The key to making the most of Illinois corporation and partnership law is the decision to incorporate your business. A corporation affects your ability to gain capital, controls the amount of debt you assume and determines your tax obligations. However, these advantages must be balanced against the additional taxes your business will incur.

Illinois partnership law makes a partnership subject only to personal income tax, unlike a corporation. On the other hand, business partners may be held responsible for business debts.

There are several options for forming a company under Illinois corporate law. These include:

1. Illinois incorporation as a profit or non-profit corporation. An S corporation (S-corp) is taxed under Subchapter S of the Internal Revenue Code which generally does not include income taxes.

2. An Illinois limited partnership. This type of partnership has limited partners in addition to general partners.

3. An Illinois limited partnership. This type of partnership has limited partners in addition to general partners.

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Determine the type of corporation that best suits your business under Illinois corporation laws

The most important factors to consider are the personal liability obligations and tax implications. You should also familiarize yourself with the operating requirements and reporting regulations.

I recommend: The Secretary of State for Illinois has numerous articles on creating business organizations in Illinois. The Illinois General Assembly provides the relevant statutes on business law sorted by organization type.

Find an attorney to help you incorporate in Illinois

Incorporating in Illinois must comply with the disclosure, operating and reporting requirements. Illinois corporation law specifies these requirements in detail.

I recommend: Defrees & Fiske in Chicago has a range of practice areas with a business group that has extensive experience in corporate law. Horowitz & Weinstein has a variety of specialties within its corporate law practice.

Find sites to show you how to form a corporation in Illinois

You must file the registration forms and pay the associated fees as required by Illinois corporation law in order to form a IL corporation or IL partnership. You may also need to file Articles of Incorporation, depending on the type of corporation you decide to register.

I recommend: Ryndak & Suri specifies the filing fees for each type of corporation in Illinois and provides a list of other services related to incorportation. IncFile offers business formation services in addition to other business documents.

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Helpful advice for making the most of this Guide

• •  Illinois corporation law requires annual fees and filings to maintain your corporation. Corporations are automatically C-corps unless they specifically register as S-corps with the primary difference being the way they are taxed. One person may frequently hold more than one position in these corporations and many if not all shareholders are also directors in a small corporation.

Starting a new Ilinois business requires deciding whether you should incorporate in Illinois, form an Illinois partnership, or create some other type of legal entity. This decision is critical as it controls the amount of business debt that you personally assume, it determines the number of investors you may have and therefore influences your access to capital, and it establishes your tax and regulatory obligations.

Illinois incorporation is usually the preferred option as it is attractive to investors and it provides the most personal liability protection. However, if you do not have outside investors, this structure might not be preferable because profits will be subject to taxation at both the business and personal income levels.

Creating an Illinois partnership under Illinois corporation laws eliminates the double taxation issue as business income from a partnership is subject only to personal income tax, but individual partners remain liable for joint business debts.

You can form a company under Illinois corporation laws as an:

1. Illinois corporation (business or non-profit)

2. Illinois limited liability company (LLC)

3. Illinois partnership (general or limited)

4. Illinois association (professional, co-op, agriculture, cemetery, or national)

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Select the best structure: Illinois partnership or corporation

When deciding which legal option under Illinois corporation law is best for your business, you should: assess personal liability obligations, understand the tax implications, become aware of operating formality requirements, and familiarize yourself with any related registration or reporting regulations.

I recommend: You can use FindLaw to help guide you through the decision making process or to find an Illinois attorney.

Make Illinois incorporation a reality

Illinois corporation law, including Illinois LLC law and Illinois partnership law, requires the filing of registration forms with the Secretary of State and the payment of associated fees to incorporate in Illinois or form Illinois partnerships. Depending on how you decide to structure your business, you might also have to file Articles of Incorporation and/or by-laws.

I recommend: File to incorporate in Illinois or form an Illinois partnership online at the Illinois Secretary of State site or use Legalzoom to complete all of the required steps for incorporating in Illinois.

Sweat the small stuff when incorporating in Illinois

Follow all Illinois incorporation requirements to the letter. Illinois corporation law requires Illinois companies and partnerships to comply with all respective formation, operating, reporting, and disclosure requirements specifically set forth in each state statute.

I recommend: You should carefully review the statutes at the Illinois General Assembly website.

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Helpful advice for making the most of this Guide

• •  Individual state laws vary, so conduct your own research or find an attorney who can advise you as to whether Illinois corporation laws will be most advantageous to your business needs.
• •  Illinois LLC law allows you to form limited liability companies (LLCs), which are regulated like corporations and provide similar liability protection, but are taxed like partnerships.
• •  Unlike some states, Illinois law does not provide for limited liability partnerships. These entities protect partners from liability for debts and obligations assumed by other partners while offering operational freedoms of a partnership. You should take this into consideration when deciding to form an Illinois partnership.

Making a new corporation is one of the most common reasons for using Illinois corporation and partnership law. A small business may prefer to file the documentation needed to incorporate a business directly with the state. There are also many companies that provide business formation services for a fee.

The most important factor in incorporating in Illinois is choosing a specific business structure. Illinois partnership law makes some important distinctions between a corporation and a partnership. A partnership generally does not pay a business tax although the partners are liable for business debts.

Corporate law defines the way in which the following entities interact:

1. Shareholders that fund an incorporation in Illinois. Shareholders may hold special privileges such electing a board of directors, proposing resolutions and sharing in the company’s income.

2. Directors that oversee the company’s activities. The activities of the board of directors are typically determined by the company’s bylaws. The board of directors and the shareholders are typically the same group of people in a small business.

3. Employees that provide expertise and perform labor for the company. Employees are also shareholders in many cases.

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Select the best structure for your business according to Illinois corporation laws

Your choice of business types can include corporations, full partnerships and limited partnerships. There are many sites that summarize Illinois incorporation laws and you may also need an attorney to explain these laws to you.

I recommend: The Champaign Public Library discusses the differences in the various types of businesses in Illinois. LLC Made Easy specifically provides the requirements for forming a limited liability company in Illinois.

Use a company to help you incorporate in Illinois

There are many online services that can submit the required forms on your behalf in exchange for a fee. However, you will still need to comply with the disclosure, operating and reporting requirements.

I recommend: AllCorp Filings provides an order form that is already customized with the specific fees for Illinois. American Incorporators allows you to provide Illinois specific filing information according to the incorporation type.

Create a new business by yourself under Illinois LLC law

Each state has a department that is responsible for the formation of new businesses. You can complete these forms yourself and submit them directly to the correct government department.

I recommend: The Secretary of State for Illinois has a Business Services Department that maintains all the required forms for incorporating yourself in Illinois. The Department of Commerce and Economic Opportunity provides assistance for entrepreneurs who wish to start their own business.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  You will need to select a name before you create a Illinois company. Many online services provide a name search function to determine if a particular name has been used before. The required forms will also provide spaces for more than one business name in many cases. This increases the chances that an unused name can be found.

If you're starting a new business, there are many decisions to make. Legally, you must decide which business structure you want to use for your company. Illinois corporation and partnership law spells out the requirements and functions of each business type. You'll need to carefully weigh your options as each business structure has its own unique features regarding liability and tax breaks. Studying the following key terms may help you distinguish the differences between business structures.

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Illinois C corporation

Incorporating your business in Illinois legally makes it a C corporation, the most common business structure. Most large companies are incorporated. In a corporation structure, a business' legal identity remains separate from that of its owners, usually the shareholders.

I recommend: C Corporations are defined by Weincorporate.com.

Illinois S corporation

A sole proprietorship, or an S corporation, is similar to a C corporation with a few differences. Although the basic structure acts like an incorporated company, an S corporation can claim some of the tax advantages of a partnership business structure. Smaller businesses usually choose this business form.

I recommend: Read through this list of advantages to declaring an S corporation structure for your Illinois business through Residual-Rewards.com.

Illinois limited liability partnership

Two individuals who go into business together in Illinois form a partnership. In a limited liability partnership, one of those partners performs the day-to-day business activities and can be held liable. The other partner acts more or less as a business investor.

I recommend: Get answers to your questions about Illinois limited liability partnerships through BizFilings.

Illinois limited liability company

Filing as a limited liability company (LLC) provides the benefits of both a corporation and a partnership. Limited liability companies have limited liability, but they are also awarded tax benefits and given management flexibility. The Illinois law regarding limited liability companies allows no limit to the amount of owners, or members, of the business. However, some businesses, such as banks or insurance companies, are not allowed to form as a limited liability company under the law.

I recommend: Check out this Nolo article about forming an Illinois limited liability company.

Illinois professional corporation

If your Illinois business performs and delivers only one type of service, you can choose to form as a professional corporation. These types of corporations are usually regulated by professional organizations and are allowed to choose taxation as either an S or a C corporation. This type of arrangement works best for businesses such as a law firm or medical office. However, a medical office must adhere to other Illinois statutes, and such a professional corporation can only be formed for medical services.

I recommend: Legalzoom.com explains how a professional corporation can be formed in Illinois.

Illinois non-profit corporation

The largest benefits of filing as a non-profit corporation include access to federal and state grants and tax exemptions. This type of business structure also provides limited liability. Businesses such as community health care clinics, domestic violence shelters or child care centers may want to consider this business structure.

I recommend: Illinois Legal Aid offers a look at the main differences between a for-profit and non-profit corporation.