How to form a Corporation in Illinois

Illinois Corporation

The news is that hundreds of entrepreneurs have moved their businesses to Illinois in the last few years according to a research paper published in Crain’s Chicago Business. New businesses are also gradually starting to capture the market space thanks to the state’s business competitiveness. There are many reasons to form a corporation in Illinois but existing entrepreneurs cite the primary reasons being availability of talent, diverse markets and robust infrastructure. Today, it is home to more than 30 Fortune 500 companies and some of the top names are Abbott Laboratories, Motorola Solutions Inc., AbbVie Inc., Deere & Company, and Exelon Corporation among others. The benefits of incorporating in Illinois often play a decisive role for those wanting to start a new company here.

What is an Illinois Corporation?

There are several types of corporations that a business owner can form although the most opted for is the traditional corporation, also known as a C Corporation. You can register a corporation in Illinois as a domestic entity or a foreign company. One of the salient highlights of this type of an entity is that it limits the liability of owners and investors. If you want to know how to form a corporation in Illinois, it is essential to identify the type of corporations that can be formed in this state. They are –

• Business or Traditional Corporation (C-Corp)
• S Corporation (S-Corp)
• Foreign Corporations
• Nonprofit Corporations
• Professional Service Corporation
• Benefit Corporations (B Corp)
• Close Corporations

What are the benefits of incorporating in Illinois?

Business owners prefer to incorporate in Illinois as this type of business structure has several advantages over other entity structures. Some of the benefits are:

• Limited Liability Protection – One of the benefits of incorporating in Illinois is limited liability protection. This ensures your assets are safe. If a corporation is sued, then the owners or shareholders of the said company will not be personally liable for any debts or damages.
• Gaining Tax Breaks – Another important benefit of forming a corporation is that this type of entity can often write off items like health insurance premiums, savings on self-employment taxes, and life insurance.
• Access to capital – If you form a corporation in Illinois, you can enjoy easy access to capital. You can raise money by issuing stock, which is sold to investors and enables capital raising. Even venture capitalists (VCs) prefer to invest in C corporations compared to other entities.

Starting an Illinois Corporation

Illinois is famous for its strong business communities and excellent quality of life. Incorporating in Illinois has several benefits, from diverse industries to the availability of the right talent and business incentive programs. All these factors can help your company to grow and expand rapidly. To register a corporation in Illinois, you must focus on key areas and processes.

1. Name Illinois Corporation

If you are planning to incorporate in Illinois, the first step would be to choose a corporate name. Although a business name is mandatory for every company, there are several benefits as well. A corporate name will be like the image or face of your company. Future customers, clients, or vendors can associate the name with your company. The corporate name will be required to fulfill several state requirements and other processes like business licensing and opening a corporate bank account.

2. Appoint an Illinois registered agent

If you plan to form a corporation in Illinois, then there are specific state business requirements that you, as the owner, must fulfill. Before registering your company or applying for incorporation, you must first hire and maintain a registered agent in the state pursuant to Illinois Compiled Statutes – 805 ILCS 105/Art. 5 heading. A registered agent can be an individual, or you can hire a company. Their primary responsibility is to accept all legal mail on your corporation’s behalf, known as Service of Process.

3. File Articles of Incorporation

The most obvious question for business owners is how to form a corporation in Illinois. The answer is that you must follow a process mandated by the Illinois Compiled Statutes. You must prepare and submit the Articles of Incorporation under Illinois Compiled Statutes – Chapter 805 – 805 ILCS 5/Art.-2 heading. It has to be submitted to the Secretary of State, Department of Business Services, along with a fee of $150. You will also be required to file franchise tax (a minimum of $25) and an optional fee of $100 if you want to expedite.

Are you thinking of starting an Illinois Corporation?

4. Prepare bylaws for the Illinois Corporation

If you incorporate it in Illinois, one of the significant requirements will be formulating corporate bylaws. This is a mandatory requirement for any new company, although they must not be submitted to the state. Yet, most state laws require a new corporation to establish these company bylaws. Bylaws are important because they ensure consistent decision-making while enabling a proper voting process. This becomes especially important and necessary if a director or officer leaves the company.

• Statement of Purpose
• Board of directors
• Titles of the officers of the corporation
• Shareholders owning stock in the company
• Committee and committee members
• Procedure and timeline for annual meetings
• Issuance of stock to shareholders
• Rights and responsibilities
• Conflicts of interest
• Amendment to the Bylaws

5. Appoint initial directors & hold an organizational meeting

The articles of incorporation can be filed by one or more incorporators and such an incorporator could be an individual with personal stake in the company while going forward. Once you file the articles to form a corporation in Illinois, you will need to appoint initial directors and hold an organizational meeting. The initial directors will be responsible for making decisions on behalf of shareholders. The appointment of initial directors is an important step as corporations are unable to function on their own or by themselves. A corporation requires real people or individuals capable of making decisions, signing contracts and performing other duties on behalf of the company.

• Appointment of corporate officers
• Acquisition of a minute book for recording meeting minutes as well as actions
• Establishing a corporate structure of the company
• Approval of Corporate Bylaws
• Approval of share certificates
• Establish principal place of business
• Approval of the corporate seal
• Appointment of a banking institution
• Special resolutions if any

6. Get an EIN

Any business that plans to operate in the United States, it is important to possess proper identification. If you want to register a corporation in Illinois then an Employer Identification Number (EIN) is the best form of identification you can obtain. This is also known as the Federal Employer Identification Number (FEIN) and is the tax identification number for corporations. This unique 9 digit number is assigned by the Internal Revenue Service (IRS). Once you have obtained the EIN, it will help you with tax reporting and compliance, opening business bank accounts, hiring employees, and withholding payroll taxes.

7. Open a bank account

There are many benefits of incorporating in Illinois, such as the ability to raise venture capital funds. As a corporation, you can derive many more benefits if you open a business bank account. It is important to understand that operating a business successfully requires managing finances carefully. A corporate bank account can ensure proper financial management of company resources. Modern-day business banking services offer many tools and resources to help you manage your finances effectively. Most importantly, it will allow you to separate personal and business finances. This will further enable you to track expenses accurately, streamline tax preparation, and protect personal assets.

8. Comply with other tax and regulatory requirements

Once you incorporate in Illinois, you must comply with state annual maintenance requirements. One of the important requirements is that of filing taxes. Your company will be required to file corporate income tax at a rate of 9.5 percent. The company will also be required to file state sales tax. Corporations in this state may have to file various taxes like Illinois Franchise Tax and withholding taxes.

Know more about starting an Illinois Corporation

If you have decided to form a corporation in Illinois but are faced with several queries, this section will help you. This section deals with queries specific to various aspects of incorporation, such as corporate name, starting costs, dissolution, S Corporation, and foreign corporation, among others.

How do I form a “C” corporation and an “S” corporation in Illinois?

There are two types of corporations that you can operate in the state of Illinois: C and S Corporations. There is a process if you are wondering how to form a corporation in Illinois, especially a C Corporation. You must submit Articles of Incorporation according to 805 ILCS 5/Art. 2 heading. You can elect S Corporation status once you have formed a C Corporation. It is important to note that an S Corporation is not a business entity but a tax status. You must submit a completed IRS Form 2553 (Election by a Small Business Corporation). This will help you to set up an S Corp with the Internal Revenue Service (IRS).

How much does it cost to start a corporation in Illinois?

If you want to register a corporation in Illinois, you must submit Articles of Incorporation for a domestic entity. The initial cost to incorporate will be a $150 filing fee and a minimum franchise tax of $25. If you want to expedite the process, there will be an additional fee. Apart from this initial incorporation cost, other costs will be associated with the reservation of corporate name, application for business licenses and permits, filing of annual report, and articles of amendment, among others.

How do I look up a corporation in Illinois?

You will need to reserve a corporate name before you can register an Illinois Corporation online. This starts with identifying a name compliant with state naming guidelines and governed by Illinois Compiled Statutes – 805 ILCS 5/Art. 4 heading. The next step would be to conduct an Illinois Corporation search, also known as a name availability search. This process will ensure that your chosen name is available for reservation.

Do I need a business license for my Illinois Corporation?

Yes. You may require single or multiple business licenses depending on the industry, the location of your company, and the primary business activity. The fee and renewal processes may vary from one jurisdiction or municipality to another.

Can I register with a foreign corporation in Illinois?

Yes. You can incorporate it in Illinois as a foreign company. This process is also known as foreign qualification. You must submit a Certificate of Authority or Application for Authority to Transact Business in Illinois (Form BCA 13.15) according to Illinois Compiled Statutes – 805 ILCS 5/Art. 13 heading. The application must be submitted to the Illinois Secretary of State – Business Services Department with a fee of $150.

How do I dissolve a corporation in Illinois?

Once you register an Illinois Corporation online, it becomes operational. If you want to dissolve this company, you will have to file the Articles of Dissolution (Form BCA 12.20) pursuant to Illinois Compiled Statutes – 805 ILCS 5/Art. 12 heading along with a fee of $5. It is important to note that the Illinois Secretary of State will verify your franchise tax status prior to accepting the articles of dissolution.

Ready to Start an Illinois Corporation?

You can form different types of domestic business structures and even register foreign entities in this state. One of the most popular entity structures in this state is a C Corporation. This is due to the wide variety of benefits of incorporating in Illinois as compared to other business structures. If you are wondering how to register your company then IncParadise can assist you with the entire process of incorporation.