Businesses were pleasantly surprised to learn that the Illinois Secretary of State reduced Limited Liability Company (“LLC”) filing fees following the passage of Senate Bill 867. This bill was passed in both houses on November 7, 2017 and went into immediate effect upon signature by the governor on December 20, 2017. The fee reduction is intended to allow more businesses to register and maintain business registrations in Illinois. The reduction impacts nearly all LLC filings, reducing fees across the board. For example, the filing fee for Articles of Organization was $500, it is now $150. Similarly, the annual report filing fee was $250, it is now $75.
The Illinois Secretary of State Business Services Department processes and files over 20,000 LLC annual reports and associated documents every month. This generates an average of $5 million per month (approximately $60 million per year). The new fees are expected to reduce the revenue by approximately $20 million, but be offset by an increased number of companies registered in Illinois.
The fee reduction in the final version of Senate Bill 867 is not as significant as initially contemplated by bill sponsor Sen. Thomas Cullerton, who originally filed the bill with a $39 filing fee for Articles of Incorporation. It is, however, welcome pro-business legislation. Secretary White stated that “[t]his is a business-friendly law that significantly reduces the cost of forming and maintaining a Limited Liability Company in Illinois.” This law comes nearly six months after the passage of Senate Bill 9, which increased the state’s income tax rate in an effort to help balance the state budget, a move many commentators deemed “not business-friendly.” Additionally, the Governor signed this bill just before President Trump signed the federal tax reform bill. Is this a sign that the Illinois legislature wants to change the state’s narrative and become known as a more business friendly state?
While this change to the LLC filing fees is a step in a pro-business direction, some commentators have noted that more should be done to make Illinois more business friendly. Taxpayers in Illinois have long complained of unclear guidelines and compliance difficulties with respect to Illinois’ franchise tax laws, also administrated by the Secretary of State’s office. As such, the Illinois legislature has tried several times in the past to eliminate or modify the franchise tax. These moves were politically infeasible due to the budgetary issues in the past. However, with the passage of Senate Bill 9 and in the increase in state income tax rates, the Illinois state budget is more balanced than it has been in several years. Is the passage of Senate Bill 867 a signal that the legislature is going to take more pro-business steps and potentially even modify the franchise tax in the future? Or, will the reduction in LLC filing fees create budget gaps in Illinois that lead to additional changes, or perhaps increases, to the tax rate? We will have to wait to see, but in the meantime, LLCs can enjoy significantly reduced filing fees in Illinois.