Illinois lowers limited liability corporation filing fees!

As 2017 drew to a close, the federal tax legislation took over news headlines and many missed a material change to Illinois filing fees. Governor Bruce Rauner signed SB 867 which slashed the filing fees charged by Illinois for limited liability companies, or LLCs. The new law will benefit businesses of all sizes looking to situs in Illinois and provide cost savings for existing Illinois LLCs. LLC fees in Illinois were previously among the highest in the nation and are now in line with many business-friendly states. For example, the fees to file articles of organization for an LLC were $500 and have been reduced to $150 under the new law. The annual report filing fees were also reduced from $250 to $75.

When properly structured and maintained, members of an LLC and the shareholders of a corporation are both protected from personal liability for business debts and claims. Important differences arise when the creditors of a business try to recover amounts they are owed.

When a creditor of an LLC seeks to recover debts of a member, the creditor’s rights are limited to charging order protection or foreclosure in Illinois. A creditor must often obtain a charging order from a court which would allow the creditor to reach assets distributed to the member but does not allow the creditor to step into the debtor’s shoes. In contrast, a creditor of an S corporation shareholder has the ability to obtain some amount of control over the corporation. The creditor may simply attach a judgment to the shares of the debtor’s stock to gain all the rights that the debtor had in the corporation, including rights to control the entity. This can have devastating results.

With the passage of this legislation, Illinois entrepreneurs and small business owners now have the stronger asset-protection mechanism and other benefits of an LLC available at a lower cost. But like everything else, not all LLCs are created equal.

Contact a Corporate Transactions & Business Law attorney for additional information to make sure your business entities are properly structured to maximize asset protection and tax planning.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client alert authored by: Lindsey Paige Markus, Principal