How to Start a Illinois Corporation (original) (raw)

Start a Illinois Corporation

When you plan to start a business in Illinois, you must decide on the appropriate structure. Starting a corporation may be more complicated than creating an LLC in Illinois or a sole proprietorship. However, it is not that difficult as well. There are a few guidelines that you should be aware of when it comes to creating Illinois corporation. Starting a corporation involves a legal process, that is, the process of incorporation.

In this article, I will share a step-by-step guide to start a corporation in Illinois. I will also enlighten you on the advantages and disadvantages of having a corporation. Some people consider starting a corporation in Illinois more than other business structures since it has many advantages over other forms.

What is a Corporation in Illinois

In definition, a corporation is a formal organization established by stockholders, shareholders, or other people to make a profit. Like individuals, corporations can undertake contracts, own assets, sue and be sued, pay taxes, limit state and federal taxes, and loan funds from banking institutions.

Common Types of Corporations

Before you start with the process of forming a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

C-Corporation: C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.
S-Corporation: An S-Corporation is set up similarly to a C-corporation but has different tax implications and owner limits. S-corps have no more than 100 stockholders and are not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.
Non-profit Corporation: Nonprofit businesses are frequently used by religious, educational, and charity institutions to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations. Read how to start a nonprofit corp in Illinois to learn about nonprofit corporations.

If you have a small business, it is recommended that you form an LLC instead of a corporation in Illinois. LLCs have more tax benefits than other structures. Besides, LLCs protect your personal assets. However, it is wise to consult a legal expert before you start setting up your business in Illinois.

– LLCBuddy Editorial Team

How to Start a Corporation in Illinois

To start a corporation in Illinois, you must follow the below steps that, include forming a corporation name, appointing a board of directors, filing for Articles of Incorporation, drafting corporate bylaws, meeting with the board of directors, issuing stocks, creating a shareholders agreement, requesting for an EIN, and getting a license and permit. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.

Step 1: Choose a Corporation Name in Illinois

Naming your business is one of the most crucial activities during the startup phase. Your corporation name serves as the foundation for your brand. Legal procedures should be taken into account when choosing your corporation name. Choose a corporation name that will enable you to develop a strong brand identity without being hampered by irrelevant factors.

If you are forming an LLC, there is a complete guide on Illinois LLC name guidelines for a proper LLC name. Here are some guidelines you must follow while naming your corporation in Illinois-

Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

Step 2: Board of Directors Initial Appointment

To form a corporation in Illinois, you must appoint an initial board of directors before making them permanent once the corporation is formed. In Illinois, you may appoint at least Three board of directors. The initial board of directors is in charge of guiding the overall strategy of your business. The structure, responsibilities, and powers given to a board of directors are determined by the bylaws of a company or organization. So, appointing your corporation’s initial board of directors in Illinois is a big step in forming a corporation.

Step 3: Filing the Articles of Incorporation in Illinois

After you appoint the initial board of directors in your Illinois corporation, the next step is to write and file a Articles of Incorporation. In writing, the Illinois Articles of Incorporation, the corporation name, principal place of business, the purpose of business, Illinois Registered Agent contact information, and the names and addresses of incorporators and/or initial board members, should be written.

Filing a Articles of Incorporation in Illinois may be done with two ways, online and by mail. The Articles of Incorporation fee may vary from different states. However, in Illinois, it costs $150 for filing in-person and by mail.

Online Filing: Create an account/Log in to the SOS site, get the online form, fill it, and submit online
Offline filing: Send the form by mail to Department of Business Services, Limited Liability Division, 501 S. Second St., Rm. 351, Springfield, IL 62746

Step 4: Draft Corporate Bylaws

Now you are done filing a Articles of Incorporation in Illinois, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made-

The responsibilities are given to each officer.
How will judgments in business be made?
Where and when are the annual shareholder meetings?
The minimum number of shareholders required for decision-making.
Location and timing of dividend payments.

Step 5: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 6: Issuing Stock in a Corporation

After starting your Illinois corporation, one of the first official corporate actions is issuing stock to the shareholders. Keep track of the number of shares issued to each shareholder and the purchase price. A corporation in Illinois is managed by its shareholders, who contribute to the business in exchange for ownership shares.

Step 7: Draft and Finalize a Shareholders Agreement

Even though drafting and finalizing a shareholders agreement is unnecessary, I suggest you still comply since it will benefit your corporation and its shareholders. A small business’s shareholders enter into a shareholder agreement contract. It establishes how ownership will be handled in unexpected situations, like a shareholder passes away, retires, becomes disabled, or quits the corporation. Early on in the life of your Illinois corporation, signing a shareholders’ agreement can help maintain corporate continuity and prevent future disputes.

Step 8: Request an EIN in Illinois

After everything is in place, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your Illinois corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Illinois can be through the following:

Apply Online- The EIN online application is the preferred method for customers to apply for and obtain an EIN.
Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
Apply by Mail- The EIN application For m SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 9: Get Licenses and Permits for your Corporation in Illinois

Before your corporation operates in Illinois, you must have a business license. A business license is a document issued by a government agency that permits you to operate your business in the geographic region that that agency governs. To legally operate your corporation, you’ll need a business license. Numerous corporate licenses need to be filed and renewed regularly. Check out how to get business licenses and permits in Illinois to know more.

You must also register a DBA name if you intend to conduct business using a name other than your corporation’s legal name. The DBA name is sometimes known as “doing business as” or a “fictitious business name.” Depending on your location, you may need to register the DBA with your state, city, and county. You can skip this step if your business solely uses your legal company name.

Important Information

Paying your Taxes in Illinois

Even if you have established your corporation in Illinois, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Illinois has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Illinois are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in Illinois

A filing and annual fee must be paid to form a corporation in Illinois. Without it, your corporation won’t operate. The initial filing fee for a corporation may vary depending on the state. However, in Illinois, it costs 150forfilingin−personandbymail.ThecorporationinIllinoisalsohastofileanannualreport(thoughitmightnotbemandatory,itisrecommendedtofileone).Ensureyoucomplywithallthenecessaryfeesandcostssoyourcorporationwillrunsuccessfullyandsmoothly.If,inthefuture,youmakeanychangestoyourcorporation,youmustfiletheIllinoisAmendment.Itcosts150 for filing in-person and by mail. The corporation in Illinois also has to file an annual report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly. If, in the future, you make any changes to your corporation, you must file the Illinois Amendment. It costs 150forfilingin−personandbymail.ThecorporationinIllinoisalsohastofileanannualreport(thoughitmightnotbemandatory,itisrecommendedtofileone).Ensureyoucomplywithallthenecessaryfeesandcostssoyourcorporationwillrunsuccessfullyandsmoothly.If,inthefuture,youmakeanychangestoyourcorporation,youmustfiletheIllinoisAmendment.Itcosts50 to file an amendment in Illinois.

Advantages of Starting a Corporation in Illinois

Limited Liability: The biggest advantage of setting up a Illinois corporation is that the shareholders are not personally responsible for the debts of the company. As a result, when you incorporate as a corporation, personal assets like homes, vehicles, and other possessions are prohibited. One of the main benefits of setting up a corporation over a general partnership or sole proprietorship business structure is that neither the business nor the owners are held legally responsible for the obligations of the business, even if it means giving up their personal assets.
Limitless Corporation: The fact that a corporation’s existence is independent of its owners is another significant benefit of incorporation. In other words, a corporation has an endless life and will continue operating normally even if the owner dies or decides to sell their ownership.
Advantages in Tax: The deduction of health insurance premium payments made on behalf of an owner-employee is one of the many financial benefits to which corporations are entitled. Corporations also save on self-employment taxes since their revenue is not subject to workers’ compensation, Social Security, or medical taxes. Tax rates on corporate profits are lower than those on individual income.

FAQs

What is the process for starting a corporation in Illinois?

The process for starting a corporation in Illinois involves filing Articles of Incorporation with the Illinois Secretary of State’s office, paying the required filing fees, appointing a registered agent, creating corporate bylaws and holding an organizational meeting.

What is the filing fee to start a corporation in Illinois?

The filing fee to start a corporation in Illinois is $150.

Is there any special paperwork needed to form a corporation in Illinois?

Yes, to form a corporation in Illinois, the Articles of Incorporation must be filed with the Illinois Secretary of State’s office.

What type of information do I need to provide when filing the Articles of Incorporation?

When filing the Articles of Incorporation, you will need to provide the corporation’s name and address, the names and addresses of the corporation’s directors, the purpose of the corporation, the name and address of the registered agent, and the number of shares the corporation is authorized to issue.

What is a registered agent in Illinois?

A registered agent in Illinois is a person or business entity authorized to receive legal papers on behalf of the corporation.

What qualifications must a registered agent have in Illinois?

The registered agent must have a physical street address in Illinois and be available to accept legal papers during regular business hours.

What are corporate bylaws?

Corporate bylaws are internal documents that define the rules and regulations for the operation of the corporation.

What is an organizational meeting?

An organizational meeting is a meeting of the corporation’s directors and shareholders, during which the directors are appointed, corporate bylaws are adopted, and other matters related to the formation of the corporation are discussed.

Are there any other requirements to form a corporation in Illinois?

Yes, the corporation must obtain an Employer Identification Number (EIN) from the Internal Revenue Service and obtain any necessary licenses or permits from the state and local governments.

What are the steps to start a corporation in Illinois?

The steps to start a corporation in Illinois are

What is the cost to form a corporation in Illinois?

The cost to form a corporation in Illinois is $150. This fee is payable to the Illinois Secretary of State at the time of filing the Articles of Incorporation.

What is the minimum amount of capital needed to form a corporation in Illinois?

There is no minimum amount of capital needed to form a corporation in Illinois. However, it is recommended that you have enough capital to cover the initial costs of starting the business, such as legal fees, accounting fees, and other business expenses.

What are the advantages of forming a corporation in Illinois?

There are several advantages to forming a corporation in Illinois, including limited liability protection, which protects shareholders from being held personally liable for business debts or liabilities; the ability to raise capital through the sale of stock; the ability to transfer ownership of the corporation; and the potential for tax savings.

Are there any tax incentives for forming a corporation in Illinois?

Yes, there are several tax incentives for forming a corporation in Illinois, including the state’s Corporation Income Tax Credit, the Research and Development Tax Credit, and the Enterprise Zone Tax Credit.

Do I need a registered agent to form a corporation in Illinois?

Yes, you must appoint a registered agent in order to form a corporation in Illinois. A registered agent is a person or business entity that can accept legal documents on behalf of the corporation.

What are the requirements for filing Articles of Incorporation in Illinois?

To file Articles of Incorporation in Illinois, you must provide a name for the corporation, the purpose of the corporation, the name and address of the registered agent, the number of shares the corporation is authorized to issue, and the name and address of each incorporator.

How long does it take to form a corporation in Illinois?

It typically takes 2-3 weeks to form a corporation in Illinois. This time frame includes the time it takes to file the Articles of Incorporation with the Secretary of State and to obtain an Employer Identification Number (EIN) from the IRS.

What documents do I need to start a corporation in Illinois?

To form a corporation in Illinois, you will need to file Articles of Incorporation with the Illinois Secretary of State. Additionally, you will need to establish a registered agent, obtain a federal tax ID number, and obtain any necessary local business licenses.

What is the filing fee for a corporation in Illinois?

The filing fee to form a corporation in Illinois is $150.

What are the requirements for naming my Illinois corporation?

The name of an Illinois corporation must be distinguishable from other businesses registered with the state. The name must include one of the following words or abbreviations

What is the process for forming a corporation in Illinois?

The process for forming an Illinois corporation involves filing Articles of Incorporation with the Illinois Secretary of State, establishing a registered agent, obtaining a federal tax ID number, and obtaining any necessary local business licenses.

What is required to maintain a corporation in Illinois?

To maintain a corporation in Illinois, you must file an annual report with the Illinois Secretary of State, hold annual meetings, maintain corporate records, and pay any applicable taxes and fees.

What are the tax implications of starting a corporation in Illinois?

Corporations in Illinois are subject to both federal and state taxes. Federal taxes may include income tax, self-employment tax, and payroll taxes. State taxes may include income tax, franchise tax, and other taxes.

What is the corporate income tax rate in Illinois?

The corporate income tax rate in Illinois is 9.5%.

What is the minimum capital requirement for a corporation in Illinois?

There is no minimum capital requirement for forming a corporation in Illinois.

What is the difference between an Illinois corporation and an LLC?

The main difference between an Illinois corporation and an LLC is that a corporation is a separate legal entity from its owners, while an LLC is a pass-through entity for tax purposes.

What is the process for dissolving a corporation in Illinois?

The process for dissolving a corporation in Illinois involves filing a Certificate of Dissolution with the Illinois Secretary of State, notifying creditors and employees, and notifying the IRS and other government agencies.

What is the penalty for failing to file an annual report in Illinois?

The penalty for failing to file an annual report in Illinois is a $100 late fee.

What are the requirements for a registered agent in Illinois?

The requirements for a registered agent in Illinois include having a physical address in the state and remaining available during regular business hours.

What is the mailing address for filing documents with the Illinois Secretary of State?

The mailing address for filing documents with the Illinois Secretary of State is Department of Business Services, 501 S. 2nd Street, Springfield, IL 62756.

Is there an online filing option for documents with the Illinois Secretary of State?

Yes, the Illinois Secretary of State offers an online filing option for documents.

Why Illinois Corporation is So Important

Illinois Corporation, with its diverse array of industries and businesses, serves as a cornerstone of the state’s economy. From manufacturing and agriculture to finance and technology, corporations in Illinois fuel innovation, create jobs, and contribute to the overall wealth of the state. Through their operations and investments, these corporations not only drive economic growth but also support local communities by providing essential services and fostering a culture of entrepreneurship.

In addition to their economic impact, Illinois corporations also play a critical role in shaping public policy and corporate governance. As they navigate complex regulatory landscapes and increasingly competitive markets, corporations must address a wide array of social, environmental, and ethical considerations – ranging from workforce diversity and inclusion to sustainable business practices and ethical leadership. Illinois Corporation, in particular, has taken a proactive stance on these issues, striving to uphold the highest standards of corporate responsibility and accountability.

Moreover, Illinois Corporation serves as a key driver of technological innovation and research. Through strategic partnerships with universities and research institutions, corporations in Illinois invest in cutting-edge technologies and scientific advancements that have the potential to revolutionize entire industries. By fostering a culture of creativity and collaboration, Illinois corporations have positioned themselves at the forefront of innovation, driving change and progress in a rapidly evolving global economy.

Furthermore, Illinois Corporation plays a pivotal role in the broader national and international landscape. With a presence in global markets and supply chains, corporations in Illinois serve as ambassadors of the state, showcasing its strengths and capabilities to the world. Through their operations and investments, Illinois corporations contribute to the global economy, foster international trade and cooperation, and serve as pillars of economic stability and growth.

In conclusion, the importance of Illinois Corporation cannot be overstated. As drivers of economic growth, agents of social change, and catalysts of innovation, corporations in Illinois play a critical role in shaping our society and economy. By upholding the highest standards of corporate responsibility, embracing technological advancements, and fostering partnerships with stakeholders, Illinois corporations are well-positioned to lead the way in a rapidly changing world. As we look towards the future, it is clear that the continued success and prosperity of Illinois Corporation are essential for the wellbeing and prosperity of the state – and the world at large.

Conclusion

When determining which corporate form is best for you, be selective. You must know which business structure is bet-fitted for your product/service in Illinois. Consult a legal professional before you take the first step while setting up your business. Finding the ideal ratio of corporate advantages and legal protection that meets your unique needs is very important. In forming a corporation in Illinois, you need to ensure that every detail is well-formed so that your corporation will be successful. And if you have any questions, share them in the comment section below.