Illinois Company Compliance Renewal and Maintenance Guidelines
After successfully registered in Illinois, the Corporation or LLC are required to operate in compliance with the General Corporation Law/Limited Liability Company Act of the State of Illinois. This guideline note intends to provide a summary of those on-going compliance requirements for the interest of our clients.
The first section of the guideline note briefs the basic maintenance and reporting that a Illinois company is required to comply with, including annual report, franchise tax report, registered office and registered agent and business license renewal.
The second section describes income tax filing services, including federal income tax filing and state income tax filing.
The third section describes the Illinois State sales tax filing requirements and tax rate.
The fourth section describes federal and state payroll tax filing and foreign person’s U.S. source income subject to withholding tax filing requirements. All U.S. companies are required to file tax returns on time to comply with tax laws.
The fifth section states the foreign banks and financial accounts reporting. If you have foreign financial accounts, you are required to report accounts to IRS on time.
The sixth section describes financial reporting, including bookkeeping service and the audit service of annual financial report.
The last section summarizes our compliance and maintenance services and costs to maintain a Illinois company in good standing. The fees listed are based on estimation and for reference purpose only. The final service fee may be different according to actual circumstances.
This guideline is not meant to cover all the compliance requirements imposed on a company by the Illinois and U.S. laws. If any issue of interest is not covered in this guideline, you are welcome to contact and consult our professional accountants.
- Annual Renewal Requirements
(1)
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Annual Report
All active business entities registered at Illinois must file Annual Report with the Illinois Secretary of State before the first day of the registration anniversary month every year.
An annual report not filed within 60 days of the due date requires payment of the late filing penalty. If the annual report is 180 days late, the Secretary of State may administratively dissolve the company.
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(2)
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Annual Franchise Tax Report (only apply to Corporations)
Each domestic and foreign Illinois Corporation is required to pay franchise tax every year based on either paid-in capital or an “allocation factor.?For the paid-in capital rate, Illinois corporations in their first year pay 0.15% of paid-in capital for the preceding twelve-month period, with a $25 minimum. For subsequent years, the tax is 0.1% for the preceding twelve-month period, with a $25 minimum and a $2 million maximum. The allocation factor rate is recommended for corporations with a high paid in capital. The franchise tax is based on gross assets and revenue with application of allocation factor.
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(3)
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Registered Office and Registered Agent
Illinois law requires that every business entity must have and maintain a Registered Agent in the State of Illinois. The registered agent must have a physical street address in Illinois. Kaizen provides professional service to help you maintain and renew the registered agent annually.
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(4)
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Business License/Permit Renewal
In the situation where a Illinois registered company holds a business licence or permit issued by the Federal or State Government because it engages in one or more regulated business, in general, such a licence or permit must be renewed each year.
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- Corporate Income Tax Filing
(1)
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Federal Income Tax Return
According to Internal Revenue Service (IRS), all business entities must file an income tax return on or before the following April 15th (Corporation) or March 15th (LLC) of the tax year, or Oct 15th (Corporation) or Sep 15th (LLC) with extension, if the company adopts the calendar year as its accounting year. However, a business entity must still pay its tax due in full no later than the original deadline for filing of its tax return (not extended deadlines). Interest and penalty will be charged for late payment of tax if an extension of time to file is granted.
A LLC is also required to file a federal income tax return each year without paying any income tax because a LLC is by default a pass-through entity unless it choose to be taxed as a corporation. Should a LLC makes such as choice, then it will need to file the Federal Income Tax Return and at the same time pay federal income tax at company level.
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(2)
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Illinois State Income and Replacement Tax Return
Every business entity doing business in Illinois is required to file a state income and replacement tax return regardless of the amount, if any, of its net taxable income. Illinois state business income tax returns are due on the 15th day of the fourth month (Corporation) or third month (LLC) after the close of the year. If the due date falls on a Saturday, Sunday, or legal holiday, the filing date becomes the next business day.
For Illinois corporation, the income tax is imposed on the net Illinois taxable income by 7%, and the replacement tax is imposed on the net Illinois taxable income by 2.5%.
Illinois LLCs doing business in Illinois are taxed and classified the same as for federal income tax purposes. If the LLC is classified as a corporation, then income tax is imposed on the net Illinois taxable income by 7%, and the replacement tax is imposed on the net Illinois taxable income by 2.5%. However, if the LLC is classified as the pass-through entity, then only the replacement tax is imposed on the net Illinois taxable income by 1.5%.
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- Sales or Use Tax
Retailers engaged in business in Illinois must register with the Illinois Department of Revenue and make periodic sales tax payments for goods sold. The use tax generally applies to the storage, use, or other consumption in Illinois of goods purchased from retailers in transactions not subject to the sales tax. Use tax may also apply to purchases shipped to a Illinois consumer from another state.
The sales and use tax rate in Illinois State consist of the state tax rate (6.25%) and local tax rate imposed by a city, county, or school district. The combined rates vary in each county and in cities that impose sales tax.
- Payroll Tax Filing
(1)
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Federal Payroll Taxes
If the business entities have employees and pay wages in U.S., they must report income and payroll taxes withheld from their employees to Internal Revenue Service (IRS) periodically and deposit these taxes in full to an authorized bank or financial institution pursuant to Federal Tax Deposit Requirements. The business entities are also responsible for filing and paying Social and Medicare Taxes (employer share amount) and Federal Unemployment Taxes.
The deposit schedule for the payroll taxes depend upon the amount of the business entity’s payroll tax liability. Employers may be subject to criminal and civil sanctions for wilfully failing to pay employment taxes.
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(2)
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State Payroll Taxes
If Corporation or LLC have employees and pays wages in Illinois, they must register as employer with Illinois Department of Revenue (IDOR). Employers in Illinois are required to withhold and pay employee income tax to IDOR. In addition, employers must contribute to Unemployment Insurance Tax (UI).
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(3)
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Foreign Person’s U.S. Source Income
According to Internal Revenue Code, the payments that certain foreign persons received from U.S. sources, are subject to tax withholding. And withholding agent or payer must report the amount withheld to IRS, if any. The sources include dividends, interest, rents, annuities, etc. Kaizen can help you prepare Form 1042, 1042-S, W-8BEN or other forms required by government agencies.
- If foreign persons received U.S source income, they are required to submit Form W-8BEN to the withholding agent or payer for tax withholding purpose.
- Form 1042 is used to report the tax withheld on U.S. source income of foreign persons;
- Form 1042-S is the statement of U.S. source income and amount withheld of foreign persons.
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- Foreign Banks and Financial Accounts Reporting
If your Illinois company owns, or has any interest in, any foreign financial accounts, Foreign financial accounts include, but are not limited to; checking, savings, securities, brokerage, deposit, or any other account held with a financial institution. Foreign financial accounts also include annuities with a cash out value, mutual funds, or whole-life insurance policies.
You must assess the balances each year to determine if your Illinois company is required to file an FBAR form (FinCEN Form 114) or FATCA Form 8938.
(1)
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FBAR Form
The FBAR form is required to be filed each year if the total balance of foreign financial accounts owned by your Illinois company exceeds USD10,000 during the year. The Foreign Bank Account Report (FBAR, FinCEN Form 114) will need to be filed with the Department of Treasury on or before 15 April following the calendar year you are reporting.
Anyone who are obligated to file the report but failed to do so may be subject to a fine of USD10,000 per violation. If it is determined that you purposely avoided filing, the fine can be USD100,000 or 50% of the balance of the account at the time of the violation, whichever is greater.
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(2)
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FATCA Form 8938
The FATCA Form 8938 is required to be filed each year if the total value of foreign financial assets owned by your Illinois company exceeds USD50,000 during the tax year. It will need to be attached to your annual return and due on the date of that return, including any applicable extensions.
Anyone who are obligated to file the form but failed to do so may be subject to a fine of USD10,000 per violation and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000; criminal penalties may also apply.
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- Financial Reporting
(1)
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Financial Reports
Illinois is required to keep adequate and correct business documents, such as financial statements, bank statements, and invoices. In addition, it should be noted that Illinois companies may still have other reporting requirements, such as filing of Federal Income Tax Return and this could not be done without properly kept accounting records and financial statements. In this regard, we suggest that you should keep all your accounting records and update the books of accounts on a regular basis.
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(2)
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Audit of Annual Financial Reports
In Illinois, all entities, both corporations and LLCs, other those than listed in a stock exchange, are not required to appoint an auditor, and is also not required to arrange to have their annual financial statements audited. Public companies are required to submit the audit reports to the U.S. Securities and Exchange Commission annually per the list rules of the relevant stock exchange. It should be noted however, private companies may also want to have their financial reports audited annually or periodically for some other reasons, such as submitting the audited financial report to lending party or to investors.
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- Illinois Company Annual Maintenance Costs
As discussed above, all active Illinois Corporations and LLCs are required to operate in compliance with the Illinois business laws. They may also need to apply for license and permits with State Department according to industry specific requirements. Kaizen U.S. office is a professional CPA firm, offers complete compliance services and business support, such as bookkeeping, financial statement audit, filing tax return, making payroll, etc. Some of our Illinois company related services and fees are listed below for your reference.
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Item
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Description
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Service Fees (USD)
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1
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Annual renewal including registered agent, registered office, annual report and annual franchise tax report (only include up to USD25 Franchise Tax amount) filing fees (Note 1)
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Yearly
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900
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2
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Business license/permits renewal (Note 2)
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Yearly
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TBA
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3
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Federal and Illinois state income tax returns filing (Note 3)
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Each filing
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800/up
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4
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Payroll tax filing and relevant services (Note 4)
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TBA
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TBA
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5
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Foreign banks and financial accounts filing (FBAR) (Note 5)
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Each filing
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200/up
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6
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Financial statements and special audit (Note 6)
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Yearly
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2,000/up
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7
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Accounting and bookkeeping (Note 7)
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Yearly
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300/up
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Note:
(1)
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Kaizen service fee for the annual renewal includes provision of the registered office, registered agent, preparation and filing the annual report and franchise tax report filing (up to USD25 minimum franchise tax), but not including business license renewal service and franchise tax due over the minimum amount. |
(2)
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This is the official filing fee for renewal of business licence when your company holds one for reason of carrying out business in Illinois. Kaizen does not charge service fee for handling the renewal of business license/permits for your Illinois company. The final amount depends on the number of locations of business operation your company may have in Illinois. |
(3)
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Our service fee for preparation and filing of the Federal and State Corporate Income Tax Return depends on business model and complexity and transactions of financial statements of your Illinois company. Once we have the opportunity to review the books of accounts of your Illinois company, we will then prepare and provide an accurate quotation for your consideration. |
(4)
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Our fee for payroll tax filing and relevant services is charged based on numbers of employees and frequency of salary payments. |
(5)
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Our fee for handling of filing of FBAR depends on the number and type of financial accounts to be reported. If no more than three accounts, the filing fee is USD 200. For each additional account, we charge USD50. |
(6)
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Our service fee for audit of annual financial statements is determined taking into consideration the business model of company, the complexity of the financial positions and the types and amounts of assets etc. Once we have the opportunity to review the books of accounts and financial statements of your company, we will then prepare and provide an accurate quotation for your consideration. In addition to audit of financial statements, we can also provide special audit and review services. |
(7)
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Our service fee for accounting and bookkeeping is determined taking into consideration the number of transactions. Other than updating books of accounts on a monthly basis, we can also update the books of accounts of your Illinois company on a quarter or annual basis. We can also prepare financial statements in a language other than English.
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