Form an Illinois Corporation
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Incorporate in Illinois
Incorporate in Illinois. Incorporation in Illinois can be vital to businesses based of Illinois. At LawInc, we prepare your Illinois corporation Articles of Incorporation, bylaws, stock certificates, stock ledger and more. We can even obtain your Illinois corporation Tax ID number and file your Illinois S corporation election with the IRS.
Illinois Incorporation Information
The following Illinois incorporation information will likely be helpful when deciding to incorporate in Illinois.
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Illinois Corporation Name
The first step in forming an Illinois corporation is selecting the business name. Illinois corporation names:
- Must contain “corporation,” “company,” “incorporated,” “limited” or an abbreviation of any of these words.
- Must be distinguishable upon the records in the office of the Secretary of State from the name or assumed name of any domestic corporation or limited liability company or of the name or assumed name of any foreign corporation or foreign limited liability company authorized to transact business in this State, or a name the exclusive right to which is, at the time, reserved or registered in the manner provided in this Act.
- Must not contain any word or phrase which indicates or implies that the corporation (i) is authorized or empowered to conduct the business of insurance, assurance, indemnity, or the acceptance of savings deposits; (ii) is authorized or empowered to conduct the business of banking unless otherwise permitted by the Commissioner of Banks and Real Estate pursuant to the Illinois Banking Act; or (iii) is authorized or empowered to be in the business of a corporate fiduciary unless otherwise permitted by the Commissioner of Banks and Real Estate under the Corporate Fiduciary Act.
- Must not contain the word “trust”, “trustee”, or “fiduciary” only if the Illinois corporation has complied with the Corporate Fiduciary Act. The word “bank”, “banker” or “banking” may only be used by a corporation if it has first complied with Section 46 of the Illinois Banking Act.
An available Illinois corporation name may be reserved for a 120 day period.
LawInc.com permits you to choose up to three names and will conduct a name search for your Illinois corporation, prior to filing.
Illinois Corporation Formation
Illinois Filing Procedure: To incorporate in Illinois, you must file Illinois Articles of Incorporation with the Illinois Secretary of State.
The Illinois Articles of incorporation should include:
- Corporation name.
- Number and classes of shares to be issued.
- Registered agent address.
- Name and address of the incorporator.
Illinois Corporation Filing Fee: $150 filing fee for Articles of Incorporation and issuing Certificate of Incorporation. 3. The initial franchise tax is assessed at the rate of 15/100 of 1 percent ($1.50 per $1,000) on the paid-in capital represented in this state. (The minimum initial franchise tax is $25.)
Illinois Incorporator: Minimum number of incorporators is one (1) (individual or an entity) and there is no requirement that the incorporator be a resident of Illinois.
Illinois Corporate Directors: The minimum number of directors is 1. An Illinois corporation director must be a natural person at least 18 years old. Directors need not be listed in the articles.
1244 Stock: Election to have stock classified as IRC Section 1244 stock allows for a substantially larger application of the deduction from business losses to ordinary income than regular stock. With regular stock, you can only offset $3,000 against ordinary income. With the issuance of Section 1244 Stock, the corporation can claim an ordinary loss deduction of as much $100,000.
Illinois Registered Agent: An Illinois corporation must maintain a registered agent and office to receive service of process in Illinois. The Illinois registered agent should be available, at an Illinois physical address, during normal business hours to accept important legal and tax documents on behalf of the Illinois corporation. The registered agent can either be (1) an individual with a physical Illinois address or (2) a corporation authorized to serve as registered agent.
Illinois Corporation Limitation of Directors’ Liability: The articles of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, provided that the provision does not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) unlawful distributions, or (iv) for any transaction from which the director derived an improper personal benefit. No such provision shall eliminate or limit the liability of a director for any act or omission occurring before the date when the provision becomes effective.
Illinois Corporation Purpose: It is acceptable to state either alone or with a specific purpose clause, “The purposes for which the corporation is organized shall be to transact any and all lawful business for which corporations may be incorporated pursuant to the provisions of the Business Corporation Act of 1983.”
Illinois Professional Corporation: Illinois Professional corporations are corporations organized for the purpose of providing professional services. Typically, professional corporations must be organized for the sole purpose of rendering professional services of the licensed practitioners.
Illinois Corporation Post-Filing Requirements
Illinois Corporation Annual Report: Illinois corporations are required to file annual reports which are due on the first day of the anniversary month of formation. For more information, visit: http://www.cyberdriveillinois.com/departments/business_services/home.html
Illinois Corporate Minutes: Illinois corporations are required to hold and document annual shareholder and director meetings.
Illinois Corporation Taxes
Illinois Corporation Taxes: For information on the Illinois state income tax rate, visit: http://www.iltax.com.
Illinois Corporation Franchise Taxes and License Fees: Illinois corporations are required to pay a franchise tax and license fee for the exercise of franchises in the state, which is generally due at the time the corporation files its share issuance reports.
Illinois C Corporation: All Illinois corporations formed by default are “C” corporations. An Illinois C corporation is an Illinois corporation that has not made an election to be an “S” corporation. The term C corporation is specifically used because the entity is taxed under subsection C of the IRS code. Illinois C corporations are taxed at two levels (“double taxation”). This means that the corporation itself pays its own tax when it makes money (the first tax). The owners or shareholders are then taxed again when they are paid a salary or dividend by the corporation (the second tax). Despite double taxation, Illinois C corporations offer many planning and benefit opportunities.
Illinois S Corporation: An Illinois S corporation is a corporation that has made an election with the IRS to be treated for tax purposes as a “pass-through entity.” This means that corporate profits and losses are passed through to the shareholders (owners) who report them on their own personal tax returns and pay the tax at the individual level. The corporation pays no federal income tax at the corporate level. Illinois S corporations are not subject to the double taxation C corporations encounter. The State of Illinois recognizes S corporation status. Illinois does not require a state election. However, Illinois S corporations are still subject to a separate 1.5% S corporation fee, which is based on the corporation’s net income.
These are the 3 main advantages of forming an S corporation:
- No double taxation: One of the main advantages of S corporation status is that it avoids the double taxation that occurs with a regular C corporation. In a C corporation, the corporation pays income tax on its profits and, if those profits are distributed to shareholders, the shareholders pay income tax on the distribution.
- Loss deductions: The availability of losses. Shareholders of an S corporation generally may deduct their share of the corporation’s net operating loss on their individual tax returns in the year the loss occurs. Losses of a C corporation, however, may offset only the corporation’s earnings.
- Self-employment tax savings: By electing S corporation status, only the earnings actually paid out to you as salary are subject to payroll taxes; money left in the business is not subject to payroll taxes or self-employment tax. All income passes through, but its tax status depends on whether it is classified as salary or ordinary income.
Federal Tax Identification Number/Employer Identification Number (EIN): The Federal Tax Identification Number, also known as the Employer Identification Number (EIN) is a number that is assigned to a business by the Internal Revenue Service. An EIN is like a Social Security Number for a business. It is a requisite for certain business functions such as opening bank accounts or hiring employees. All Illinois corporations should obtain an EIN.
Illinois Corporation Dissolution
Illinois Corporation State Dissolution requirements: An Illinois corporation can be voluntarily dissolved by filing Articles of Dissolution.
Illinois Corporation Federal/IRS Dissolution requirements: Corporations are required to file IRS Form 966, Corporate Dissolution or Liquidation. A final tax return should be filed with the IRS. Form 966 should be filed along with the final tax return. Final state tax returns may also need to be filed. Follow up with an accountant regarding all tax related requirements.