How to start an Illinois corporation

It might seem like a lot at first, but once you understand the steps, it’s very doable. This guide will walk you through everything you need to know to start your Illinois corporation.

How to start a corporation in Illinois

Incorporating means registering your business as a corporation so the law sees it as its own entity, separate from you. Each state has its own rules for how to do this, so the process can seem confusing. Let’s go through each step: 

1. Choose a name for your Illinois corporation

Your corporation’s name should be unique and make a statement about your business. Make sure it complies with the following Illinois requirements:

• Your name must include "Company," "Incorporated," "Corporation," "Limited," or an abbreviation of one of these terms.
• Don't use a name that implies a business purpose other than what your corporation actually does. For example, don't call your business "The Burger Company" if it is a garden center.
• The name must be unique and not too similar to a name already registered with the Secretary of State.
• Illinois limits the use of words that imply banking or insurance to those businesses authorized by the applicable state agency to conduct such activities.

Need help coming up with a business name for your corporation? Try the Rocket Copilot™ AI Business Name Generator, a free tool to help you brainstorm business names and get started registering your corporation.

2. Decide between an Illinois S-Corp and C-Corp tax designation

There are similarities between an Illinois S-Corp and a C-Corp regarding personal liability, management, structure, and compliance. The differences, however, come down to the following:

• Ownership Rules: There are no limits on the number of shareholders and stock classes a C-Corp may have. An S-Corp is limited to one stock class and 100 shareholders. Shareholders in an S-Corp must be citizens or legal residents of the United States.
• Taxes: A C-Corp is taxed as its own entity. This means it files a corporate tax return and it pays taxes on corporate income. Shareholders' dividend payments may also be taxed on their individual tax returns. An S-Corp also files its own tax return, but it doesn't pay corporate taxes. It is a "pass-through" entity and income is reported only on shareholders' individual returns.
• Documents: A C-Corp is the default corporate designation. To establish an S-Corp, you must file IRS Form 2553, Election by a Small Business Corporation.

3. Appoint directors and shareholders for your Illinois corporation

Each state has its own personnel requirements for incorporating. In Illinois, your corporation must have at least one director, but there is no age requirement for directors of a corporation, and Illinois does not require that directors or owners live in the state.

State the number of your corporation's directors in either your Bylaws or your business's Articles of Incorporation. 

4. Choose a Registered Agent

A Registered Agent is the person or business responsible for receiving tax, legal, and government documents during regular business hours. It's important that every business has one. You can either serve as your own registered agent (if you have an Illinois address) or choose one to do that service for you (if you are not located in Illinois or would like an extra layer of privacy).

5. File your Articles of Incorporation with the state of Illinois

Once you have a business name and registered agent, you can register your business as an Illinois corporation with the state by filing your Articles of Incorporation. This document may be referred to in other states as "Certificate of Organization," "Certificate of Filing," or "Articles of Organization."

6. Get an Employer Identification Number (EIN)

Before opening your doors for business, apply to the IRS for an employer identification number, or EIN. All corporations with employees in Illinois must have an EIN. An EIN is similar to your Social Security number, but it's for businesses. You'll also need an EIN to open your corporate bank account.

Congratulations! After you have completed all these steps, you have formed your Illinois corporation.

What to do after incorporating in Illinois

Illinois requires that you create and keep certain corporate records to maintain your corporate status:

• Corporate Bylaws define how your corporation is structured and how it operates. You may include any provisions you like in your Bylaws, as long as they are consistent with your Articles of Incorporation and with Illinois law.
• You must record Corporate Minutes for every meeting of shareholders and directors. The Minutes provide a record of all decisions and actions taken during the meeting.

You don't have to file either document with the state, but you should keep them with your other corporate documents. We can help you compare Corporate Meeting Minutes requirements and Bylaws requirements from state to state.

Still have questions? Learn more about how to start your own business with Rocket Lawyer and get started today!
 

Key takeaways Starting a corporation in Illinois means following state rules, like choosing a unique name, filling out paperwork, and paying fees to make it official. One important choice is deciding how your corporation will be taxed in Illinois, either as an S-Corp or a C-Corp. This affects how the business and owners pay taxes, and the differences between the two change from state to state. After forming the corporation, you must also keep records – like Bylaws and Meeting Notes – to stay in good standing with the state and prove your business is real and operating correctly.

Additional resources

Learning how to enforce a contract is just one step. Explore these additional topics to learn more and take the next steps.

• What is a corporation?
• What is an S-corporation?
• How are corporations taxed?
• How to start a corporation
• How to register a corporation by state