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There are several ways to open and run a business in Illinois. This is called your business "entity."
If you are the only owner of the business, you…
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Help ILAO open opportunities for justice File your articles of incorporationThe first step to beginning a corporation is filing your articles of incorporation. Do this with the Illinois Secretary of State. Your corporation will not exist in Illinois until the SOS accepts the articles.
To complete the articles, you will need:
Your corporation must have a unique name. This means that it is not currently in use by any corporation or limited liability company registered to do business in Illinois. You may check the availability of your chosen name with the Secretary of State.
Also, you must indicate that the business is a corporation. Do this by including "Corporation", "Incorporated", "Company", or "Limited", or an abbreviation of one of those words, in the name.
Each Illinois corporation is required to maintain a registered agent and registered office in Illinois. A registered agent is the person designated by the corporation to receive legal notices. The Secretary of State will send notices, including annual report notices, to the registered agent. The registered agent must be an individual who lives in Illinois or another Illinois business entity that has an office in Illinois.
The Articles of Incorporation form already states that your business may transact any business that is lawful for corporations to transact in Illinois. This purpose is broad enough for most businesses and should normally be left unchanged. If you do change the corporate purpose, you will not be able to file your Articles of Incorporation online and you will need to paper file.
Certain types of businesses, like professional engineers, may not practice their professions as a corporation unless their business purpose is more specific. Contact the Illinois Department of Financial and Professional Regulation for further details.
Shares represent the ownership interests of the owners, called shareholders, of a corporation. You must list the total number of shares authorized and issued.
Authorized shares are the maximum number of shares that the corporation may issue. Issued shares are the number of authorized shares actually issued to shareholders.
You must also disclose how much your shareholders paid for each share. If there is more than one class of shares, you will need to disclose the number of authorized and issued shares for each class and the rights and powers of each class.
Talk to a lawyer if you are considering starting a corporation with more than one class of shares.
The shareholders of a corporation elect a board of directors to oversee the direction of the corporation. Each corporation must have at least one director. The names and addresses of the board of directors may be listed in the Articles of Incorporation, or the people forming the business may elect the directors at a meeting upon filing the Articles of Incorporation.
If your corporation will own any property, or transact any business outside of Illinois, you must complete the "allocation factors" section. This allows Illinois to more accurately calculate the portion of income and other taxes your corporation will owe Illinois. If your corporation will only transact business and own property in Illinois, you do not need to complete this section.
The person signing the Articles of Incorporation must provide their name and address.
Follow "corporate formalities"One of the main reasons to have a corporation is so the owners aren't liable for the debts of the corporation. However, sometimes creditors will challenge whether the corporation is legitimate.
To avoid this, a corporation should follow a formal process. This is called following "corporate formalities." This includes:
The bylaws of a corporation is a document that explains how the shareholders want the corporation to run.
The bylaws include:
Talk to a lawyer before writing your bylaws.
Electing the board of directors requires that the shareholders vote. Written evidence of the vote should be kept with the corporate record book. If a corporation only has one shareholder, it only needs one director.
The bylaws should set forth the procedure for the election. Generally, there are two ways in which shareholders vote for directors.
The first is straightforward: each share entitles each shareholder to one vote per director seat. This type of voting is rare because a majority owner can make all of the director decisions.
The second method is called cumulative voting. In cumulative voting, each shareholder gets a total number of votes equal to the number of director seats available. This number is multiplied by the number of his or her shares. Each shareholder may allocate their votes however they see fit.
Cumulative voting allows minority shareholders to have representation on the board of directors.
Each corporation is required to have the officers set forth in its bylaws. Typically, a corporation has at least the following officers:
The board elects each of these officers. If permitted in the bylaws, a single person may hold more than one position. Each officer has the duties set forth in the bylaws.
The president, often called the chief executive officer ("CEO"), is the person charged with carrying out the day-to-day operations of the company.
The secretary is responsible for keeping the corporate minute books and other records.
The treasurer is responsible for overseeing the corporation's finances.
A corporation may have additional officers, but is required to have at least those three under Illinois law.
The shareholders should meet at least once a year to discuss the business of the corporation. Depending on how long directors serve, the annual meeting may also be the time to elect new directors. They may then elect new officers, but it is not required.
The secretary should summarize the actions taken at the annual meeting (called "minutes"). They should keep copies of each annual meeting's minutes in the corporate record book.
All resolutions proposed or passed at the annual meeting should also be recorded by the secretary.