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How to Incorporate in Illinois (May 2024 Update)

Meow Technologies, Inc.

Meow Technologies, Inc.

Incorporating a business in Illinois provides important legal and financial protections as well as credibility for small business owners. Forming an Illinois corporation formally registers your company with the state, limits owners’ personal liability, allows for equity financing, and establishes continuity for the business. While incorporating does require meeting Illinois legal requirements and annual franchise taxes, the benefits often outweigh the costs for most small businesses. This comprehensive guide will walk through all the key steps and requirements for incorporating in Illinois.

Steps to Incorporate in Illinois

1. Choose a Name for Your Illinois Corporation

The first step is selecting an available business name that complies with Illinois Secretary of State naming guidelines. Your corporate name must contain a designator word like “Corporation,” “Incorporated,” “Limited,” or an abbreviation. It also cannot be distinguishable from any existing business names in the state of Illinois. Before settling on a name, conduct an Illinois business entity name search through the Secretary of State’s website.

If you need time deciding on a name, you can reserve a name for 90 days by filing an Application for Reservation of Name form by mail for a $25 fee. Once you land on the perfect name, check if the domain is available to purchase as well.

2. Appoint an Illinois Registered Agent

Illinois corporations must designate a registered agent, which is a person or service that agrees to accept legal documents and service of process on behalf of the business. Often business owners will serve as their own registered agents initially to save costs. Using a third party registered agent service based in Illinois provides reliability that you will get the proper notices to remain compliant.

3. Select Initial Directors

The directors make important high-level decisions on policies, finances, transactions, and officer appointments. While most small corporations only require one director, it’s important to select qualified candidates with relevant experience such as legal, finance, or marketing depending on your business needs. List the chosen initial director(s) when drafting your Articles of Incorporation.

4. File Articles of Incorporation

The Articles of Incorporation form requires details like your corporation's name and purpose, registered agent info, number and type of stock shares, and the names and addresses of the initial director(s) and incorporator(s). The filing fee is $150 plus a minimum $25 franchise tax that is due initially and every year after.

5. Obtain an Employer Identification Number (EIN)

Though you likely won’t have employees initially, securing a federal EIN is required to open business bank accounts, apply for business licenses, file taxes, and hire employees later on. Apply directly through the IRS website anytime to obtain your EIN instantly.

6. Set Up a Corporate Records Binder

Keep all your key documents in one place. Be sure to store copies of your filed Articles of Incorporation, corporation bylaws, minutes from shareholder and director meetings, share distribution ledger, shareholder information, and annual report documents. Maintain your corporate records book onsite at your principal business location.

7. Hold your First Shareholders and Directors Meetings

Within 90 days of incorporating, you must hold an initial meeting of directors to appoint officers, adopt bylaws, authorize stock certificate issuance, and discuss relevant corporate business matters. Shareholder meetings must happen annually at a minimum depending on your bylaws. Remember to properly record meeting minutes.

8. Issue Stock to Shareholders

Create stock certificates indicating share distribution and ownership stakes. Get any shareholder buy-sell agreements signed early on to dictate future stock transactions. Depending on your number of investors and offering amounts, you may need to meet Illinois securities exemptions.

9. Obtain Business Licenses

Research federal, state, and local licenses required for your industry and business activities. While there is no general business operating license in Illinois, many permits and registrations may apply to your corporation depending on your location and line of work.

Illinois LLC vs. Corporation Differences

Should you form an LLC instead? Illinois imposes extra fees and paperwork burdens on corporations that LLCs avoid. However, corporations allow for equity financing and have greater prestige. Talk to legal and tax experts to determine if incorporating makes sense or if a more flexible LLC better fits your small business needs. Some key Illinois LLC vs corporation considerations include:

  • Taxes - Corporations pay taxes on profits and owners pay taxes on distributions while LLC owners report profit/loss on their personal returns only.
  • Investors - LLC ownership percentages don’t easily convert to stocks shares to sell to investors. Getting qualified small business certifications also tends to be easier for corporations.
  • Fees and Paperwork - Illinois corporations face extra franchise taxes and annual reporting requirements that LLCs don’t deal with.

Many small businesses launch as LLCs initially since they are simpler to form and maintain. As growth and financing opportunities arise down the road, they then elect to incorporate further into their development. Contact an attorney to map out the best stages and structures for your goals.

Annual Compliance After Incorporating in Illinois

To remain in good standing you must file annual reports, taxes, and occasionally amend your Articles of Incorporation if major changes to your corporation occur. Here are the key ongoing filings Illinois corporations should track:

  • Annual Report - Due before your annual anniversary month and requires a $75 fee plus owed franchise taxes. File through Cyberdrive.
  • Annual Franchise Tax - Minimum of $25 per year after the first year. Assessed at a rate of .15% in Year 2 then .10% of paid-in capital value from then on.
  • IL Income Taxes - 7% flat corporate income tax due on the standard March 15th deadline through the IL Department of Revenue.

Conclusion

While incorporating in Illinois takes important planning and ongoing commitments, the upside for limited liability protections and increased legitimacy can certainly outweigh the costs for small business owners. Carefully weigh the differences between an Illinois corporation and LLC when getting started. Remember that structures can evolve over time as your business matures. Reach out to both legal and accounting professionals to ensure you remain compliant as you grow.

Meow Technologies is a financial technology company, not a bank or FDIC-depository insured institution. Likewise, Meow Technologies is not an investment adviser and none of the information presented herein should be relied upon as financial advice or a recommendation to make any financial decision nor should it be considered to be tax or legal advice. The information is the opinion of Meow Technologies for educational purposes and may not be suitable for all companies. Products, like the one described herein, are offered through Meow Technologies and are not advisory services which are only offered through Meow Advisory, LLC.** The FDIC’s deposit insurance coverage only protects against the failure of an FDIC-insured bank.**

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*Disclaimer: Meow Advisory LLC is a registered investment adviser. Registration as an investment adviser does not imply any level of skill or training.
For accounts opened through Atomic Brokerage LLC: Meow Advisory LLC has an engagement with Atomic Brokerage LLC (“Atomic Brokerage”), a registered broker-dealer and member of FINRA and SIPC , to bring you the opportunity to open a brokerage account. Brokerage services for customers of Meow Advisory LLC are provided by Atomic Brokerage. For more details about Atomic Brokerage, please see the Form CRS, General Disclosures, and the Privacy Policy. Check the background of Atomic Brokerage on FINRA’s BrokerCheck.
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See the Legal Section within the Meow website for additional agreements.

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**Disclaimer: Meow Technologies is a financial technology company, not a depository, bank or credit union, and your account at Meow is not, itself, an FDIC-insured product.

Meow currently partners with three banking providers. Banking services are provided by Third Coast Bank SSB; Member FDIC, Grasshopper Bank, N.A; Member FDIC, and FirstBank, a Tennessee corporation; Member FDIC.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by Grasshopper Bank, N.A, you deposit your funds into a deposit account at Grasshopper Bank, N.A. which sweeps those funds into deposit accounts across a network of Federal Deposit Insurance Corporation (“FDIC”)-insured banks, for up to the current standard maximum deposit insurance amount (“SMDIA”) of $250,000 per eligible depositor, per destination institution, for each ownership capacity or category, subject to applicable terms and conditions, including Grasshopper's ICS Deposit Placement Agreement. Grasshopper Bank, N.A. uses a third-party vendor and agent to help administer this sweep process. Visit https://www.intrafi.com/network-banks/ for a list of the banks and savings associations with which we/Grasshopper, N.A. have a business relationship for the placement of deposits at destination institutions, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by Grasshopper, N.A. or you). The current maximum deposit insurance amount for your funds is up to $125 million in FDIC insurance through the sweep network of Grasshopper Bank, N.A, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and restrictions and refer to the applicable rate sheets for additional information.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by Third Coast Bank SSB, you deposit your funds into a deposit account at Third Coast Bank SSB. If you also hold funds in a sweep program with Third Coast Bank SSB, Third Coast Bank SSB sweeps those funds into deposit accounts across a network of FDIC-insured banks, for up to the current SMDIA of $250,000 per eligible depositor, per receiving bank, for each ownership capacity or category, including any other balances you may hold at that receiving bank directly or indirectly through other intermediaries, including broker-dealers. Third Coast Bank SSB uses a third-party vendor and agent to help administer this sweep process. Visit Third Coast Bank SSB for a list of the banks and savings associations with which we/Third Coast Bank SSB have a business relationship for the placement of deposits at receiving banks, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by Third Coast Bank or you). The current maximum deposit insurance amount for your funds is up to $50 Million in FDIC insurance through the sweep network of Third Coast Bank, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and conditions and refer to the applicable rate sheet for additional information.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by FirstBank, a Tennessee corporation, you deposit your funds into a deposit account at FirstBank, which sweeps those funds into deposit accounts across a network of FDIC-insured banks, for up to the current SMDIA of $250,000 per eligible depositor, per destination institution, for each ownership capacity or category, subject to applicable terms and conditions, including FirstBank's ICS Deposit Placement Agreement. FirstBank uses a third-party vendor and agent to help administer this sweep process. Visit IntraFi for a list of the banks and savings associations with which FirstBank has a business relationship for the placement of deposits at destination institutions, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by FirstBank or you). The current maximum deposit insurance amount for your funds is up to $125 million in FDIC insurance through the sweep network of FirstBank, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and restrictions and refer to the applicable rate sheet for additional information.

***FDIC insurance coverage is only available to protect you against the failure of an FDIC-insured bank that holds your deposits (and does not protect you against the failure of Meow or other third party). Your account with Meow and all services provided to you are subject to the Meow Terms of Service (“Account Agreements”) and other applicable terms and no other representations or warranties, express or implied, are provided to you except as expressly set forth in those written Account Agreements. If you have any questions regarding your account, please contact team@meow.com.

FirstBank Funds Availability Notice

FirstBank’s general policy is to allow you to withdraw funds deposited in your account on the first business day after the day we receive your deposit. Funds from electronic deposits will be available on the day we receive the deposit. In some cases, we may delay your ability to withdraw funds beyond the first business day. Then, the funds will generally be available by the SECOND business day after the day of deposit.