*Note: This article provides essential information on forming a professional corporation in Illinois. It's important to consult with a legal professional or an accountant to ensure compliance with the latest regulations and requirements.*
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Introduction
Forming a professional corporation (PC) in Illinois can offer numerous advantages to professionals in various fields, such as attorneys, doctors, accountants, architects, and engineers. A PC provides limited liability protection to its shareholders, allowing them to separate personal assets from business liabilities. If you're considering forming a professional corporation in Illinois in 2023, this comprehensive guide will help you navigate the process with ease.
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Step 1: Choose a Name
Selecting an appropriate name for your professional corporation is crucial. Ensure that the name complies with the Illinois Secretary of State's guidelines and is distinguishable from existing corporate entities in the state. You can conduct a name availability search on the Illinois Secretary of State's website to check if your desired name is available.
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Step 2: Draft and File Articles of Incorporation
The next step is to draft and file the articles of incorporation with the Illinois Secretary of State's office. The articles should include:
1. Company Name: State the chosen name of your professional corporation.
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2. Registered Agent: Provide the name and address of the registered agent who will receive legal notices and documents on behalf of the corporation.
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3. Shares and Shareholders: Mention the number of authorized shares and their par value.
4. Duration: Indicate whether the corporation has a specific termination date or will exist perpetually.
5. Profession-Specific Clauses: Some professions require specific clauses in the articles of incorporation. For example, attorneys may need to include additional language related to professional privileges.
Once you have prepared the articles, file them with the Illinois Secretary of State's office along with the required filing fee. You can file online or mail it to the following address:
`Illinois Secretary of State`
`Department of Business Services, Limited Liability Division`
`501 S. 2nd St., Rm. 351 Springfield, IL 62756`
Step 3: Obtain Required Licenses and Permits
Depending on your profession, you may need to obtain additional licenses or permits in order to practice as a professional corporation in Illinois. Different professions have specific regulatory bodies overseeing their licensing requirements. Consult with your professional licensing organization to ensure compliance with their guidelines.
Step 4: Determine Your Corporate Structure
Selecting the appropriate corporate structure is crucial to the successful operation of your professional corporation. In Illinois, you can elect to organize your professional corporation as a C Corporation or an S Corporation. Both have distinct requirements and tax implications:
- C Corporation: A C Corporation is subject to double taxation, as profits are taxed at both the corporate and shareholder levels. It offers more flexibility in terms of ownership and allows for multiple classes of stock.
- S Corporation: An S Corporation avoids double taxation. Income, deductions, and credits flow through to the shareholders' personal tax returns. However, an S Corporation is subject to stricter ownership rules, allowing only a limited number of shareholders, who must be U.S. citizens or residents.
Consult with a tax professional or an accountant to determine the most suitable corporate structure for your specific needs.
Step 5: Create Bylaws
Drafting and adopting corporate bylaws is an essential step in forming a professional corporation. Bylaws outline the rules and procedures that govern the operation of your corporation. It covers key aspects such as how directors and officers are elected, how shareholder meetings are conducted, and how corporate decisions are made. Bylaws help maintain internal order and establish a clear framework for decision-making processes.
Step 6: File Initial Report and Pay Franchise Tax
Within 60 days of incorporating, a professional corporation in Illinois must file an Initial Report, also known as an Annual Report, with the Illinois Secretary of State's office. This report provides critical information such as current directors, shareholders, and registered agent details.
Additionally, professional corporations in Illinois are subject to an annual franchise tax of $75, which must be paid to the Secretary of State's office. The Franchise Tax is due by the first day of the anniversary month of incorporation.
Conclusion
Forming a professional corporation offers numerous benefits for professionals seeking limited liability and increased flexibility. By following the steps outlined in this guide, you can navigate the process of forming a professional corporation in Illinois smoothly. Remember to consult with a legal professional or a qualified accountant to ensure compliance with all legal and regulatory requirements in Illinois. Good luck in your journey to establish a professional corporation!
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