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How does Illinois tax a Limited Liability Company (LLC)?
- If the LLC is a disregarded entity for federal income tax purposes, and its income, deductions, and other items are reported on the federal income tax return of its owner, for Illinois purposes the income, deductions, and other items will be reported on the Illinois return of its owner. The LLC has no Illinois income tax filing requirements. For example, if the LLC is treated as a sole proprietorship for federal income tax purposes and its income is reported on its owner's federal Form 1040, U.S. Individual Income Tax Return, for Illinois purposes the LLC's income will be reported on its owner's Form IL-1040, Illinois Individual Income Tax Return.
- If the LLC is a partnership for federal income tax purposes, and files federal Form 1065, U.S. Return of Partnership Income, for Illinois purposes the LLC will file Form IL-1065, Illinois Partnership Replacement Tax Return. Each partner should receive a Schedule K-1-P, Partner's or Shareholder's Share of Income, Deductions, Credits, and Recapture, indicating what amounts will flow to the partner's Illinois income tax return.
- If the LLC is a corporation for federal income tax purposes, and files a federal Form 1120, U.S. Corporation Income Tax Return, for Illinois purposes the LLC will file Form IL-1120, Corporation Income and Replacement Tax Return.
- If the LLC is a subchapter S Corporation for federal income tax purposes, and files a federal Form 1120S, U.S. Income Tax Return for an S Corporation, for Illinois purposes the LLC will file Form IL-1120-ST, Illinois Small Business Corporation Replacement Tax Return. Each shareholder should receive a Schedule K-1-P, Partner's or Shareholder's Share of Income, Deductions, Credits, and Recapture, indicating what amounts will flow to the shareholder's Illinois income tax return.
If you are an LLC, the tax return you file with Illinois depends on how you have elected to be treated with the Internal Revenue Service (IRS).