dividends and Distributions
You will also need to pay regular federal income tax when you file your tax return every year. Note that you will be able to apply your standard deduction, personal exemption and business expenses to this tax.
Taxes Payable by S Corporations
Because your Illinois corporation income flows through to your personal tax return, you must pay self-employment tax (also known as FICA, Social Security or Medicare tax) on your earnings. This is typically at a rate of 15.3 percent. You will be able to deduct your business expenses from your income when working out how much self-employment tax you owe.
In some cases, part of the income from an S Corporation can be paid as a “distribution” rather than “salary” so it would not be subject to self-employment tax. Find out how this can save you money.
Taxes Payable by C Corporations
Unlike the Limited Liability Company and the S Corporation, a C Corporation is required to file a corporate tax return and pay corporation taxes on any profits. When those taxed profits are paid to shareholders as dividends, they will also be subject to taxation on that individual’s tax return. This is known as “double taxation.”
C Corporation Tax Rates
The income of the C Corporation is taxed at the corporate level and then again at the shareholder level. The standard corporation tax rate is 21 percent.
Stock Dividends From C Corporations
A C Corporation may pay shareholders dividends as a share of the profits of the company. The value of dividends that each shareholder is entitled to depends on how many shares they own.
Dividends that are distributed to shareholders are taxed twice, first at the corporate level as profit (on the corporation’s form 1120) and again at the individual level as stock dividends (on the shareholder's form 1040).
Ready to Start Your Illinois Corporation?
Incfile provides a cost-effective service to help you create your Illinois corporation. We guide you through the process and handle most of the administrative steps, such as filing the Articles of Incorporation/Certificate of Formation on your behalf. Our basic package also provides a free Registered Agent service for the first year.