Professional corporations (PCs) are owned and operated by licensed professionals. Only those who perform services that require a state license can form an Illinois professional corporation. All businesses should consider a formal entity structure, but there are some that would do better as a corporation than other types. See the ZenBusiness entity guide to see what’s right for you.
Steps for Forming an Illinois Professional Corporation
If you’re ready to form an Illinois professional corporation, here’s what you need to know.
Determine whether an Illinois professional corporation structure is right for you
The first thing to consider is whether a PC is the right structure for your business. One alternative is a limited liability company (LLC). Many states allow licensed professionals to form a professional limited liability company (PLLC), but Illinois didn’t recognize this entity until 2020, and only a few professions qualify for it. Still, licensed professionals are permitted to form a regular LLC.
After evaluating all of the possibilities, you may find that a PC isn’t the best fit for your business after all. With a professional corporation, you’ll be subject to double taxation, have more paperwork, and less flexibility than an LLC. But a PC has better protection from liability and can be more attractive to investors.
Choose a name for your Illinois professional corporation
Your company’s name has to be unique from any other business operating in Illinois. Check the Illinois Secretary of State’s business name database to see if your desired name is available. If so, you have the option to reserve it through the state’s website. Or, you can use ZenBusiness’s name reservation service to hold your desired business name for 90 days.
Illinois requires PCs to include the words “Professional Corporation” or “P.C.” in their names. “Chartered,” “Limited,” “Ltd.,” and “Prof. Corp.” are also suitable designations. The name also cannot include any words or abbreviations used by other business types, such as “LLC.” Finally, you also cannot use words that indicate other business types, such as “bank,” unless your business fits that type.
Keep websites in mind as you choose your business name so that you can find something that aligns with an available domain name. ZenBusiness can help claim a business domain name for your website.
Select an Illinois registered agent
A registered agent is a person or entity that receives legal notices and documentation on behalf of a company, including legal summons, lawsuit notices, and documents from the Secretary of State. The registered agent must have a physical address within Illinois and maintain an office that operates during standard business hours.
Because of this regulation, it can be difficult or inconvenient for an individual to act as their own registered agent. Instead, many companies choose to hire a third-party to perform this task. ZenBusiness offers a service that can connect you with a registered agent in the state.
Complete your Illinois Articles of Incorporation
Your Articles of Incorporation is the most important document your company will submit. To start, you’ll need to decide who will act as your company’s incorporator. The incorporator is the person required to sign all the initial documents to set up your corporation. This can you or someone you authorize to act on your behalf, like an attorney.
You can file this document online or mail your paperwork to the Illinois Secretary of State. The standard filing fee is $150. Payments can be made online, by cashier’s check, certified check, or money order. Checks should be payable to the Illinois Secretary of State. Expedited filings can be submitted in person in Chicago for a fee of $250.
Establish a corporate record in Illinois
Once your paperwork is approved, your PC officially exists! But there’s much more to handle before this process is done. Illinois requires all companies to keep a permanent record of every company decision and all important documents. This record can be kept physically or digitally, but it must be safely stored to prevent loss or tampering to help your business stay in compliance.
Designate an Illinois professional corporation board of directors
The next task is to select the initial director(s) of your PC. Whoever is chosen, these appointments must be recorded for the corporate record as an Incorporator’s Statement that shows the names and addresses of each individual.
These directors can include any number of people, including the incorporator themselves. The directors don’t necessarily need to be located in Illinois to serve in the role. The only stipulation is that each director must share the same profession as the one the corporation was created for.
Create Illinois corporate bylaws
Bylaws are the rules and regulations that determine how your PC will operate. You’ll cover a variety of important topics, including how often the board of directors will meet and rules for ratifying the bylaws.
Bylaws must be recorded in your internal corporate record, but they don’t need to be filed with the state of Illinois. There are no particular rules as to how bylaws are determined, but they do need to be consistent with state law.
Hold first board meeting
After all of the above has been handled, it’s time for your PC to hold its first board meeting. During this initial meeting, you should plan to ratify your bylaws, designate officers, make decisions about shareholders, and deal with financial topics. The minutes of this meeting, and all meetings afterwards, should be signed by the directors and kept in your corporate records.
Handle tax obligations
To operate your professional corporation, you’ll need to get it set up for taxes. On the federal level, this means applying for an Employer Identification Number (EIN) with the IRS. You can also use our convenient EIN service.
On the state level, your PC will be subject to state income tax. You may also be subject to other taxes depending on your business, such as sales tax. Some city or county jurisdictions may have local taxes that apply to your business as well.
Obtain Illinois business licenses and permits
PCs must register with the Illinois Department of Revenue to conduct business. Additionally, you’ll need to get a professional license from the Illinois Department of Financial and Professional Regulation. There may also be city and county permits that your corporation will need depending on the kind of work you do. There’s no central place to check to see whether you have every federal, state, and local license and permit you may need. However, our business license report service can research these requirements for you.
Acquire insurance for your Illinois professional corporation
Insurance is important for the continued operation of any business. By law, PCs in Illinois that have employees must have workers’ compensation insurance coverage or approval from the state to self-insure.
You may also want to set up optional general liability insurance as well as any industry-specific insurance that applies to your business, such as malpractice, even if it’s not required.
Open a business bank account
It’s smart to keep your personal assets separate from your business assets. Therefore, you’ll need a business bank account for your corporation. Make sure to have your business documents, including your EIN, on hand when you open your account.
Ready to launch your business?
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or are looking to register a domain, our goal is to help you stay on the road to success. Check out our services and reach out to us today to see how we can help you grow your company.
Illinois Professional Corporation FAQs
What are the filing fees for a professional corporation?
The basic fee to file the Articles of Incorporation is $150 unless you opt for expedited service, which costs $100 more. Filing fees can be paid online or by cashier’s check, certified check, or money order if filing by mail.
Do I need a lawyer to form a professional corporation?
While it’s not required to have a lawyer, it may be a good idea to hire one to prevent any mistakes or unnecessary delays.
Does Illinois have a professional limited liability company entity?
Illinois allows some professionals to form a PLLC, but only a very few are recognized. Any licensed professionals who don’t qualify can still form a standard LLC.
Can professionals from different fields form a professional corporation together?
No, everyone involved in forming a professional corporation must belong to the same profession or provide related services.