Are you looking to form an Illinois professional corporation, but you’re not familiar with the incorporation process?
Professional corporations are those owned and operated by licensed professionals, like doctors, lawyers, and architects. There are quite a few important steps you’ll need to take to create your Illinois professional corporation and maintain it, so this guide will outline the rules and regulations involved with this process.
To get started, please reference our 11-step guide below or hire a professional online incorporation service like LegalZoom.
How to Form an Illinois Professional Corporation (in 11 Steps)
Step One) Choose a Name
One of the most important aspects of the incorporation process is naming your business. There are three major elements to consider when choosing a name:
When naming a professional corporation in the state of Illinois, you will need to include the words “professional service corporation” or the abbreviation “PSC.” Your professional corporation’s name also cannot include any words or abbreviations that indicate other business types, like the phrase “limited liability company” or the initials “LLC.” You also are not allowed to include words that refer to certain types of businesses (like “bank” or “law office”) unless your business fits those descriptions.
In addition to the legal considerations, you might want to identify your line of business or your mission in your company name. For example, you can display any closely held values in your name, like using the word “green” for environmentally friendly businesses.
A Name You’re Proud of
Keep in mind that this is your business, so you should choose a name that you’re proud of, and that you enjoy sharing with potential customers. You should also make sure it sounds good when spoken aloud, and also looks good when written down.
Check Whether Your Preferred Name is Available
Visit the Illinois Secretary of State’s website and search the Corporations/LLC Database to check whether it is already in use. If it’s not unique enough, you may need to tweak it or come up with a new name altogether.
Get Your Company URL
To solidify your brand and to fully embrace the company name, register your URL. You’ll be able to quickly build a company website so that nobody else can use it.
Step Two) Select a Registered Agent
Illinois professional corporations must designate a person or business to receive legal notices on behalf of the company. This important point of contact is known as the registered agent. You will be required to list the registered agent’s name and address when filing the Articles of Incorporation in step four.
Who can be my registered agent?
A registered agent must have a physical address within the state of Illinois where mail and legal notices can be served during regular business hours. You can hire a service to act as your registered agent, serve as your own registered agent, or even use an accountant or other business professional’s address – with their consent, of course.
The Illinois Secretary of State says that,
Every domestic and foreign corporation must, at all times, maintain a registered agent with a registered office within the State of Illinois. . .The registered agent can be either a natural person or a domestic or foreign (licensed to transact business in this State) artificial legal entity (Corporation, LLC, LP or LLP). . .The Registered Office must be located at a street address (a P.O. Box alone is not acceptable) within the State of Illinois.”
We recommend hiring a professional service to act as your registered agent. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off the public record. For a list of the top 5 registered agent services, check out our guide.
Step Three) Complete Your Articles of Incorporation
This is THE document that formally registers your professional corporation with the state of Illinois. The Articles of Incorporation for an Illinois professional incorporation cannot be filed online. Instead, you’ll have to fill out a Form BCA 2.10 (PSCA) Articles of Incorporation Professional Service Corporation and mail it to the Secretary of State.
Keep in mind that you are acting as the incorporator when you fill out and submit the Articles of Incorporation. You should sign as the incorporator before submitting the document.
|Cost to File||$150 filing fee plus a minimum initial franchise tax fee of $25 ($100 additional for expedited service)|
|Time to Complete Filing||Typically within 10 days of receipt (24 hours excluding weekends and holidays for expedited service)|
|Agency||Illinois Secretary of State|
Secretary of State
|Agency contact info for filing questions||217-782-9522|
Step Four) Establish a Corporate Record
Professional corporations are required under Illinois law to document and keep a permanent record of all important company decisions.
The official corporate record may be kept at the professional corporation’s principal place of business, or stored in a safe location elsewhere. You should take the opportunity to set up a secure digital or physical location for storing company records as soon as possible.
Step Five) Designate a Board of Directors
The incorporator is responsible for selecting initial director(s) of the professional corporation. The incorporator should record initial director appointments in a signed document and file it to the corporate record. This document is known as the “incorporator’s statement.” A sample incorporator’s statement can be found here.
The initial directors will serve until new directors are elected at an annual shareholder meeting, or as otherwise indicated in the bylaws. The incorporator may also serve as an initial director. Keep in mind that your directors must all share the same profession as the one the professional corporation was formed for.
Step Six) Create Corporate Bylaws
Corporate bylaws set out the rules and procedures for how the professional corporation will operate. Some important topics typically covered in the bylaws include:
- How shareholders will conduct votes
- The total number of directors and how each director will be elected
- How often the board of directors will meet
- The types of officer roles that will be appointed
- Procedures for resolving internal disputes
All Illinois corporations are required to adopt bylaws.
Bylaws help your business run smoothly, and are sometimes required by financial institutions for opening business bank accounts or acquiring loans.
Either the incorporator or the initial directors may prepare the company bylaws. The bylaws should be recorded in an internal company document, signed by the incorporator or a director, and filed to the corporate record. The bylaws are not filed with the state of Illinois.
Popular Strategies for Preparing Bylaws:
- Use a free online template. Northwest Registered Agent has a great free template you can download.
- Hire a lawyer to draft the bylaws. If your business has investors, is already profitable, or has multiple co-owners, we strongly encourage you to hire a lawyer experienced in Illinois corporate law to help you draft suitable bylaws. Look through Avvo’s directory of KY attorneys you can work with.
Step Seven) Hold First Board Meeting
After designating a board of directors and preparing bylaws, the new professional corporation should call for an initial board meeting. The incorporator often arranges and attends this first meeting. During the first board meeting, the initial directors should plan to cover the following topics:
- Review and approve corporate bylaws
- Designate officers to manage day-to-day business affairs
- Choose a bank
- Approve issuance of stock certificates
- Determine whether the company should elect to be taxed as a C corporation or S corporation (see step nine for more details)
Recording Meeting Minutes: a detailed record of all key discussions and decisions during the board meeting should be prepared and distributed to all board members for their review and approval. This record is known as the “minutes.” A copy of the minutes should be sent to each director for review and filed in the company record.
Step Eight) Handle Tax Obligations
You’ll need a federal tax ID number (EIN) to operate a professional corporation in Illinois. You can obtain your EIN from the IRS for free, and it’s a fairly painless and simple process. An EIN enables your professional corporation to hire employees, file corporate taxes, open business bank accounts, and more.
A major decision for any professional corporation is determining whether to be taxed as a C corporation or an S corporation. Take a look at how these two formats differ:
- C Corp: The majority of professional corporations are C corporations, as they are subject to far fewer restrictions than S corps. With a C corp, profits are taxed at the corporate level, and again on the personal tax returns of the shareholders, resulting in what’s commonly referred to as double taxation.
- S Corp: This is only an option if your professional corporation has fewer than 100 shareholders, only issues one class of stock, is not owned by another business entity, and does not have any foreign shareholders. If your corporation meets these requirements, you can select the S corp’s pass-through taxation which eliminates the double taxation issue of C corps. S corp dividends are not taxable.
Depending on how you elect to treat your professional corporation for tax purposes, it may be responsible for paying state income tax. Illinois corporations are also subject to a franchise tax at the time of formation, on an annual basis thereafter, and upon certain specified corporate events.
Other state-level taxes may also apply to your professional corporation, depending on the nature of your business. For more information you should contact the Illinois Department of Revenue, Income Tax Division or visit its website. Once you’ve determined your professional corporation’s tax responsibilities, you can use the MyTax Illinois website to file and pay taxes and manage your tax account online.
Your city and/or county may also impose local taxes on your business. You should confirm your local taxation requirements by contacting the revenue department in your area. The four largest cities in Illinois offer resources for businesses on their websites:
Step Nine) Obtain Business Licenses and Permits
If your professional corporation conducts business within the state of Illinois, you will need to register your business with the Illinois Department of Revenue. You can either submit your Illinois Business Registration Application online through MyTax Illinois or print and submit a paper application.
In addition, you will likely need to get a license from the Illinois Department of Financial and Professional Regulation, which is the agency responsible for overseeing and licensing most professions in Illinois. See their website for a list of regulated professions and instructions on how to obtain a license. If your business requires a license, you should obtain the license before conducting any business.
You should also check with your city and county to confirm whether there are any additional licenses, permits, or registrations that you need to obtain for your professional corporation prior to conducting business.
Step Ten) Acquire Insurance
Illinois generally requires businesses with employees to obtain either obtain workers’ compensation insurance or approval from the state as a self-insurer. You can learn more about workers’ compensation insurance in Illinois in the Illinois Workers’ Compensation Commission’s Handbook on Workers’ Compensation and Occupational Diseases.
In addition, you should also pursue general liability insurance and other more industry-specific types of insurance. Because professional corporations are specialized businesses, you will most likely require insurance policies based on your occupation.
Step Eleven) Open a Business Bank Account
To operate a professional corporation and receive the limited liability protection that comes with it, you have to keep your personal assets entirely separate from your business assets. Due to this requirement, it’s strongly advised that you acquire a business bank account for your corporation.
Get Help Forming a Professional Corporation
The process of forming a professional corporation in any state can be a lengthy one. If you run into any trouble along the way, remember that there are plenty of organizations that can help you navigate the incorporation process.
Online Incorporation Services
If you would like to hire an affordable business incorporation service to create your professional corporation for you, services like LegalZoom and MyCorporation can help you out. These service providers can handle most of the formation process, while still charging much lower rates than a business attorney’s fees.
There isn’t the same level of personalization that a lawyer can provide, but online incorporation services can still be a tremendous help. The only major issue with these service providers is the fact that they can’t provide any actual legal advice, so you need to know what you want ahead of time.
Illinois Business Attorney
There are some situations where hiring a business lawyer is a preferable route to using an online incorporation service. The professional corporation as a business structure can be highly complicated and specialized, and if you want to have the peace of mind that every single step was taken care of by a true expert, hiring a business attorney to form your Illinois professional corporation is the way to go.
If you would like to pursue this route, there are some convenient services that can help you choose the right lawyer for your business. We like to use Avvo, which has extensive reviews and ratings for hundreds of Illinois business lawyers, which can make it much easier to select an attorney who has your best interests in mind, and also has the expertise to get the job done right.
Illinois has several Illinois Small Business Development Centers across the state that can provide business guidance, training, and other resources for your professional corporation. Services include one-on-one business advice as well as assistance with your business plan, financial analysis, market plan, and more.
For additional resources, you can also contact the Illinois District Office of the U.S. Small Business Administration. Visit their website for more information. Business resources, news, and information about small business events can also be found on their website.