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Tax Implications for:

Corporations, LLCs & Partnerships

* Non-Illinois Readers – because this article is a brief summary of the procedural aspects of business formation in Illinois, and not legal advice, it MAY NOT be applicable to you.

* Illinois Readers – the info. in this article DOES NOT constitute legal advice and should be supplemented with the advice of an Illinois attorney..

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In Illinois, like most other states, one is generally free to choose from a number of different legal entities in forming a new business:  C corporation, S corporation, partnership, limited liability company (LLC), or sole proprietorship.  The entity type one selects will, to a large extent, determine whether the individual owners or the business itself pays income taxes on the business income.


§         Corporations.  In Illinois, all C corporations are required to pay an annual corporate tax of 4.8 percent on the amount of income that the corporation reports to the IRS.  In addition, Illinois assesses a “personal property replacement tax” (2.5 percent for corporations, 1.5 percent for S corporations and all other incorporated entities) on all businesses.

§         Subchapter S Corporations.  Becoming a Subchapter S Corporation is a matter of federal tax law.  If a new business qualifies for S-Corporation status, the IRS allows the corporation to “pass its income through" to the shareholders, thus eliminating the standard corporate level income tax.  All corporate profits are reported by the individual shareholders on their personal income tax returns – even the shareholders of the corporation did not take any money out of the business (i.e, no dividends, salaries, etc.).  In Illinois, S corporations do not have to pay state corporate income taxes, but remain subject to the 1.5 “percent personal property replacement tax.”


§         Limited Liability Companies (LLCs).  LLCs are treated, for tax purposes, exactly like partnerships.  Accordingly, in Illinois, an LLC's net income is subject to the 1.5 percent “personal property replacement tax.”


§         Partnerships.  Net partnership income is subject to Illinois’1.5 percent “personal property replacement tax.”

See Also:

Chicago Real Estate Attorney’s Checklist
for Sellers


Chicago Real Estate Attorney’s Checklist
for Buyers


The Typical
Residential Real Estate Transaction

Preliminary Matters


The Role of the
Real Estate Attorney


Hiring a Real Estate


Real Estate Seller’s Agent

Real Estate Buyer’s Agent

Real Estate Broker


Negotiating the
Real Estate Contract

‘For Sale By Owner’

Deciding Key Terms


Pre-Closing Matters

Mortgage Issues


The Closing

The Deed

Affidavit of Title
ALTA Statement


The Statute of Frauds


Doctrine of Equitable



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