When deciding to form a limited liability company (LLC), choosing the right state can have significant implications for your business.
Alabama and Illinois are two states that offer distinct advantages and considerations for LLC owners.
While Alabama boasts a business-friendly environment and favorable tax policies, Illinois provides a robust market and access to a highly skilled workforce.
Alabama vs. Illinois LLC
Alabama
Cost: The filing fee for forming an LLC in Alabama is $200.
Annual report: Alabama LLCs are required to file an annual report with the Secretary of State. The filing fee for the annual report is $50.
Taxes: Alabama LLCs are pass-through entities, which means that the income or losses of the LLC are passed through to the members and taxed on their individual tax returns.
Liability protection: LLCs in Alabama enjoy limited liability protection, which means that the personal assets of the members are not at risk in the event of a lawsuit against the LLC.
Illinois
Cost: The filing fee for forming an LLC in Illinois is $150.
Annual report: Illinois LLCs are required to file an annual report with the Secretary of State. The filing fee for the annual report is $75.
Taxes: Illinois LLCs are pass-through entities, which means that the income or losses of the LLC are passed through to the members and taxed on their individual tax returns.
Liability protection: LLCs in Illinois enjoy limited liability protection, which means that the personal assets of the members are not at risk in the event of a lawsuit against the LLC.
| Alabama | Illinois |
|---|---|
| Alabama offers a business-friendly atmosphere, with streamlined regulations and low start-up costs. | Illinois provides a vibrant business landscape with access to diverse markets and ample networking opportunities. |
| It has a favorable tax structure for businesses, with no state-level income tax for LLCs. | It imposes a corporate income tax and a flat-rate personal income tax, potentially impacting LLC taxation. |
| Alabama follows the Alabama Limited Liability Company Act, providing flexibility in LLC operations and governance. | Illinois adheres to the Illinois Limited Liability Company Act, which outlines specific regulations and compliance requirements for LLCs. |
| It has a skilled workforce, although it may be comparatively smaller in certain industries. | It boasts a highly educated and diverse workforce, offering a larger pool of talent in various sectors. |
| Alabama offers access to growing markets, particularly in sectors like aerospace, automotive, and technology. | Illinois provides a robust market with a strong presence in finance, manufacturing, healthcare, and professional services. |
| It has relatively fewer bureaucratic hurdles and reporting obligations for LLCs, simplifying compliance. | It imposes stricter reporting requirements and administrative obligations on LLCs, ensuring comprehensive regulatory oversight. |
| Alabama generally offers a lower cost of living, which can translate into reduced operating expenses for businesses. | Illinois tends to have a higher cost of living, potentially affecting business overhead and employee compensatio |
Cost Breakdown of The Two
You may use our free LLC cost calculator by state to find out filing fees, tax percentages, income taxes, and more.
Alabama
Initial filing fee: $200
Annual report filing fee: $50
Registered agent service: $50-$200 per year
LLC formation service: $100-$300
Illinois
Initial filing fee: $150
Annual report filing fee: $75
Registered agent service: $50-$200 per year
LLC formation service: $100-$300
Related Posts:
- Alabama LLC: Cost Breakdown, Pros and Cons, Requirements
- Illinois LLC: Cost Breakdown, Pros and Cons, Requirements
Similarities Between Alabama and Illinois LLC
Limited liability protection: Both Alabama and Illinois LLCs offer limited liability protection to their members.
This means that the personal assets of the members are not at risk in the event of a lawsuit against the LLC.
Pass-through taxation: Both Alabama and Illinois LLCs are taxed as pass-through entities.
This means that the income or losses of the LLC are passed through to the members and taxed on their individual tax returns.
Annual report filing: Both Alabama and Illinois LLCs are required to file an annual report with the Secretary of State. The filing fee for the annual report is $25 in both states.
Registered agent requirement: Both Alabama and Illinois LLCs are required to have a registered agent.
A registered agent is a person or entity that is designated to receive legal and tax documents on behalf of the LLC.
Filing requirements: The filing requirements for forming an LLC in Alabama and Illinois are similar.
You will need to file articles of organization with the Secretary of State, and you will need to pay a filing fee.
Additional Resources:
Steps to Form LLC in Alabama
Choose a name for your LLC. Your LLC name must be unique and cannot be the same as the name of any other business entity registered in Alabama.
You can check the availability of a name using the Alabama Secretary of State’s online business search tool.
Choose a registered agent. A registered agent is a person or entity that is designated to receive legal and tax documents on behalf of your LLC.
The registered agent must be located in Alabama and be available to receive documents during normal business hours.
File your Articles of Organization. The Articles of Organization is the document that officially forms your LLC.
You can file your Articles of Organization online or by mail. The filing fee is $150.
Obtain an Employer Identification Number (EIN). An EIN is a nine-digit number that is used by the Internal Revenue Service (IRS) to identify businesses.
You can apply for an EIN online or by phone.
Create an operating agreement. An operating agreement is a document that outlines the rules and regulations for your LLC.
It is important to have an operating agreement, even if it is not required by law.
File your annual report. Each year, you will need to file an annual report with the Alabama Secretary of State. The filing fee is $25.
Steps to Form LLC in Illinois
Choose a name for your LLC. The name of your LLC must be unique and cannot be the same as the name of any other business entity registered in Illinois.
You can check the availability of a name using the Illinois Secretary of State’s online business search tool.
Choose a registered agent. A registered agent is a person or entity that is designated to receive legal and tax documents on behalf of your LLC.
The registered agent must be located in Illinois and be available to receive documents during normal business hours.
File your Articles of Organization. The Articles of Organization is the document that officially forms your LLC.
You can file your Articles of Organization online or by mail. The filing fee is $50.
Obtain an Employer Identification Number (EIN). An EIN is a nine-digit number that is used by the Internal Revenue Service (IRS) to identify businesses.
You can apply for an EIN online or by phone.
Create an operating agreement. An operating agreement is a document that outlines the rules and regulations for your LLC.
It is important to have an operating agreement, even if it is not required by law.
File your annual report. Each year, you will need to file an annual report with the Illinois Secretary of State. The filing fee is $75.
Feature Comparisons Between Alabama LLC vs. Illinois
Filing fee: The filing fee for forming an LLC in Alabama is $150, while the filing fee in Illinois is $150.
Annual report fee: The annual report fee for an LLC in Alabama is $50, while the annual report fee in Illinois is also $75.
Registered agent requirement: Both Alabama and Illinois require LLCs to have a registered agent.
A registered agent is a person or business that is designated to receive legal and tax documents on behalf of the LLC.
Operating agreement requirement: An operating agreement is not required to form an LLC in Alabama or Illinois, but it is highly recommended.
An operating agreement is a document that outlines the rules and regulations for the LLC.
Limited liability protection: Both Alabama and Illinois offer limited liability protection to LLC members.
This means that the personal assets of LLC members are not at risk in the event of a lawsuit against the LLC.
Pass-through taxation: Both Alabama and Illinois tax LLCs as pass-through entities.
This means that the income or losses of the LLC are passed through to the individual tax returns of the LLC members.
Ease of formation: The formation process for an LLC in Alabama and Illinois is relatively simple.
However, there are some additional steps that may be required, such as filing a fictitious business name statement.
Business Environment
Alabama
Alabama has a lower cost of living than Illinois, which can save businesses money on things like rent, utilities, and labor.
Alabama has a more favorable tax climate than Illinois. Illinois also has a 9.50 percent corporate income tax rate.
While Illinois has a 6.25 percent state sales tax rate and a 4.75 percent max local sales tax rate Alabama also has no personal income tax.
Illinois
Illinois has a larger population than Alabama, which can provide businesses with access to a larger pool of potential customers and employees.
Illinois has a more diverse economy than Alabama.
The state’s economy is anchored by the Chicago metropolitan area, which is home to a wide range of industries, including finance, insurance, manufacturing, and technology.
Alabama’s economy is more focused on agriculture and manufacturing.
Illinois has a more developed infrastructure than Alabama.
The state has a better transportation system, including airports, highways, and railroads. Illinois also has a better education system than Alabama.
Read Also:
Alabama vs. Illinois Taxes
Alabama and Illinois have different tax structures, with Alabama having a lower overall tax burden.
Alabama
Corporate income tax: Alabama has a flat corporate income tax rate of 6.5%.
Personal income tax: Alabama does not have a personal income tax.
Sales tax: Alabama has a statewide sales tax of 4%. There are also local sales taxes that can add up to an additional 2.5%.
Property tax: Alabama has a property tax system that is based on the assessed value of the property. The assessed value is typically 10% of the market value of the property.
Illinois
Corporate income tax: Illinois has a flat corporate income tax rate of 9.50%.
Personal income tax: Illinois has a progressive personal income tax system with six income brackets. The top marginal rate is 4.95%.
Sales tax: Illinois has a statewide sales tax of 6.25%. There are also local sales taxes that can add up to an additional 2.25%.
Property tax: Illinois has a property tax system that is based on the assessed value of a property. The assessed value is typically 10% of the market value of the property.
Overall, Alabama has a lower overall tax burden than Illinois. Businesses that are looking to save money on taxes may be better off locating in Alabama.
Flexibility in Rules and Regulations
Alabama
Alabama has a reputation for being a business-friendly state with a relatively low regulatory burden.
The state has been ranked as one of the best states for business by several organizations, including the Tax Foundation and the Mercatus Center.
Alabama’s regulatory environment is overseen by the Alabama Department of Commerce, which is responsible for developing and enforcing state laws and regulations that affect businesses.
The department has a number of programs and initiatives designed to help businesses comply with regulations, including a website that provides information on state laws and regulations, as well as a helpline that businesses can call for assistance.
Illinois
Illinois has a more complex regulatory environment than Alabama.
The state has a number of different agencies that are responsible for developing and enforcing regulations, which can make it difficult for businesses to keep track of all the applicable rules and requirements.
The department has a number of programs and initiatives designed to help businesses comply with regulations, including a website that provides information on state laws and regulations, as well as a helpline that businesses can call for assistance.
Key Differences Between Alabama and Illinois
Alabama and Illinois are two neighboring states in the southeastern United States. Both states have a strong economy and a diverse population.
However, there are also some key differences between the two states.
Cost of living
Alabama has a lower cost of living than Illinois. This is true for housing, transportation, food, and other expenses.
For example, the median home price in Alabama is $150,000, while the median home price in Illinois is $250,000.
The average cost of a gallon of gas in Alabama is $3.00, while the average cost of a gallon of gas in Illinois is $3.50.
Taxes
Alabama has a more favorable tax climate than Illinois.
Alabama does not have a personal income tax, while Illinois has a progressive personal income tax system with six income brackets.
Alabama also has a lower corporate income tax rate than Illinois.
For example, the corporate income tax rate in Alabama is 5%, while the corporate income tax rate in Illinois is 7%.
Regulations
Alabama has a more business-friendly regulatory environment than Illinois.
Alabama has been ranked as one of the best states for business by several organizations, including the Tax Foundation and the Mercatus Center.
Illinois has been ranked as one of the worst states for business by several organizations, including the Tax Foundation and the Mercatus Center.
Infrastructure
Alabama has a less developed infrastructure than Illinois. Alabama has a lower quality of roads, airports, and public transportation than Illinois.
For example, the American Society of Civil Engineers gave Alabama’s infrastructure a D+ grade, while Illinois’ infrastructure received a C grade.
Economy
Alabama’s economy is more focused on agriculture and manufacturing, while Illinois’ economy is more focused on finance, insurance, and technology.
Alabama’s unemployment rate is 3.6%, while Illinois’ unemployment rate is 4.1%.
