Articles of Incorporation are an important aspect of many companies. This piece of paperwork determines how the company should be set up for various legal aspects, such as who can be a director or officer and how many members are on the board of directors. If you’re looking to incorporate your own company, this post shares some useful information on what to include in Illinois Articles of Incorporation.
How to Incorporate in Illinois
Before incorporating, a business owner must make sure that he or she meets the requirements as an owner of a corporation. To ensure this, the Illinois Secretary of State website offers helpful information on how to incorporate in Illinois by going through certain steps.
Choose a Corporate Structure
The first step that a business owner must take when incorporating in Illinois is choosing a corporate structure. Unless the company will not be accepting any private investment, the owner must choose a corporate structure with the ability to be publicly traded. If you choose to do this, you can still have fewer shareholders than other companies. This is because Illinois allows for corporations with more than one class of shares. The different classes of shares can have specific rights attached to them that are unique to each class.
For example, a common structure that is used within the financial industry is called the “C” corporation. This structure has two classes of stock, which can be seen in the diagram below:
Types of structures:
- C Corp
- D Corp
- S Corp
- Limited Liability Company (LLC)
I. C Corporations and D Corporations:
a) used most often by businesses with publicly traded shares. In this case, the owners of the business are compensated with cash and stock that can be sold at any time.
b) the individuals who own the stock choices of these organizations do not have certain risks associated with owning a publicly traded corporation. This is because their investments are protected in case the company fails or goes under.
c) Another advantage of owning one of these structures is that they are able to raise capital through debt and equity. This only works if you choose a structure that allows underwriting. The money can either be earned through fees, interest, dividends, or capital gains. With this option comes potential liabilities because corporations that are publicly traded must follow specific reporting requirements.
II. The “S Corporation”
a) another structure option that can be chosen by business owners in Illinois who want to incorporate. The “S Corporation” is essentially corporations that are restricted by their ownership structure.
b) the S Corporation limits the corporation’s owners to an unlimited number of stockholders. These stockholders, however, do not have liability protection.
c) the liability protection that is provided by this structure is because the owners have limited liability for business debts and obligations. S corporations can also raise capital through debt and equity.
a) another structure that is available in the state of Illinois. It is impossible to form a corporation as a partnership, however.
b) the only types of business structures that can be formed as partnerships are sole proprietorships and general partnerships.
IV. Limited Liability Company (LLC)
a) this structure allows for members to have their legal limitations on their personal assets reduced as long as they follow certain rules.
b) members of an LLC must file specific articles of organization with their state in order to be recognized as a member of an LLC.
c) the limited liability of the LLC is based on the state regulations and agreements that members have made.
Check Name Availability
After the decision is made on which structure the business will use to incorporate, it is important to check the name of the company for name availability. The business owner must check for:
- Name conflicts with other businesses
- Reserve availability
- Length of corporation name
For a company to be recognized and have legal rights, Illinois requires that a “doing business as” (DBA) name is provided with all other names that are registered. If the company is in operation, then the DBA name must be used. The DBA need not be registered with the Secretary of State but it should be filed with the county where the business is located. A DBA will help prevent potential issues that can occur if a conflict arises between two businesses that are using similar business names and licenses.
The registration of a business name in Illinois includes:
- Filing the original articles of incorporation and a Statement of Corporate Changes with the Secretary of State.
- To file these documents, a form can be downloaded from the Illinois SOS website.
- The form will need to be signed by each officer and director within one day of being signed by the incorporation.
- After it is signed, it should be delivered to the SOS office in Springfield or Chicago for filing.
- After the form is filed, amendments to the articles of incorporation will need to be made. These documents should include changes for adding members, changing the name of the corporation, and any changes on where it is registered.
- The amendments will need to be signed by all officers and directors once they are approved.
- They must also be delivered to the Secretary of State in the appropriate location.
Appoint a Registered Agent
A corporation in Illinois is also required to have a registered agent. These agents are usually chosen when a corporation is formed. The agent will be responsible for receiving legal notifications and important mail that is addressed to the company.
The registered agent must:
- be located in Illinois and the service can be obtained from the Secretary of State.
- keep a copy of the current Certificate of Good Standing, which is issued by the Secretary of State, on file in their place of business.
- any mail that comes to the corporation must be forwarded to its owners or officers.
- ensure that Illinois receives all tax forms within seven days after they are filed with an internal revenue agency.
- provide the SOS with a Notice of Change of Registered Agent. The organization should get a new certificate of good standing after it has been changed and this information should be submitted to the SOS but it is not required to have the agent’s name updated.
File Illinois Articles of Incorporation
The process of registering Illinois corporations begins by filing the required Articles of Incorporation with the Secretary of State.
The process of filing:
- The form will need to be signed by all company officers and directors within one day.
- It must also be delivered to the Springfield or Chicago office within two days.
- Once it is received, it will be kept in the Secretary of State’s office for four months, after which time a new certificate must be filed.
- After the certificate is filed, it will need to be amended to reflect any changes that have occurred since it was first filed with the Secretary of State. This may mean adding or changing officers, directors, and members as well as changing where the corporation will be registered.
- The amendments must be signed by all officers and directors within one day of being submitted to the SOS’ office.
After this, all certificates can remain in a safe in the Secretary of State’s office for four months until they are filed anew.
The Cost of Filing Articles of Incorporation
The cost of filing Articles of Incorporation can vary depending on the business and the business structure they decide to register. The Illinois SOS website offers a free online form for registering S corporations but it will come with the added cost of a filing fee.
- Subchapter S corporations must pay $50 for each certificate that is filed by its officers and directors.
- If the articles are filed using a DBA name, then it will cost between $75 and $100 per certificate.
- After the articles of incorporation are filed, there is a fee for an annual statement. This will need to be renewed when it is due every year and will need to be filed with the SOS within four months. The amount of the fee depends on the type of business that is registered.
When filing Articles of Incorporation with Illinois, make sure you choose a company formation company that will help you complete these business activities in time for you to open your doors in less than one year!
Content of Articles of Incorporation
The Articles of Incorporation will be the first document required to register a corporation in Illinois.
The form must contain the following information:
- The name and street address of its registered agent
- The purpose and reason for its formation
- The names, titles, and addresses for all officers and directors
- Listing of the initial stockholders along with their addresses if a stock company is formed
After the registration process has been completed, the articles will need to reflect any changes that have occurred since they were first filed. This may mean adding or changing officers, directors, and members as well as changing where the corporation will be registered.
How Do I Get a Copy of the Articles of Incorporation?
The process of obtaining a copy of the Articles of Incorporation or similar document is relatively simple.
- The document is filed with the SOS with either a notary public or commissioner present and can be requested by sending a letter to the state with an explanation of why you want to see the document.
- If you are unsure if your request is valid, do not send in any money since if your request does not meet all legal requirements, then it will most likely be denied.
Establish Bylaws & Corporate Records
A corporation in Illinois must also establish approved corporate bylaws that govern the actions of the organization.
The bylaws should:
- be established along with the corporation’s constitution and state there are specific procedures that should be followed when electing officers or directors.
- include any rules that are set forth relating to a company’s day-to-day operations, its capital contributions, and stock options. It will also detail the duties of each officer and director as well as how they should perform their responsibilities in accordance with the laws of Illinois.
The corporation may also develop corporate records that can be used by its owners and officers. These records will need to include any changes that have been made to the organization’s original Articles of Incorporation since they were first filed with the SOS.
The Secretary of State Department will use these records whenever a corporation is dissolved.
Appoint Initial Directors
One of the first steps in registering an Illinois corporation will be to appoint at least three directors. These must be elected before its Certificate of Formation will be accepted by the SOS.
The organization will need to elect:
1) a president
2) a vice-president
3) a secretary who may or may not be the same person.
Additionally, two other board members may also be elected. However, there must be at least one director that is not an employee of the company and who does not have any direct interest in it either.
All directors will be elected to serve until they are replaced by a new board. The process of removing an individual from the board becomes more complicated if this occurs because there is a need for two-thirds of the board members and at least one to serve as a chief executive officer or president.
After the initial officers have been selected, business owners should prepare to pay their own company formation fees which can cost between $50 and $100 per individual.
Hold Organizational Meeting
The officers of the corporation will need to hold an organizational meeting at least once within two months of the company’s formation.
Purposes of Organizational Meeting
- This meeting will need to take place at a location certified as a meeting place for the purposes of holding it.
- This will allow all officers and directors to elect new directors as well as approve actions such as amendments, buy-out contracts, and corporate resolutions. It is also important for all correspondence to be distributed among the board members.
- The meeting will also allow the officers to take all resolutions required by the Articles of Incorporation and bylaws.
- Each director will need to be present at this meeting which may only last one hour. However, the organization would be required to hold some type of reorganizing meeting if more than two directors are elected or if a vote change of two-thirds or more is made.
The SOS may require that all meetings take place at least once each year and can charge fees for this service too.
Issue Stock Certificates
The next step in registering an Illinois corporation will be to issue stock certificates. These are needed for all companies that have issued share ownership before they can do so.
The company will need to record the shares it has issued along with the facts that should be included on each stock certificate. This will include:
- the type of corporation
- the location of the issuing company
- a method for identifying and proving who owns which shares
- the stock’s value.
If there is more than one stockholder, this record will need to attest to each individual’s relationship with the corporation as well as their rights. However, it will not be required that this information be included in a business’ corporate records.
The business registration process for a corporation in Illinois must be completed when all this information has been recorded in its articles or bylaws.
Get a Federal Employer Identification Number (EIN)
All organizations in the United States will need to have a Federal Employer Identification Number (EIN) before they can begin doing business. This is an identification number that all businesses under the Internal Revenue Service regulations will be required to utilize.
- The IRS requires that businesses with more than 100 employees must submit an application for this number so it can assign it to their name. It will also be valid for the duration of the organization’s tax year which is from April 1 through March 31 of the next year.
- There are various different ways that an EIN can be applied depending on what type of business requires it and how many employees it has.
- The IRS will also accept applications from different organizations including corporations.
- Individuals wanting an EIN can do so by visiting the IRS.gov web page and going to the page for Form SS-4.
- Upon completion of this form, the employer will be issued an Employer Identification Number (EIN).
Get Illinois State Tax Identification Numbers/Accounts
The SOS will require that all registered corporations apply for both a State Employer Identification Number (FEIN) and an Illinois Tax Identification Number.
Differences between FEIN and tax ID number
- The FEIN is different from the federal EIN because it is not mandatory.
- It is also not issued to specific businesses, organizations, or corporations and can only be used for one tax year.
- The FEIN will be used by the state to identify employers who are filing for state income tax purposes during this time period. As for the tax ID number, it is used by the SOS to identify businesses when they are reporting sales and filing other business tax returns.
- To apply for these numbers, corporations will need to fill out Form ST-14 which is a form that takes about 20 minutes to complete.
- The FEIN and taxable ID number will be responsible for identifying employers in Illinois state and federal tax records. It will also determine how much income tax must be paid to the state of Illinois each year. This application is an easy process that takes about 10 minutes to complete and can be done online. Once this has been done, the business will need to apply for a sales tax permit from the SOS as well.
The sales tax permit is a document that proves that they have permission to collect and pay sales taxes in Illinois. These taxes are required by law to process sales for any type of product or service in Illinois.
The permit will need to be applied for by any corporation which sells more than $100,000 in their state of operation.
Consider Electing S-Corp Taxation
An S-corp could be set up with an EIN and the SOS will require that all of its registered businesses file for a tax ID number. This is a number which only Illinois S-corps are required to possess until they are ready to apply for their federal corporate tax ID numbers.
The S-Corp business will be responsible for paying both EIN-related taxes as well as federal income tax.
It is recommended that companies using S-corp status avoid corporate income taxes if possible. This will allow them to grow their company and make greater profits for the shareholder which will also contribute to their personal financial success.
In order to file for the S-Corp tax ID number, the SOS will require that all officers and directors of the corporation complete Form ST-1 in connection with its internal rules and bylaws. This form is about 30 pages if completed correctly.
Advantages and disadvantages of S-Corp status
- These include that it will allow business owners to pay taxes on their business only, have greater control over their financial affairs, make themselves available for any sales tax or other legal matters, and split profits with their fellow shareholders.
- On the other hand, S-corp status requires that all members of the organization be incorporated under Illinois state law instead of federal regulations. This includes that all the owners will be required to file for a variety of other permits and licenses including those concerning workers’ compensation, unemployment insurance compensation, disability, and property insurance coverage information.
- One advantage of S-corp taxation is that it will allow the business to deduct all business expenses from their federal taxes. These deductions may include travel costs, entertainment costs as well as marketing strategies. This tax status also allows companies to not prepare complicated income statements and keep simple books.
- On the other hand, S-corp companies will not be considered financial institutions. Therefore, they will have no federal deposit insurance assistance. They also may not be allowed to receive low-cost funding through the Federal Reserve’s discount window.
- Lastly, the cost of special start-up and maintenance fees can be significant for S-corp companies as well as high benefit taxes.
There are some very good reasons to consider this type of taxation for some business enterprises in Illinois. However, there are also some things which need to be taken into consideration.
The best way to figure out if this option will work for your business is to get the company attorneys who can review the finances of the company and take action accordingly.
For more information on S-corp status, contact a legal representative or accountant in Illinois.
A number of different companies may be incorporated as either LLCs, PTAs or S-corps depending on their particular business needs.
Illinois Business License
All companies will need to apply for an Illinois business license. This license can be obtained from the Illinois Department of Business Services within the SOS.
This state Department of Business Services is in charge of all corporate business administrative rules and regulations in Illinois and this includes granting licenses as well as providing some helpful information on corporate law and taxes in Illinois.
The process of obtaining the business license
- The specific license that will need to be procured by businesses in Illinois can be obtained after filling out an application form for a Tax Identification Number (TIN). This number is issued by the SOS when corporations register with the state.
- Any company that is registered with the state of Illinois as a corporation must have a TIN before it can begin a business in Illinois. This number will appear on all sales tax documents filed by the business with the SOS.
- Once a business has been granted a TIN, it must prepare and file an Application for Business Tax Registration Number (Form ST-4). This is used to qualify for certain tax credits.
- The government will then review the application and make any necessary changes. If there are none, they will issue the business its Illinois business license within 14 days of filing.
- The number will be assigned by the department and this allows businesses to legally transact sales in Illinois.
Ongoing Filings to Maintain Your Corporation
I. Any business which receives a TIN will also be required to submit monthly or quarterly tax returns to the Oregon Treasurer’s office. This is necessary in order to keep the corporation from losing its tax ID number.
a) The Treasurer’s office will review every return and make any necessary changes. The company may also receive a fine for failing to file in a timely manner.
b) Companies may be able to avoid this fine if they can show that they had a good reason for not filing on time.
c) Those who fail to file for three years in a row, as well as those who continually fail to file their returns, may lose their legal standing as a corporation in Illinois. This means that they will no longer have the right to exist in Illinois and will be treated like any other business or individual from then on.
II. Companies are also required to pay an annual fee of $50 to maintain their TIN number.
a) Companies that are owned by S-corps must also renew their information annually. This renewal includes filing a special form and paying a fee of $100.
b)They will also have to file all the same documents as if they were applying for a new tax number from the SOS.
c) This process is known as “renewing corporate existence.” This means that the company’s chance of losing its legal standing in Illinois due to non-payment or late filings is diminished somewhat after successfully renewing.
Domestic Illinois Corporation Annual Report Requirements:
- Companies that are incorporated within Illinois must submit an annual corporate tax return to the SOS. This form is known as Form ST-3. This form must be completed every year by filing for a corporation number and should be filed as soon as possible after the end of the fiscal year. You have to file an annual report by March 31 in order to receive a state corporation tax credit.
- The filing deadline is also important because if there are any late filings, the company will be fined $200 per day for each day of late filing.
- The company will also be required to pay a $50 late filing fee if the return is not filed within the first 15 days of the fiscal year.
- Late filings and non-payment of fees can lead to the loss of company status and may result in financial penalties. The state may also revoke the corporate charter in order to force companies to dissolve.
- When filing for a corporation, many businesses choose to choose this corporation type because they are able to receive tax credits from many states besides Illinois.
- In Illinois, companies that form S-corps are required to submit an annual return in order to maintain their corporate status.
Illinois Nonprofit Formation
The process of forming a non-profit corporation in Illinois is fairly simple.
Steps and features of non-profit corporation formation:
- The state of Illinois provides for the formation of non-stock non-profits and protects them under most circumstances.
- Non-profit corporations in Illinois are also given certain rights which are not given to other forms of businesses. Several laws were passed in order to protect these types of companies from being taken over improperly by investors for their own personal gain.
- Since non-profits are intended to serve the public, many of them are tax exempt. This is meant to allow them to receive funding without having to worry about paying taxes on that funding.
- These types of organizations are usually formed by people who have an interest in a specific area or community and set out to form a group or corporation with other like-minded individuals in order to create change in that community.
- Non-profit corporations can be created as either corporations or trusts which serve specific purposes within Illinois.
- Following the formation of a non-profit organization, a few important documents will need to be filed with the SOS. These documents include the Articles of Incorporation and the Certificate of Good Standing. The Articles of Incorporation will set up the purpose and scope of the corporation while the Certificate of Good Standing will outline all of its dealings during that year.
- The state offers many programs for those who wish to form non-profits in Illinois. Many organizations are formed through these programs including associations, trade unions, and business leagues.
How Do I Pay for the Non-Profit Status?
After forming a non-profit in Illinois, most organizations will also be required to pay a fee which is known as the initial non-profit status filing. This fee can range from $550 to $2,000 PER YEAR depending on the type of organization you are going after.
The template for this form can be downloaded from the SOS website and simply needs to be filled out and sent in with all of your supporting documents.
The amount of the fees that you will need to pay will depend on whether or not your organization can become exempt from paying taxes. This is an important distinction to make when considering which type of non-profit to make as it can significantly cut down on how much you have to pay into the system.
Starting a business in Illinois can be a fun and exciting experience. The state government has put a great deal of time and effort into making the process easy so that entrepreneurs will have all the resources they need to succeed.
If you are considering forming a business in the state, then this is an area that should not be overlooked.