Illinois at a glance
Partnership law
RUPA (revised)
LLC default split
Equal per-capita
Operating agreement
Not required
Community property
No
Formation cost
$150
Annual cost
$75 annual report fee
Illinois adopted RULLCA, defaulting to equal per-capita distributions. The state is a major business hub with a large startup ecosystem in Chicago. Illinois imposes both an income tax and a personal property replacement tax on business income.
Default partnership rules in Illinois
Illinois adopted RUPA, treating partnerships as separate entities. Profits and losses are shared equally by default. Partners have equal management rights and owe fiduciary duties of loyalty and care. The partnership can own property in its own name.
The most important takeaway: profits are split equally by default in Illinois, regardless of capital contributions. If you and a partner start a business and one of you invests $100,000 while the other invests $5,000, you still split profits 50/50 without a written agreement. This is true in every US state, including Illinois.
LLC defaults in Illinois
Illinois follows RULLCA, which defaults to equal per-capita distributions among members regardless of capital contributions. An operating agreement is not required but is recommended. Illinois imposes a personal property replacement tax in addition to the state income tax, which applies to partnership and LLC income. LLCs must file an annual report with a $75 fee.
Because Illinois follows RULLCA with equal per-capita defaults, LLC members should pay special attention to their operating agreement. Without one, a member who contributed 90% of the capital gets the same share of profits as a member who contributed 10%. Use our equity calculator to determine a fair split based on actual contributions.
What happens when a partner leaves in Illinois
Under Illinois's RUPA, a partner's dissociation does not dissolve the partnership. The remaining partners can continue the business. The departing partner is entitled to a buyout at fair value. For LLCs, members can withdraw as provided by the operating agreement or by RULLCA's default provisions.
A written partnership agreement should still address departure terms specifically, including how the buyout value is calculated, the payment timeline, and any non-compete provisions. While RUPA provides a default framework, the details of a buyout can still lead to disputes if not spelled out in advance. Understanding the concept of dead equity is important for managing these situations. Learn more about how dead equity affects businesses.
Marriage and business equity in Illinois
Illinois is an equitable distribution state. Business interests acquired during marriage are marital property and are divided equitably in a divorce. The court considers the duration of the marriage, each spouse's contributions, and the economic circumstances. A business owned before marriage may be partially marital if it increased in value during the marriage.
Even though Illinois is not a community property state, marriage can still affect your business equity. In equitable distribution states, courts divide marital property based on what is fair, which may include business interests acquired or grown during the marriage. A clear equity agreement and proper documentation of ownership can help protect your business in the event of a divorce.
Formation and cost considerations in Illinois
| Formation cost | $150 |
| Annual/recurring cost | $75 annual report fee |
| State income tax | Yes |
| Partnership law | RUPA (revised) — partnership continues after departure |
| LLC default distributions | Equal per-capita (RULLCA) — all members get equal share |
| Operating agreement | Not required (strongly recommended) |
Frequently asked questions
What is the default LLC profit split in Illinois?
Illinois follows RULLCA, which defaults to equal per-capita distributions. All members get the same share regardless of capital contributions. An operating agreement can change this to any arrangement the members agree on.
What taxes do Illinois LLCs pay?
Illinois LLCs pay state income tax on profits that flow through to members. In addition, there is a personal property replacement tax of 1.5% on partnership and LLC income. This is a tax on the business itself, not just the individual members. Combined with federal taxes, the total tax burden in Illinois is significant.
How much does it cost to form an LLC in Illinois?
The filing fee for Illinois Articles of Organization is $150, and the annual report fee is $75. First-year costs are at least $225 before legal or professional fees.
Can a partner leave an Illinois partnership without dissolving it?
Yes. Under RUPA, a partner's departure does not dissolve the partnership. The remaining partners can continue the business and must buy out the departing partner at fair value.
Related resources
- Equity calculator: find a fair split for your business
- Does your small business need an equity agreement?
- Equity for small businesses: the complete guide
- Dead equity calculator: how much is yours costing you?
- Slicing Pie calculator
- What is an operating agreement?
- All 50 states: partnership and LLC default rules
Partnership laws in neighboring states
Disclaimer: This page provides general information about Illinois partnership and LLC default rules and is not legal advice. Laws change, and the information here may not reflect the most recent amendments. The formation costs and annual fees listed are approximate and may vary. Consult a qualified attorney licensed in Illinois for advice specific to your situation. Equity Matrix is a software tool for tracking contributions and calculating equity; it does not provide legal services.
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