From C-Corps to S-Corps, here is an Illinois corporation primer.
If you are interested in forming a corporation in Chicago or anywhere in Cook County, you have undoubtedly done your homework. Forming one without a corporate attorney is risky, however, because there are many formalities that may be overlooked which could cost you down the road.
Here is a basic primer into the requirements Illinois imposes on those who wish to form a corporation. Note that several legal structure types exist.
Choosing your structure
The following corporation types are recognized in Illinois:
This legal entity can be formed by filing with the State of Illinois. You are entitled to an unlimited number of shareholders, and can elect a board of directors to provide oversight. C-Corporations are taxed as separate entities, and must report all losses and gains on a corporate tax return. Other points to consider before choosing this structure:
- Shareholders are not taxed on corporate profits;
- Post-tax dividends paid to shareholders must be reported on their respective personal tax returns;
- Employees receive tax-free benefits; and,
- C-Corps usually accumulate capital more efficiently than other entity types.
To form an S-Corp in Illinois, you must already be a C-Corp and be prepared to file Form 2553 with the Internal Revenue Service. Forming a corporation in Chicago using this structure would give you pass-through taxation, along with other benefits:
- You can change ownership seamlessly by gifting, selling or buying stock without disrupting business;
- Ability to secure credit or additional resources can drastically improve (subject to credit approval of business and, in some cases, personal credit reports);
- Separation of records and finances from stockholders reduces potential for unrecognized equity liquidation; and,
- Fractional ownership shares are accommodated in the early stages of corporate formation.
All Illinois corporations, regardless of structure, are required to file an Illinois Annual Report.
Interested in forming a corporation?
LLCs, LLPs, and non-profit organizations can also be formed in Illinois, although specific steps are required if you intend to add “Inc.” or “Corp.” at the end of your business name.
All corporation types have built-in benefits worth exploring, although the best fit for your business needs should be discussed with an experienced lawyer.
If you would like to learn more about forming a corporation in Chicago, follow our blog or contact the firm today at 773-732-7611.