Forming a corporation requires you to choose a compliant name, appoint a registered agent, establish a board, adopt governing documents, issue shares, register for applicable taxes, and meet ongoing reporting requirements.
A corporation is a separate legal entity from its shareholders. It can provide personal liability protection, issue stock, and create a structure that may be better suited to businesses seeking outside investment. However, corporations also have more formal governance and recordkeeping requirements than many limited liability companies (LLCs).
Here’s what to expect as you form your corporation.
Key takeaways
- Choose a distinguishable corporate name that includes an approved designator, such as Corporation, Incorporated, Company, Limited, Corp., Inc., Co., or Ltd.
- Every Illinois corporation must continuously maintain a registered agent and registered office with a physical street address in the state.
- The Illinois Secretary of State currently charges $150 for standard online incorporation and $250 for 24-hour service, before any payment-processing fee or applicable franchise tax.
- After the state approves the articles of incorporation, the organization should appoint its board and officers, adopt bylaws, issue shares, and document those actions in corporate records.
- Ongoing compliance requirements include taxes, licensing, annual reports, and maintaining business licenses, among other tasks.
How to start an Illinois corporation in 8 steps
The paperwork is only one part of creating a corporation. Taking the time to establish the entity correctly can help prevent avoidable delays, ownership disputes, and compliance problems later.
Step 1: Choose a name for your Illinois corporation
Your corporation’s name must satisfy Illinois naming rules. Below are some basic requirements. For a deeper dive, refer to our comprehensive guide to Illinois business names.
- The name must contain one of the following words or abbreviations: Corporation, Company, Incorporated, Limited, Corp., Co., Inc., or Ltd. The designator must appear as a separate word or abbreviation rather than as part of another word.
- The name must be distinguishable from other business names on the Secretary of State’s records. Adding a corporate designator, changing punctuation, or making another minor alteration may not be enough to distinguish the name.
- Certain words may require additional authorization or may be restricted if they imply that the corporation conducts banking, insurance, fiduciary, or other regulated activities.
Use the Illinois Secretary of State’s Corporation/LLC Search to look for existing entities with the same or similar names. Search the complete proposed name as well as its most distinctive words. A clear search result is useful, but the Secretary of State makes the final availability determination when it reviews the filing. You can also use LegalZoom’s free name search tool below.
Illinois Business Name Check
Starting a business? Use our free name check tool to check your business name against the Illinois Secretary of State records.
By clicking "Check Availability," I agree to LegalZoom's Terms of Use. This search is a preliminary check of state databases and does not include variations or trademarks. Results do not guarantee name availability or compliance with legal requirements.
If you’ve found a name but you’re not ready to incorporate, you may reserve an available name for 90 days by filing an application for reservation of name and paying the required fee.
Step 2: Appoint an Illinois registered agent
Every Illinois corporation must maintain a registered agent and registered office in the state. The registered agent receives service of process and other official documents on the corporation’s behalf. The agent may be:
- An individual who resides in Illinois
- A business entity authorized to serve as a registered agent in Illinois
The registered office must be a physical Illinois street address. A P.O. box alone is not sufficient. The agent should be reliably available at that address during normal business hours.
An owner or officer may serve as the registered agent if the individual meets the state’s requirements. Some businesses instead use a commercial registered agent to provide consistent availability and avoid listing an owner’s home address as the registered office.
A corporation that fails to maintain a registered agent or registered office can fall out of compliance and may eventually face administrative dissolution. It may also miss lawsuits, tax notices, or other time-sensitive communications.
Step 3: Appoint the initial directors
Illinois corporations must have at least one director. The incorporator generally appoints the initial director or directors through a written incorporator action unless the initial directors are validly named in the formation documents.
The board oversees major corporate decisions, appoints officers, approves the issuance of shares, and adopts or recommends important governance policies. Small corporations may have one person serve as shareholder, director, and officer, but each role should still be documented separately in the corporate records.
Step 4: Prepare and file Illinois articles of incorporation
Filing articles of incorporation with the Illinois Secretary of State legally creates the corporation. Most ordinary business corporations use Form BCA 2.10 or the Secretary of State’s online incorporation system.
The filing generally asks for:
- The corporation’s desired name
- The registered agent’s name and Illinois-based registered office address
- The number of authorized common shares
- The number of shares the corporation proposes to issue initially
- The consideration the corporation expects to receive for those shares
- The corporation’s purpose
- The incorporator’s name, address, and signature
An Illinois incorporator must be a natural person who is at least 18 years old. The incorporator does not have to remain a shareholder, director, or officer after completing the formation process.
Tip: Illinois requires corporations using this form to have the purpose “The transaction of any or all lawful purposes for which corporations may be incorporated under the Illinois Business Corporation Act.” Any professional or specific corporations may need a separate process. Check with a business attorney if this applies to you.
Most standard corporations can file online. Paper filing may be required or preferable for corporations with specialized purposes or provisions that the online form does not support.
Step 5: Pay the formation franchise tax
Illinois calculates a franchise tax using paid-in capital allocated to the state rather than revenue or profit. Illinois currently exempts the first $10,000 of calculated franchise tax liability. As a result, many newly formed small corporations owe no franchise tax at formation, although corporations with a larger paid-in-capital base may owe an additional amount.
The Secretary of State’s filing system or applicable form instructions should determine the amount due for the specific filing. Businesses with complex capitalization or multistate activity should consult a tax professional or attorney.
Step 6: Adopt bylaws and complete the organizational process
Illinois does not require you to file corporate bylaws with the state, but a corporation should adopt bylaws as part of its organizational process. Bylaws establish the internal rules for operating the corporation.
Bylaws commonly address:
- The number, election, powers, and removal of directors
- Officer positions and responsibilities
- Shareholder and board meeting procedures
- Notice, quorum, and voting requirements
- Written consents and electronic participation
- Share-transfer procedures
- Indemnification of directors and officers
- Procedures for amending the bylaws
The board should hold an organizational meeting or act by written consent to adopt the bylaws, appoint officers, authorize bank accounts, approve initial contracts, and address other startup matters. Record these actions in minutes or written resolutions.
Note: Per Illinois law, corporations are required to keep and retain meeting minutes and accounting records.
Step 7: Issue shares and maintain ownership records
The articles authorize shares, but filing the articles does not itself issue stock to anyone. The board must approve the initial issuance and specify the recipient, number and class of shares, and consideration received.
- Authorized shares are the maximum number of shares the corporation may issue under its articles.
- Proposed issued shares are the shares the corporation expects to issue initially and reports for the state’s filing calculation.
- Issued shares are the shares the board later authorizes and the corporation actually transfers to shareholders.
Avoid authorizing or proposing substantially more shares than the business needs without understanding the potential effects on Illinois franchise tax calculations and future governance.
The corporation should maintain a stock ledger or capitalization table showing each shareholder’s ownership. It may also issue stock certificates if it uses certificated shares. Keep board approvals, subscription agreements, payment records, and any shareholder agreement with the corporate records.
Stock issuances may be subject to federal and state securities laws even when the corporation is privately held. Businesses raising money from investors should obtain legal advice before offering or issuing securities.
Step 8: Get an EIN and register for applicable taxes
An employer identification number (EIN) is the corporation’s federal tax identification number. Corporations generally need an EIN to file tax returns, hire employees, open a business bank account, and complete other financial transactions. Apply directly through the IRS at no charge after the articles have been approved.
Register with the Illinois Department of Revenue if the corporation will be responsible for Illinois-administered taxes, such as sales and use tax or employee withholding. Registration is commonly completed through MyTax Illinois. The taxes and accounts required depend on the corporation’s activities.
Note: Formation with the Secretary of State does not automatically register the business for every tax or license it may need.
A newly formed corporation is generally taxed as a C corporation for federal purposes unless it makes a valid S corporation election or another classification applies.
An eligible corporation elects S corporation treatment by filing IRS Form 2553. The filing deadline is generally no later than two months and 15 days after the beginning of the tax year for which the election should apply, although late-election relief may be available.
Illinois generally follows a valid federal S election rather than requiring a separate state election. However, an Illinois S corporation may still have state filing and replacement-tax obligations, including Form IL-1120-ST. Check with a CPA or tax attorney to determine your obligations.
Post-formation and ongoing compliance requirements
State approval gives your corporation legal status, but staying operational requires a few additional administrative steps. Handling these requirements early can help keep the business organized, compliant, and ready to work with banks, customers, and government agencies.
Open a business bank account
Keep corporate funds separate from personal funds. Banks commonly request the EIN confirmation, approved articles, bylaws, and a board resolution authorizing the account. Requirements vary by institution.
Register an assumed name if needed
An Illinois corporation that operates under a name other than its legal corporate name generally registers that assumed name with the Illinois Secretary of State. This differs from the county-level assumed name process commonly used by sole proprietorships and general partnerships.
Obtain required licenses and permits
Illinois does not impose one universal statewide business license for every corporation. Requirements depend on the corporation’s industry, profession, location, employees, and activities. Check state agencies as well as the city, county, and other local jurisdictions where the business operates.
File the Illinois annual report
An Illinois domestic corporation generally files an annual report before the first day of its anniversary month. The report updates information such as the registered agent, registered office, principal office, officers, directors, and shares.
The corporation must pay the current annual report filing fee and any applicable franchise tax. Confirm the form, amount, and filing deadline each year because requirements can change.
Maintain corporate records
Keep the following records organized, available, and current:
- Articles of incorporation and amendments
- Bylaws and amendments
- Documentation of incorporator actions
- Board and shareholder minutes or written consents
- Stock ledger and share-issuance documents
- Tax registrations and returns
- Licenses and permits
- Annual reports and good-standing documents
- Major contracts and resolutions
Losing good standing can interfere with financing, licensing, state filings, qualification certificates, and certain legal proceedings. Continued noncompliance can eventually lead to administrative dissolution. Reinstatement generally requires correcting the delinquency, filing past-due reports, and paying applicable fees and penalties.
How much does it cost to form an Illinois corporation?
The state’s current standard online incorporation fee is $150. The 24-hour online option costs $250 total, and a payment processing fee may also apply. The total formation cost may be higher if the corporation reserves its name, orders certified copies, uses professional assistance, obtains licenses, or owes franchise tax.
Many small corporations will not owe franchise tax at formation because Illinois exempts the first $10,000 of calculated liability. The amount depends on the corporation’s paid-in capital and allocation, not its revenue or profit.
Illinois corporation vs. LLC
Both corporations and LLCs can provide personal liability protection when properly formed and maintained, but they differ in governance, ownership, fundraising, and default tax treatment.
A corporation has shareholders, a board of directors, officers, bylaws, and formal ownership represented by shares. This structure is often preferred by businesses that expect to issue stock options, seek institutional or venture investment, or eventually pursue a public offering.
An LLC has members and may be managed by its members or appointed managers. It generally offers more flexible internal governance and is taxed as a pass-through entity by default, although an LLC can elect corporate tax treatment.
The better choice depends on the company’s funding plans, ownership needs, tax circumstances, and tolerance for formal governance. A tax professional or attorney can help evaluate the consequences for a specific business.
How to form your Illinois corporation with LegalZoom
LegalZoom can prepare and file Illinois articles of incorporation through our proven, structured process. Additional services, such as registered agent service, tax assistance, legal plans, or compliance support, are available separately depending on your needs.
Illinois corporation FAQs
Can I be my own registered agent for an Illinois corporation?
Yes. An Illinois resident may serve as the registered agent if the individual maintains a physical Illinois registered office address and is reliably available to receive official documents. The address becomes part of the public record.
How many incorporators does Illinois require?
One incorporator is sufficient. The incorporator must be a natural person who is at least 18 years old and does not need to remain involved as an owner or manager after formation.
Can an Illinois LLC convert to a corporation?
Illinois law provides conversion procedures for eligible entities. The required documents, approvals, tax consequences, contracts, licenses, and ownership changes can be more complex than a standard incorporation, so obtain legal and tax advice before converting.
Does an Illinois corporation need a separate business license?
Possibly. There is no single statewide license required of every business, but state, professional, industry-specific, county, or municipal licenses may apply.
When is the first Illinois corporate annual report due?
A domestic corporation generally files its annual report before the first day of the month marking the anniversary of its incorporation. Confirm the corporation’s exact deadline and current fee through the Illinois Secretary of State.
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