When your business is growing, incorporation is often the natural next step. In Illinois, incorporating is a way to create separation between you and the business, access liability protection, open the door to new kinds of capital, and get serious about the long-term future of your business.

Below, we’ll discuss how to incorporate in Illinois, from state-specific requirements and costs to the important decisions you’ll need to make along the way.

What’s in this article?

• What does it mean to incorporate a business in Illinois?
  
• What are the advantages of forming a corporation in Illinois?
  
• What are the steps to incorporate your business in Illinois?
  
• How much does it cost to incorporate in Illinois?
  
• How Stripe Atlas can help
  

What does it mean to incorporate a business in Illinois?

Incorporating turns your business into a separate legal entity that can own property, sign contracts, borrow money, and be sued, all under its own name. That legal separation gives you limited liability, which means your personal assets are protected if something goes wrong with the business.

C corporation vs. S corporation

When you incorporate in Illinois, your company becomes a C corporation (C corp) by default. This means it pays corporate income tax on its profits, and shareholders also pay personal tax on dividends. This is known as double taxation. Many businesses are comfortable with that arrangement, especially if they plan to raise outside capital or reinvest most of their profits back into the company.

If your business qualifies, you can file with the US Internal Revenue Service (IRS) to elect S corporation (S corp) status. An S corp doesn’t pay federal corporate income tax. Instead, its profits and losses pass through directly to shareholders’ personal tax returns. Illinois also replaces its 7.0% corporate income tax with a 1.5% replacement tax on S corps.

S corps do have some restrictions. They can’t have more than 100 shareholders, and all shareholders must be US citizens or residents, or certain trusts or estates. Only one class of stock is allowed.

What are the advantages of forming a corporation in Illinois?

The core benefit of incorporating is that it separates your business from your personal assets. In addition, there are structural and long-term advantages unique to Illinois.

Here are the benefits of incorporation in Illinois.

Liability protection that scales with your business

Incorporation gives you limited liability. If your company is sued or takes on debt, your personal assets are generally protected. That protection is the legal framework that allows businesses to take on risk, hire employees, and sign contracts.

Flexible, sustainable ownership

Illinois corporations have a perpetual existence so they don’t dissolve if a shareholder leaves the company or dies. Ownership is held through stock, which makes it easier to bring on partners, raise capital, or eventually sell.

Local advantages

Illinois has the fifth-highest state gross domestic product (GDP) in the country and a diversified economy. Incorporating here keeps your compliance local and gives you access to statewide programs, such as Enterprise Zone tax credits, that are designed to support in-state businesses. Companies that already operate in Illinois can avoid duplicate filings.

What are the steps to incorporate your business in Illinois?

Here’s how to get your business officially up and running in Illinois.

1. Choose a name that complies with Illinois rules

Your name must be unique within the state and include a corporate suffix (e.g., “Inc.,” “Corporation”). Use the secretary of state’s online database to check availability. If you’re not ready to file immediately, you can reserve the name for 90 days for a small fee.

2. Decide on necessary structural details

Before you file, you’ll need to decide the following:

• Whether you’re forming a C corp or plan to elect S corp status later

• The number of shares to authorize and the par value

• Your directors (at least one is required)

• Your registered agent (they must have a physical address in Illinois)

For reference, Illinois requires corporations that do business in the state to pay an annual franchise tax based on the total amount of their paid-in capital. Small businesses often authorize shares at no or low par value to reduce their initial franchise tax.

3. File articles of incorporation

File Form BCA 2.10 online or by mail with the secretary of state.

The form requires:

• Business name

• Registered agent’s name and address

• Business purpose (a broad clause like “any lawful business” is fine)

• Authorized shares and value

• Names or addresses of incorporator(s) and, optionally, initial directors

Once your filing is approved, you’ll receive a certificate of incorporation.

4. Hold your organizational meeting

After incorporation, the initial board (or incorporator, if you haven’t named directors yet) adopts bylaws, appoints officers, and authorizes the issuance of stock. Even if you’re a solo founder, these formalities matter because they reinforce liability protection.

Document everything with signed meeting minutes and store them in your corporate records.

5. File for S corp status (if applicable)

If you want your corporation taxed as an S corp, file Form 2553 with the IRS no more than 2 months and 15 days after the beginning of the tax year when the S corp election takes effect, with consent from all shareholders. Illinois automatically accepts the federal S corp election so there’s no separate state form needed.

6. Register for Illinois business taxes

Corporations typically need to register with the Department of Revenue using Form REG-1, especially if they’re collecting sales tax or hiring employees. You can register online through MyTax Illinois.

7. Stay compliant

An annual report is due before the anniversary month of incorporation. If you change your business name, increase shares, or change your registered agent, you’ll need to file the appropriate updates with the state. You’ll also need to hold at least one shareholder and director meeting per year and document it.

Now your business has a legal foundation that’s built to last.

How much does it cost to incorporate in Illinois?

Incorporating in Illinois comes with one-time and annual costs. It’s not the cheapest state, but it’s also not the most expensive. For many businesses, the cost is predictable and manageable.

Here are the costs associated with incorporation in Illinois.

Articles of incorporation

To file articles of incorporation online or by mail, you pay a fee of $150. Your documents are processed within 10 business days.

If you need expedited processing, you can pay $250 to file your articles of incorporation online and have them processed within a day.

Franchise tax

When you incorporate, you’ll need to pay an initial franchise tax if your total due is over $10,000. If your total franchise tax due is $10,000 or less, you pay $0 in franchise tax and a small filing fee.

By comparison, some states, such as California, charge a higher minimum franchise tax even if your business isn’t profitable. Others, such as Delaware, have lower up-front fees but require extra filings if you operate in Illinois.

Annual report

It costs $75 a year to file your annual report (Form BCA 14.05).

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