Deciding between forming an LLC in Delaware or Illinois can be challenging due to the different regulations, taxes, and costs associated with each state.
Here we will break down the similarities and differences between Delaware vs. Illinois LLCs to help you decide on what’s best for your business.
Delaware vs. Illinois LLC
Delaware offers a streamlined and business-friendly environment for LLC formation, while Illinois has a straightforward process but can involve more administrative steps.
Delaware’s franchise tax for LLCs is often more affordable, whereas Illinois has a higher overall fee burden, including initial filing and annual report fees.
Delaware’s legal system is highly specialized in business law, especially for complex cases, whereas Illinois provides a solid legal environment.
| Delaware LLC | Illinois LLC |
|---|---|
| The filing fee for a Certificate of Formation in Delaware is $90. | In Illinois, the fee for filing Articles of Organization is $150. |
| Delaware LLCs must pay an annual report fee of $300. | Illinois requires LLCs to file an annual report with a fee of $75. |
| It imposes a progressive state income tax with rates ranging from 2.2% to 6.6% on taxable income. | It has a flat state income tax rate of 4.95% on individual and corporate income. |
| Delaware does not have a statewide sales tax. | Illinois has a base sales tax rate of 6.25%, with additional local taxes that can bring the total rate to 10.25% or higher in some areas. |
| It levies a flat corporate income tax rate of 8.7% on net income. | It has a flat corporate income tax rate of 9.5% on net income. |
| Delaware’s franchise tax varies based on the number of authorized shares for corporations and is often around $300 for LLCs. | Illinois charges a flat fee for LLC formation, which is $150. |
| It is known for its specialized Court of Chancery, providing expertise in business and corporate law. | It follows a general legal system without a specialized business court. |
| Delaware doesn’t require the disclosure of member information in formation documents, offering greater privacy. | In Illinois, member information is publicly available in state records. |
| It offers limited local market access but is favored for its business-friendly reputation. | It provides access to diverse and substantial consumer and business markets. |
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.
Delaware
Formation Fee: Filing the Certificate of Formation with the Delaware Secretary of State costs $90.
Annual Franchise Tax: The franchise tax in Delaware is based on the number of authorized shares. For LLCs, it’s typically a flat fee of $300 per year.
Registered Agent Fee: Hiring a registered agent in Delaware can cost around $100 to $300 annually.
Annual Report Fee: Delaware requires an annual report, which costs $300.
Illinois
Formation Fee: Filing the Articles of Organization with the Illinois Secretary of State costs $150.
Annual Report Fee: Illinois requires an annual report, with a fee of $75.
Registered Agent Fee: Hiring a registered agent in Illinois can cost approximately $100 to $300 per year.
Related Posts:
- Delaware LLC: Cost Breakdown, Pros and Cons, Requirements
- Illinois LLC: Cost Breakdown, Pros and Cons, Requirements
Similarities Between Delaware and Illinois LLC
Both Delaware and Illinois require the filing of articles or documents with their respective Secretary of State’s office to establish an LLC.
These filings include essential information about the LLC, such as its name, registered agent, and principal address.
Both states provide limited liability protection to the owners (members) of an LLC.
While neither Delaware nor Illinois legally mandates having an operating agreement, it is advisable to create one.
An operating agreement outlines the internal management structure, member roles, and operational procedures of the LLC, helping to prevent disputes among members and provide clarity.
Both states require LLCs to designate a registered agent with a physical address in the respective state.
The registered agent is responsible for receiving legal documents and official notices on behalf of the LLC.
Delaware and Illinois both require LLCs to file annual reports.
These reports typically include updated information about the LLC’s management, addresses, and other relevant details.
LLCs in both states have flexibility in how they are taxed.
They can choose to be taxed as a pass-through entity or elect corporate taxation.
If an LLC was formed in another state but wishes to conduct business in Delaware or Illinois, it generally needs to register as a foreign LLC. This involves additional paperwork and fees.
Additional Resources:
Steps to Form LLC in Delaware
Choose a Unique Name: Select a unique name for your LLC that complies with Delaware’s naming rules.
Designate a Registered Agent: Appoint a registered agent in Delaware who will receive legal documents on behalf of the LLC and maintain a physical address in the state.
File a Certificate of Formation: Prepare and file a Certificate of Formation (also known as Articles of Organization) with the Delaware Division of Corporations. You can do this online or by mail.
Pay the Filing Fee: Pay the required filing fee, which varies depending on the LLC’s structure and the method of filing.
Get an EIN: Obtain an Employer Identification Number (EIN) from the IRS.
File an Annual Report: Delaware LLCs must file an Annual Report and pay the associated fee each year.
Comply with Local Regulations: Depending on your specific business activities, you may need to obtain licenses or permits at the local level.
Maintain Records: Keep accurate records of important LLC documents and financial transactions for compliance and tax purposes.
Steps to Form LLC in Illinois
Choose a Unique Name: Select a unique name for your LLC that complies with Illinois naming rules, including including “Limited Liability Company” or its abbreviations.
Designate a Registered Agent: Appoint a registered agent in Illinois who will receive legal documents on behalf of the LLC and maintain a physical address in the state.
File Articles of Organization: Prepare and file Articles of Organization with the Illinois Secretary of State online, by mail, or in person.
Pay the Filing Fee: Pay the required filing fee, which varies based on the type of LLC and how you choose to file.
Obtain an EIN: Obtain an Employer Identification Number (EIN) from the IRS.
File an Annual Report: Illinois LLCs are required to file an Annual Report and pay the associated fee each year to keep the entity in good standing.
Comply with Local Regulations: Depending on your specific business activities, you may need to obtain licenses or permits at the local level.
Maintain Records: Keep accurate records of important LLC documents and financial transactions for compliance and tax purposes.
Feature Comparisons Between Delaware LLC vs. Illinois LLC
Delaware LLC
It is renowned for its business-friendly environment, well-established legal system, and specialized Court of Chancery for business disputes.
The formation process in Delaware is streamlined.
It allows for flexible taxation options, including the ability to elect corporate taxation or opt for pass-through taxation.
It assesses an annual franchise tax on LLCs, often considered reasonable compared to other entities like corporations.
Delaware doesn’t require members’ names and addresses to be publicly disclosed.
Illinois LLC
Forming an LLC in Illinois can be cost-effective, with lower initial filing fees compared to Delaware.
Illinois has a robust regulatory environment and offers comprehensive protections for businesses and consumers.
As a populous state, provides access to diverse and large consumer markets, which can benefit businesses.
Illinois allows LLC members or managers to serve as registered agents, potentially reducing costs.
It requires LLCs to file annual reports with the Secretary of State, maintaining the entity’s good standing.
Business Environment
Delaware
Business-Friendly Reputation: It is well-known for its business-friendly environment.
Legal Expertise: Delaware has a specialized Court of Chancery that deals specifically with business disputes.
Tax Advantages: It offers flexibility in taxation. LLCs can choose to be taxed as pass-through entities, allowing for tax planning that suits the business’s needs.
Privacy: Delaware offers greater privacy for LLC members, it doesn’t require members’ names and addresses to be publicly disclosed.
Efficient Formation: The state has a streamlined formation process, with the option for online filing, making it efficient to establish an LLC.
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Illinois
Diverse Markets: Illinois, as one of the most populous states in the U.S., offers access to diverse and substantial consumer and business markets.
This can be advantageous for businesses targeting local markets.
Robust Regulatory Environment: Illinois maintains a comprehensive regulatory environment that provides protections for businesses and consumers alike.
This can instill confidence in customers and partners.
Cost-Effective Formation: Forming an LLC in Illinois can be cost-effective, with lower initial filing fees compared to Delaware, which may be appealing for smaller businesses.
Local Presence: If your business operates primarily in Illinois or relies on local relationships, having an Illinois LLC can convey a strong local presence.
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Delaware vs. Illinois Taxes
Delaware
Delaware has a progressive state income tax with six tax brackets, ranging from 2.2% to 6.6% on taxable income.
It does not have a statewide sales tax, making it attractive for retail businesses.
Delaware levies a flat corporate income tax rate of 8.7% on net income.
It charges an annual franchise tax based on the number of authorized shares for corporations and a flat fee for LLCs, often around $300.
Illinois
Illinois has a flat-rate state income tax of 4.95% on individual and corporate income.
The state has a base sales tax rate of 6.25%, with additional local taxes that can bring the total rate to 10.25% or higher in some areas.
Illinois levies a flat corporate income tax rate of 9.5% on net income.
It charges a filing fee of $150 for LLC formation.
Illinois requires LLCs to file an annual report with a fee of $75 to maintain good standing.
Flexibility in Rules and Regulations
Delaware
Business-Friendly Reputation: Delaware is renowned for its business-friendly environment.
Legal Expertise: Delaware’s Court of Chancery specializes in business and corporate law, providing a high level of expertise in resolving business disputes efficiently.
Tax Flexibility: Delaware allows LLCs to choose their taxation structure, either as pass-through entities or by electing corporate taxation, providing flexibility in tax planning.
Illinois
Comprehensive Regulations: Illinois maintains a robust regulatory environment that provides protections for businesses and consumers.
These regulations can instill confidence in customers and partners.
Market Access: As one of the most populous states in the U.S., offers access to diverse and substantial consumers, which can be advantageous for businesses targeting local markets.
Cost-Effective Formation: Forming an LLC in Illinois can be cost-effective, particularly for smaller businesses, due to lower initial filing fees.
Key Differences Between Delaware and Illinois- An Overview
