Benefits of a corporation
When you form a corporation, your personal assets gain protection from your business’s debts and obligations. This limitation of liability can also help protect you personally if someone sues the corporation or one of its employees. Other reasons to form a corporation include fringe benefits such as health insurance programs and beneficial tax structures.
Requirements for incorporating in Illinois
Preparing your articles of incorporation
Your corporation exists as soon as your articles of incorporation are filed. To form a corporation, file the original and a copy of the articles of incorporation with the Illinois Secretary of State and pay a filing fee. At a minimum, the articles of incorporation must contain these provisions:
- Name of the corporation
- Corporate purpose
- Stock structure
- Registered agent and registered office
- Name and address of incorporators
A corporation can have different types of stock, called classes or series. These types of stocks can have different advantages, for example, one can offer voting rights while another may not. In regards to share structure, your articles must contain the following additional information:
- The articles of incorporation must list the number and class of shares that are authorized.
- If there is more than one class of shares, the articles must list the differences between classes of common shares and the preferences, qualifications, limitations, restrictions, and special or relative rights with respect to each preferred class of shares.
- If the articles authorize preferred or special shares, but you do not yet know their characteristics, the articles must include specific language indicating that the board of directors will determine these matters and put them in a resolution to be filed with the Secretary of State.
- Shares are typically issued to owners of a corporation at the time the corporation is formed. The articles of incorporation must list the number of issued shares, itemized by class and series.
- The articles must also state the total consideration paid for the issued shares. Consideration is something of value, such as cash, property, or a promissory note, that is given to the corporation in exchange for the shares.
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Naming your corporation
It is wise to check the availability of your proposed corporate name before filing your articles of incorporation. You can do this online at the Secretary of State’s website or by writing or calling the business services department.
You can reserve a name for 90 days by submitting a form or a letter to the Secretary of State.
Your corporation’s name must meet the following requirements:
- The name must contain the words “corporation,” “incorporated,” “company,” or “limited,” or an abbreviation for one of those words.
- The name must be distinguishable from the corporate or assumed name of any other corporation or limited liability company on file with the Illinois Secretary of State or any name that is currently reserved or registered.
The incorporators prepare, sign, and file the articles of incorporation. Their names and addresses are listed in the articles. If the incorporator is another corporation, the articles must show the corporation’s exact name and state of incorporation.
When specifying incorporators, you must meet the following requirements:
- There must be at least one incorporator.
- An incorporator must be at least 18 years old.
- If the directors are not named in the articles of incorporation, then the incorporators may meet to choose the initial directors. After that, the incorporators have no further responsibilities.
Corporate directors are responsible for managing the corporation and setting corporate policies and strategies. Directors may delegate their management duties to committees or officers. Directors must always act in the best interests of the corporation and its shareholders.
Directors do not have to be Illinois residents or shareholders of the corporation. The articles of incorporation or bylaws can establish eligibility requirements for directors.
There must be at least one director. Illinois law does not specify a maximum number of directors.
Specifying a registered agent
All corporations must designate a registered agent to receive lawsuits and other legal documents in the corporation’s name. Official correspondence is sent to the registered agent at the registered office.
Your registered agent must meet the following requirements:
- A registered agent must be either a person who resides in Illinois or a corporation whose articles of incorporation specifically authorize it to act as a registered agent.
- The registered office must be the registered agent’s business office. It must have an actual street address or rural route and box number, and it must be in Illinois.
Stating a corporate purpose
Usually, a corporation may state its purpose in general terms, which provides corporations with flexibility. Illinois authorizes this general-purpose language: “The transaction of any or all lawful purposes for which businesses may be incorporated under the Illinois Business Corporation Act of 1983.”
A corporation’s bylaws establish important procedures for the way your corporation will operate. Bylaws typically include such things as the number and duties of officers and directors, the way that officers and directors are chosen, and the way that directors’ and shareholders’ meetings are called and conducted.
Although bylaws are not filed with the state, the following requirements must be met:
- Bylaws are required, and they may be adopted by the board of directors or the shareholders.
- Bylaws cannot be inconsistent with your corporation’s articles of incorporation or Illinois law.
Costs of incorporating in Illinois
The Illinois Secretary of State requires a fee when filing articles of incorporation or reserving a corporation name. When the articles are filed, an initial franchise tax is also due. Corporations are also required to pay state and federal income taxes.
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