Launching a new company can be exciting, but you may have many questions about the formation process. If you’re looking to start a company with enhanced liability protection, you might be interested in forming a corporation.
Forming a corporation in Illinois can seem complicated, but if you follow the right steps, it’s relatively straightforward. You can form your corporation on your own or partner with a reputable company like ZenBusiness to ensure complete compliance during the setup process.
We’ll walk you through everything you need to know about forming a corporation in Illinois and offer helpful tips and links along the way.
To form your corporation in Illinois, you’ll have to register with the Secretary of State’s office by filing your Articles of Incorporation.
This guide will take you through all 10 steps to forming your corporation in Illinois as detailed below:
Before you can jump into registering your corporation in Illinois, you’ll have to decide on your company’s official name. You may already have a few name options in mind, so we recommend keeping a list of potential names that you’re satisfied with. When choosing a name, you’ll want to settle on an option that’s distinct and memorable — it’s also helpful if you can find a name that also encompasses your industry or services. You’ll want to ensure your name complies with Illinois law and does not contain any words that could be considered offensive.
Your corporation name must be unique in Illinois, so you’ll need to run your list through a database of existing corporations. You can perform a corporation name search on the Illinois Secretary of State’s website. Run each name you’re considering through the database and note the available names.
Once you’ve selected an available name from your list, you’ll need to add a corporation designator to its end. This suffix exists to distinguish your company as a corporation quickly. You can choose from “Corporation,” “Incorporated,” “Limited,” or “Company” or any abbreviation of these four designations.
For instance, “Lancott Pharmaceuticals” might be officially named “Lancott Pharmaceuticals, Inc.” or “Lancott Pharmaceuticals Co.”
Now that you have an official name chosen, you can choose to reserve your name online to prevent another corporation from registering it. To reserve your name, you’ll need to fill out the Application for Reservation of Name and pay a $25 filing fee. You can file this form by mailing it to the below address:
Secretary of State
Department of Business Services
501 S. Second St., Rm. 350
Springfield, IL 62756
There are a few other considerations you might want to consider once you’ve settled on a corporation name. To see if a trademark already exists federally regarding your corporation, you can check the online database on the U.S. Patent and Trademark Office (USPTO) website. You can also apply for a federal trademark there. If you’re interested in registering a trademark at the state level and have checked that the trademark is available, you can file an Illinois Trademark or Service Mark Application. There’s a $10 filing fee, and you can mail this form to the same address where you sent your name reservation. It’s often easier and quicker to file at the state level, but if you plan on doing business outside of Illinois, a federal trademark registration can provide broader protection.
If you intend to sell your corporation’s services or products under a name that differs from your official corporation name, then you’ll need to secure a DBA or “doing business as” name. In Illinois, DBA names are referred to as “assumed names,” and you can register a DBA name in the county where your corporation is located. For example, if your company resides in Cook County, you can register your assumed name online on the county website.
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Next, you’ll want to appoint a board of directors for your new company. Corporations need appointed directors by law, and in Illinois, you’ll need to appoint at least one director to satisfy state business law.
Your corporation’s director(s) will work to procure the best interests of your company. They can help manage and oversee the corporation while acting on behalf of the shareholders and, at times, the company itself.
Many states have specific requirements regarding who can sit on the board of directors, but Illinois does not. Directors do not have to reside in-state, but they must be at least 18 years old and listed on your Articles of Incorporation.
Once you’ve selected at least one director to work for your corporation, it’s time to select a registered agent. A registered agent is required for all companies in Illinois. Your registered agent will act as a third party to handle communications and the delivery of important legal notices as well as important paperwork between your corporation and the Secretary of State’s office.
Your company’s registered agent can be a person or company, as long as they reside in Illinois and are available between normal business hours of 9 a.m. to 5 p.m., Monday through Friday. Your registered agent must also have a physical operating address — a P.O. box will not be accepted. You, a shareholder or director, can legally act as your own registered agent, although there are many reasons this might not be in your best interest.
Here are a few reasons many corporations in Illinois opt to work with an outside registered agent service:
Next, you’re ready to file your Articles of Incorporation with the state of Illinois. This form allows the state government to officially recognize your company as a legitimate corporation so you can get up and running.
You can submit your Articles of Incorporation online through the Secretary of State website. If you’re a medical corporation, close corporation, or professional service corporation, you’ll select the corresponding form found here.
To submit your Articles of Incorporation, you’ll need to provide the below information:
In Illinois, there’s a $150 filing fee for this form, which you can pay online or via mail if you’re filing a printed form.
You can submit your form and payment via mail to:
Secretary of State
Department of Business Services
501 S. Second St., Rm. 350
Springfield, IL 62756
Note that the state’s initial franchise tax is also due upon filing. The tax is $1.50 per $1,000 of paid-in capital in the state with a minimum tax of $25.
Once you’ve registered your corporation, it’s time to create your corporate bylaws. To get started, you want to conduct a meeting where the company’s shareholders, directors, and the incorporator discuss how the corporation will operate and function, detail any clauses or important operational agreements, and establish shareholder roles and limitations.
In this meeting, you’ll want to put your company’s bylaws into writing. Although Illinois does not require your company to file these bylaws, it does require bylaws to be established, agreed to by the shareholders, and denotes that corporation bylaws cannot be in conflict with state law or your Articles of Incorporation.
Your corporate bylaws will also help you set up financial accounts. It’s important to create a corporate records book that holds all of your company’s important paperwork, such as records and minutes of shareholder meetings, stock certificates, and financial stubs.
The next step you’ll want to take is to create a shareholder agreement. This agreement details the rules and processes between the shareholders and the corporation.
Although this document is private, it must follow your company bylaws and be in agreement with state laws and your Articles of Incorporation. It can also be as expansive as you’d like, dictating shareholder voting structures, additional rights, financial rules, and operational details. You should have every shareholder agree to and sign this contract.
Now you’re ready to start issuing shares of stock for your corporation. This step is required and does require strict oversight. When you filed your Articles of Incorporation, you selected the number of shares your company was authorized to issue. You’ll need to make sure your corporation issues shares that are for this quantity or less.
To begin issuing stock, your corporation will need capital (funding). First, you’ll want to figure out how much capital you need to start issuing stocks and divide this number as evenly as possible across the shares your company is issuing.
Your corporation can issue stocks privately or publicly. If issued privately, your shares will be spread across the initial shareholders. If issued publicly, any buyer in the marketplace will have access to your stock shares.
Each share can only be released one time, although it can be sold and traded multiple times. When a stock is issued, it must be noted in your annual report.
Now, you’ll need to ensure you have all the necessary business permits and licenses to operate officially. While many states have a statewide general business license requirement, Illinois does not; however, some cities and counties do require a general business license for a company to operate in their jurisdiction.
Depending on your specific industry, you might need to apply for separate licenses or permits. You’ll need to do some research, as licensing can be federal, state, and local.
You can determine if your corporation needs to secure special licensing at the state level by reviewing the Illinois Registration, Licenses, and Permits requirements. You may also be required to be licensed at the county or city level, so be sure to check with your local government offices.
One of the last steps you’ll need to take to finalize your corporation’s setup process is applying for an Employer Identification Number (EIN). You’ll receive an EIN from the Internal Revenue Service (IRS). This number will act as a Social Security number for your business, allowing you to set up bank accounts, secure loans, file taxes, and hire employees and contractors.
You can secure an EIN in minutes online by visiting the IRS website. You’ll receive your EIN right after filing and can start using it immediately.
Illinois law requires corporations to file an annual report with the Secretary of State. This report is mandatory to remain compliant with the state and registered as a legal business.
There’s a separate form for domestic and foreign corporations, but both can be filed online for $75.
You’ll also be expected to pay a franchise tax when you submit your annual report. The formula for calculating the franchise tax is fairly complicated, so you may want professional help.
The cost to form a corporation in Illinois will vary from company to company and is also impacted by whether you need expedited filing and if you opt to work with a consultant or business formation service to help you file and process your formation paperwork.
At a minimum, you should expect to pay $150 to file your Articles of Incorporation. You may also choose to reserve your business name for and register a trademark at the state level for .
This does not include the $75 fee for your annual report or any additional license or permit costs.
You can receive help with your corporation’s setup by teaming up with ZenBusiness. We have affordable annual plans to help keep you compliant and connect you with a professional registered agent.
There are different types of companies that you can form in Illinois, so why pick a corporation? Creating a corporation comes with a number of benefits that can better protect you. A few benefits to consider include:
On the downside, here are some disadvantages to consider:
Your corporation in Illinois can be taxed differently depending on the type of corporation you establish. There are three types to choose from: C corporations, S corporations, and nonprofit corporations. C corporations are the most common type.
C corporations are taxed as separate entities, which means your corporation will fill out a corporate tax return. All shareholders and owners will also file individual tax returns, detailing corporate profits and losses, and are taxed twice on these earnings.
S corporations are taxed as “pass-through entities,” which means they do not file corporate taxes. Instead, the money earned passes through to the shareholders, who must report them on their individual taxes.
It’s worth noting that if you form a nonprofit corporation and follow nonprofit guidelines, your company will be exempt from paying any corporate taxes. Employees of the corporation will still pay taxes on their salary.
In addition to the franchise tax mentioned previously, you’ll also be responsible for paying Illinois corporate income tax and Illinois personal property replacement taxes. You can use the Tax Rate Database to help you determine what your corporation will owe for both of these taxes.
If your corporation is collecting sales tax in Illinois, you’ll also be required to apply for a sales tax license through MyTax Illinois. City, county, and specialty taxes are sometimes added to the state sales tax.
This is an excellent time to remind you that corporate taxes are never simple in any state, and Illinois is no different. There’s no shame in consulting a qualified tax professional for help.
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