How to Incorporate in Illinois

Entity types at a glance

Illinois doesn’t offer just one “corporation.” The Business Corporation Act (BCA) stacks multiple regimes—standard C-corps, S-corps, close corporations, professional corporations, medical corporations, and benefit corporations—plus foreign corporations registering here. Use this menu to orient yourself before drilling down.

        Primary statutes & regulations:
        805 ILCS 5 – Business Corporation Act of 1983 (Articles 1–17, 2A for close corps, 11.05 for conversions).
ILCS 10 – Professional Service Corporation Act.
ILCS 40 – Benefit Corporation Act.
ILCS 15 – Medical Corporation Act.
ILCS 105 – General Not For Profit Corporation Act (referenced here only for contrast).
Ill. Admin. Code Part 150 – name availability, professional naming rules, assumption filings.

      

Entity flavor	Statutory anchor	Use cases	Naming & notes
Standard Illinois corporation (C-corp)	805 ILCS 5 (BCA)	Manufacturing, tech startups, holding companies, any for-profit that needs corporate governance and access to equity markets.	Name must contain Corp./Inc./Ltd. Registered agent + office required; subject to franchise tax.
S-corporation	BCA + federal/Illinois tax election	Owner-operated businesses seeking payroll tax efficiency with corporate law structure.	Same articles/bylaws as C-corp; elect S status via IRS Form 2553 + IL forms; pass-through state tax with 1.5% replacement tax.
Professional corporation (PC)	805 ILCS 10 + BCA	Law firms, medical practices, accountants, engineers, architects, veterinarians, and other DFPR-regulated professions.	Name must include “Professional Corporation,” “P.C.,” “Chartered,” etc., and often shareholder names; shareholders/officers must be licensed.
Medical corporation	805 ILCS 15 + 10	Physicians, dentists, chiropractors, optometrists needing additional IDFPR oversight.	Additional filings with Medical Corporation Division, proof of malpractice coverage, and stricter ownership limits.
Close corporation	BCA Article 2A	Family businesses and closely held companies wanting partnership-like governance.	Shareholder agreements can limit board power; transfer restrictions baked into articles.
Benefit corporation	805 ILCS 40 + BCA	Social enterprises and ESG-focused ventures wanting statutory fiduciary expansion and public benefit branding.	Must state benefit status in articles, file annual benefit report, and consider stakeholders beyond shareholders.

Standard Illinois corporation (C-corp)

The default Illinois business corporation is formed under the BCA by filing Articles of Incorporation (Form BCA 2.10). Everything else—S elections, benefit overlays, professional designations—builds on this base.

Key fields on Form BCA 2.10

Corporate name & registered agent

Name must include Corp./Inc./Co./Ltd. and be distinguishable on SOS records. Banking, insurance, or fiduciary terms require regulator approval. Registered agent must maintain a physical Illinois office; RA info is public.

Purpose clause

General “to transact any or all lawful businesses for which corporations may be incorporated under the BCA” is acceptable unless you’re forming a professional corporation, which requires more specific statutory references.

Authorized shares & par value

This drives franchise tax. Authorizing 10,000 no-par shares keeps initial tax low. Par value stock increases paid-in capital and taxable base. Venture-style corporations often authorize millions of shares with a very low par value (e.g., $0.0001) but should model franchise tax impact.

Directors & optional provisions

List initial directors or state that the number will be set in bylaws. Optional clauses can limit director liability (Section 2-102), grant preemptive rights, or adjust cumulative voting. Benefit and close corporations require additional statements.

Filing fees and franchise tax

Filing fee is $150, plus initial franchise tax calculated as 0.15% of paid-in capital allocated to Illinois (minimum $25). Paid-in capital equals (authorized shares × par value) for par stock, or stated capital for no-par stock. Example: 10,000 no-par shares with stated capital of $1,000 yields $1.50 franchise tax, rounded up to $25 minimum.

Example share structures

Services firm: Authorize 1,000 no-par common shares; issue 100 to founders; minimal franchise tax.
Venture track: Authorize 10,000,000 common at $0.0001 par + 2,000,000 preferred; initial paid-in capital of $1,200 requires $1.80 franchise tax (rounded to $25). Later financing rounds trigger additional franchise tax via BCA 14.30 filings.

Organizational checklist

1. Incorporator actionDraft and file BCA 2.10, pay $150 + franchise tax, secure stamped Articles.

2. Organizational meetingAdopt bylaws, elect directors (if incorporators named), authorize share issuances, approve banking authority.

3. Issue stockBoard resolutions, subscription agreements, certificates or electronic ledger, 83(b) elections for restricted stock.

4. EIN & IDORApply for EIN, then register with Illinois Department of Revenue (MyTax Illinois) for income withholding, sales/use, and unemployment taxes.

5. Compliance calendarSchedule annual report + franchise tax, payroll filings, CTA deadlines, and board meetings.

S-corporations and Illinois tax treatment

S-corporation status is purely a tax classification layered on top of the BCA corporation. You still file the same Articles, pay franchise tax, and follow corporate governance, but elect S status with the IRS (Form 2553) and Illinois (Form IL-2553).

Illinois tax comparison

Feature	Illinois C-corp	Illinois S-corp	Illinois LLC taxed as partnership
Entity law	805 ILCS 5 corporation.	Same 805 ILCS 5 corporation (S election).	805 ILCS 180 LLC.
State entity-level tax	7% corporate income tax + 2.5% replacement tax = 9.5% of Illinois net income.	No 7% income tax; pays 1.5% replacement tax on net income.	1.5% replacement tax if multi-member (0% if disregarded single-member), but subject to individual 4.95% tax.
Federal tax	Subject to double taxation (corporate level + shareholder dividends).	Pass-through (Form 1120S); shareholders pay on K-1 income; must pay reasonable compensation.	Pass-through (Form 1065 or Schedule C); more flexible allocations.
Ownership flexibility	Unlimited shareholders, multiple classes of stock.	100 shareholder cap, must be individuals/qualifying trusts, one class of stock.	No cap; membership interests can be customized in operating agreement.
Typical use case	VC-backed startups seeking QSBS, manufacturing companies reinvesting profits, multi-state operations.	Owner-operated services, agencies, distributors needing payroll tax planning but comfortable with corporate formalities.	Real estate holdings, professional services avoiding franchise tax, ventures needing flexible profit allocations.

PTE tax election

Illinois allows S-corps and partnerships to elect a 4.95% pass-through entity (PTE) tax through 2025, creating a state credit to owners and helping high-income taxpayers circumvent SALT deduction caps. Election is made annually with Form IL-1065/IL-1120-ST filings.

Professional & medical corporations

Licensed professions can choose among professional corporations, LLCs/PLLCs, or, in some cases, general partnerships. PCs remain popular when boards insist on corporate governance or when multi-state practices already use P.C. structures.

Professional Service Corporation Act (805 ILCS 10)

Shareholders, directors, and officers generally must be licensed in the profession (limited exceptions for deceased shareholders’ estates).
Name must include “Professional Corporation,” “P.C.,” “Chartered,” or profession-specific phrases (e.g., “Law Corporation”). Many boards require surnames unless granted an assumed name.
Articles require statements restricting services to the licensed profession and compliance with PSC Act.

Medical corporations

Physicians, dentists, and other medical professionals often must file additional documentation (e.g., proof of malpractice insurance, certain ownership affidavits) under 805 ILCS 15 and IDFPR rules. Some hospital systems require medical corporations rather than LLCs for credentialing.

PC vs LLC for professionals

Professional corporation advantages

Easy to integrate with existing multi-state PC structures, allows corporate retirement plans, accepted by lenders and franchisors, and boards are familiar with P.C. filings.

LLC/PLLC advantages

No franchise tax, single annual report fee, operating agreement flexibility, and easier to add non-voting investors (where permitted). Many boards now accept PLLCs, but confirm with your specific regulator.

Benefit corporations (public benefit / ESG)

Illinois benefit corporations opt into 805 ILCS 40 while remaining under the BCA. Articles must state the corporation is a benefit corporation and may list specific public benefits (e.g., affordable housing, renewable energy access).

Formation & conversion

New corporation: Include benefit language in Articles of Incorporation (e.g., “This corporation is a benefit corporation under 805 ILCS 40”).
Existing BCA corporation: Amend articles with at least a two-thirds vote in each class/series.
Termination: Amend articles (same vote) to remove benefit status.

Governance & reporting

Directors must consider shareholders, employees, customers, community, and the local/global environment when making decisions. An annual benefit report using a recognized third-party standard (e.g., B Lab, SASB) must be prepared and often published on the corporation’s website. Benefit status is especially useful when courting mission-driven investors or aligning with foundation or municipal procurement programs.

Close corporations & shareholder agreements

BCA Article 2A allows a corporation to elect “close corporation” status, typically for entities with fewer than 35 shareholders. Close corporations use shareholder agreements to override typical board-centric governance, functioning more like partnerships.

Common features

Shareholder agreements can limit or eliminate the board, specify management duties, and define profit distributions.
Transfer restrictions (rights of first refusal, consent requirements) embedded in articles and stock certificates.
Buy-sell clauses triggered by death, disability, retirement, or divorce; valuations often linked to appraisals or formulas.

        Sample clause concept: “No shareholder may transfer shares without offering them first to the corporation, then to remaining shareholders at book value plus 20%, payable over 36 months.” – Not a template, but a reminder to formalize exit mechanics.

Formation checklist & filings

Whether you are forming a domestic BCA corporation or qualifying a foreign one, the same basic workflow applies: name + RA, draft Articles, file, pay franchise tax, adopt bylaws, issue stock, register with IDOR, and calendar compliance.

Step 1 – Name & RAConfirm name availability (805 ILCS 5/4.05) and secure a registered agent with a physical Illinois office.

Step 2 – Draft Articles (BCA 2.10)Outline share structure, director info, and any special provisions (benefit, close corp, PC language).

Step 3 – File & pay franchise taxSubmit BCA 2.10, pay $150 + initial franchise tax; expedite if needed (24-hour service).

Step 4 – Organizational meetingAdopt bylaws, elect directors/officers, issue stock, authorize bank accounts, approve indemnification.

Step 5 – EIN & IDORSecure EIN, register on MyTax Illinois for withholding, sales/use, unemployment, and other accounts.

Step 6 – Post-formation filingsFile assumed name if needed, foreign qualify in other states, secure business licenses, register with IDES for unemployment insurance.

Foreign qualification (out-of-state corp entering IL)

File Application for Authority (BCA 13.15), attach certificate of good standing from home state, pay filing fee + initial franchise tax.
Appoint Illinois registered agent and maintain registered office.
File annual reports (BCA 14.05 FOR) and pay franchise tax based on paid-in capital allocated to Illinois (often proportionate to property, payroll, and sales formula).

Annual reports, franchise tax & good standing

Illinois corporations must file an annual report every year by the last day of the month preceding the anniversary month. Failure to file results in penalties and eventual dissolution. Franchise tax is unique to Illinois; plan for it.

Annual report basics

Forms BCA 14.05 (domestic) / BCA 14.05 FOR (foreign).
Due the month before anniversary month (incorporated Feb 14 → report due Jan 31).
Filing fee: $75 plus franchise tax.
Late penalty: Minimum $3 per month or 10% of franchise tax, plus risk of dissolution after ~120 days.

Franchise tax example (2025 rules)

Assume a corporation has $500,000 paid-in capital allocated to Illinois. Annual franchise tax = 0.1% × 500,000 = $500. From 2025 onward, the first $10,000 is exempt, so tax is $490. Add the $75 annual report fee for a total of $565. Additional franchises taxes apply when issuing new shares or increasing paid-in capital mid-year.

        Common pitfalls:
        Authorizing millions of shares without modeling franchise tax impact.
Failing to file BCA 14.30 when raising capital, leading to large catch-up franchise tax bills.
Ignoring annual reports after moving out of state; dissolution makes bank/brokerage access difficult.

      

Illinois corporate tax overview (C vs S vs LLC)

Illinois imposes both income tax and replacement tax. Understanding the combined rate helps you decide whether to remain a C-corp, elect S status, or use an LLC taxed as partnership.

	C-corp	S-corp	LLC taxed as partnership
Entity-level tax	9.5% (7% + 2.5%) of Illinois taxable income.	1.5% replacement tax.	1.5% replacement tax (multi-member) or none (single-member disregarded).
Owner tax	4.95% Illinois individual tax on dividends; federal double taxation.	4.95% on pass-through income (plus payroll taxes on reasonable salary).	4.95% on pass-through income; self-employment tax if active.
QSBS / VC suitability	Yes (QSBS, preferred stock, global investors).	No (limited to 1 class of stock, 100 shareholders).	No stock; membership interests only.
PTE tax election	N/A	Yes (4.95% credit election through 2025).	Yes for partnerships.

After-tax cash comparison (simplified)

Assume $500,000 Illinois net income.

C-corp: Pays $47,500 (9.5%). Distributes remaining $452,500 as dividend → shareholder pays 4.95% ($22,392). Net cash ≈ $430k before federal taxes.
S-corp: Pays $7,500 (1.5% replacement tax). Pass-through income taxed to owner at 4.95% ($24,525). Net cash before federal ≈ $468k, but owner must take reasonable salary subject to payroll taxes.
LLC: Similar to S-corp but with self-employment tax on active income; no franchise tax.

Foreign corporations doing business in Illinois

Corporations formed outside Illinois must qualify before “transacting business” here—meaning more than mere solicitation. Physical offices, employees, inventory, or construction projects generally trigger qualification.

Qualification checklist

Documents

Form BCA 13.15 (Application for Authority).
Certified copy or certificate of good standing from home state (dated within 90 days).
Illinois registered agent consent.
Initial franchise tax payment (same 0.15% of paid-in capital allocated to IL).

Common mistakes

Failing to allocate paid-in capital to Illinois before calculating franchise tax.
Assuming single-member Delaware LLC taxed as corp avoids IL franchise tax.
Not updating RA when moving offices; leads to revoked authority.

Foreign corps file the same annual report (BCA 14.05 FOR) and pay franchise tax on Illinois allocated capital. Failure to qualify can bar the corporation from Illinois courts until it cures the defect and pays penalties.

Corporate Transparency Act (beneficial ownership)

        CTA snapshot: Most privately held corporations and LLCs created by filing with a secretary of state are “reporting companies” unless an exemption applies. Reporting companies must report beneficial owners (25%+ ownership or substantial control) and, for entities formed on/after Jan 1, 2024, company applicants. Deadlines: existing entities formed before 1/1/2024 must file by Jan 1, 2025; new entities must file within 30 days of formation (extended temporarily to 90 days for 2024 filings).

Several lawsuits challenged the CTA. A district court temporarily exempted specific plaintiffs, but the injunction has since been narrowed and appeals courts have reinstated enforcement nationwide. Unless you are part of a successful plaintiff group, assume you must file. Illinois SOS filings remain public, while CTA filings go to FinCEN and stay non-public.

When to choose an Illinois corporation vs LLC or Delaware

Illinois corporation makes sense when…

You need QSBS eligibility or plan to raise institutional venture capital that expects a corporation.
Licensing boards require a PC or medical corporation format.
You want benefit corporation branding codified in statute.
You have a multigenerational business needing close corporation buy-sell mechanics.

Consider LLC or Delaware corp when…

You want to avoid franchise tax and keep governance flexible (LLC).
All operations occur outside Illinois, and you’re already forming a Delaware holding company for multi-state investments.
You need series LLC structures for real estate holdings (Illinois LLC) or intend to move HQ out of Illinois soon.

        You may want legal guidance if:
        You’re unsure how paid-in capital affects franchise tax.
You need to convert an Illinois LLC into a corporation for financing.
You must reinstate a dissolved Illinois corporation (catching up franchise tax + annual reports).
You’re structuring multi-entity professional practices or benefit corporations.

      

How I help with Illinois corporations

I operate as a remote corporate attorney with Illinois fluency. Typical engagements include entity-choice consults, drafting and filing articles/bylaws/shareholder agreements, coordinating with licensing boards, managing benefit conversions, modeling franchise tax, cleaning up delinquent filings, and advising on CTA compliance.

Entity strategy: Illinois corporation vs LLC vs Delaware, QSB planning, and step-plan for reorganizations.
Articles & bylaws: Drafting BCA 2.10 filings, benefit/close corp language, restated articles, shareholder agreements, and buy-sells.
Professional structures: PC/medical corp filings, DFPR coordination, multi-state practitioners.
Benefit & ESG: Benefit corporation conversions, annual benefit report frameworks, stakeholder governance.
Franchise tax & reinstatement: Modeling paid-in capital, preparing BCA 14.30 reports, reinstatement petitions.
CTA / BOI: Owner ledgers, filing workflows, coordination with outside counsel for multi-entity groups.

Ready to map out your Illinois corporate strategy? I typically respond within one business day with next steps, fee proposals, and expected timelines.