How to Form a Professional Corporation in Illinois


Steve Goldstein
Steve Goldstein
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Form a Professional Corporation in Illinois

Are you considering starting a professional corporation in Illinois? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in Illinois can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in Illinois, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in Illinois!

What is a Professional Corporation in Illinois?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in Illinois. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in Illinois.

LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in Illinois if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in Illinois

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Illinois, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in Illinois

After you have decided on the idea to form a professional corporation in Illinois, deciding the name for your corporation is significant. There is a complete guide on Illinois LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In Illinois, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 90 days. To keep the name, you must file a name reservation application with Illinois Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the Illinois Registered Agent

The next step in forming a professional corporation is hiring the Illinois Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Illinois. Forming a professional corporation for your service will be easier if you have Registered Agent in Illinois.

Alternatively, you can serve as your own Illinois Registered Agent if you have the time. However, you must stay compliant to avoid missing any important documents from Illinois.

Step 4: File the Articles of Incorporation in Illinois

After you hire a Illinois Registered Agent to form a professional corporation, the next step is to file the Illinois Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in Illinois may be done with two ways, online and by mail. The Articles of Incorporation fee may vary from different states. However, in Illinois, it costs $150 for filing in-person and by mail. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail to Department of Business Services, Limited Liability Division, 501 S. Second St., Rm. 351, Springfield, IL 62746.

Step 5: Write an Operating Agreement in Illinois

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Illinois operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in Illinois

The next step is to appoint the initial board of directors in your PC in Illinois. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the Illinois SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in Illinois

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Illinois can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in Illinois might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in Illinois

Before your professional corporation operates in Illinois, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In Illinois, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in Illinois

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the Illinois classification of taxes for the taxes an LLC in Illinois has to pay.

Important Information

Maintaining Professional and Business License in Illinois

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in Illinois

In Illinois, you will be required to submit a report each year. The owners’ and Registered Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in Illinois, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in Illinois

A professional corporation takes a lot of time to process and pursue. However, with the help of the Illinois Registered Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in Illinois.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What is a professional corporation in Illinois?
A professional corporation in Illinois is a type of corporation that is formed for the purpose of providing professional services, such as those offered by doctors, lawyers, accountants, and other professionals.
What are the requirements for forming a professional corporation in Illinois?
To form a professional corporation in Illinois, the professional must be licensed in the state to practice their profession and the corporation must obtain a certificate of authority from the Illinois Secretary of State.
What type of documents are required to form a professional corporation in Illinois?
To form a professional corporation in Illinois, you must file Articles of Incorporation with the Illinois Secretary of State. You must also file a Statement of Professional Corporation, which is a special form for professional corporations. Additionally, you must also file a Certificate from the Professional Responsibility Commission and a Certificate of Good Standing from the Department of Professional Regulation.
How much does it cost to form a professional corporation in Illinois?
To form a professional corporation in Illinois, the filing fee is $150, plus any additional fees associated with the Certificate of Good Standing.
What are the benefits of forming a professional corporation in Illinois?
Forming a professional corporation in Illinois provides several benefits, such as limited liability protection for the corporation’s owners and the ability to receive benefits and compensation as the corporation’s employees. Additionally, forming a professional corporation in Illinois can help protect the professional’s personal assets from the liabilities of the business.
How long does it take to form a professional corporation in Illinois?
It typically takes about 5-7 business days for the Illinois Secretary of State to process the paperwork for forming a professional corporation.
Do I need to have a registered agent to form a professional corporation in Illinois?
Yes, a registered agent is required to form a professional corporation in Illinois. The registered agent must be located in Illinois and must be authorized to accept service of process for the corporation.
How often must a professional corporation in Illinois file annual reports?
Professional corporations in Illinois must file an annual report with the Illinois Secretary of State each year. The annual report must be filed by the corporation’s anniversary date.
What is the penalty for failing to file the annual report for a professional corporation in Illinois?
If the annual report is not filed by the corporation’s anniversary date, the corporation may be subject to a late fee of up to $250. Additionally, if the report is not filed within 6 months after the due date, the corporation may be administratively dissolved.
What is a Professional Corporation in Illinois?
A Professional Corporation in Illinois is a type of corporation formed under the Professional Service Corporation Act, which allows certain professionals, such as doctors, lawyers, and accountants, to conduct their business as a corporation.
What are the benefits of forming a Professional Corporation in Illinois?
Forming a Professional Corporation in Illinois can provide several benefits, including limiting the personal liability of the owners, providing tax advantages, and allowing for easier transfer of ownership.
What are the steps for forming a Professional Corporation in Illinois?
The steps for forming a Professional Corporation in Illinois include filing Articles of Incorporation with the Secretary of State, choosing a name for the corporation, obtaining a Federal Employer Identification Number (EIN) from the IRS, and obtaining any additional licenses or permits required by the local government.
What documents are required to form a Professional Corporation in Illinois?
To form a Professional Corporation in Illinois, you will need to file a set of Articles of Incorporation with the Secretary of State. Additionally, you may need to obtain a Federal Employer Identification Number (EIN) from the IRS, and obtain any additional licenses or permits required by the local government.
How much does it cost to form a Professional Corporation in Illinois?
The cost to form a Professional Corporation in Illinois depends on the type of corporation, the location, and the services used to incorporate. The filing fee for Articles of Incorporation ranges between $60 and $150. Additionally, there may be additional fees for obtaining a Federal Employer Identification Number (EIN) from the IRS and any applicable licenses or permits.
How long does it take to form a Professional Corporation in Illinois?
The time it takes to form a Professional Corporation in Illinois depends on the complexity of the filing and the availability of the Secretary of State. Generally, it can take up to 10 days to form a Professional Corporation in Illinois.
What are the requirements for naming a Professional Corporation in Illinois?
To name a Professional Corporation in Illinois, the name must be distinguishable from existing corporations and not contain any prohibited words or phrases. Additionally, the name must end with the words “Professional Corporation” or the abbreviation “P.C.”
What ongoing requirements does a Professional Corporation in Illinois have?
For a Professional Corporation in Illinois, ongoing requirements include filing an annual report with the Secretary of State, maintaining accurate corporate records and minutes, and complying with annual taxes and fees. Additionally, the corporation must hold annual meetings and elect directors.
Are there any restrictions on who can own a Professional Corporation in Illinois?
Yes, in Illinois, Professional Corporations may only be owned by individuals who are licensed in the same profession as the corporation.
Is there any difference between a Professional Corporation and a regular corporation in Illinois?
Yes, in Illinois, Professional Corporations are subject to additional requirements such as annual meetings and reports, and may only be owned by individuals who are licensed in the same profession as the corporation. Additionally, Professional Corporations must have the words “Professional Corporation” or the abbreviation “P.C.” in its name.
Does a Professional Corporation in Illinois need to have bylaws?
Yes, a Professional Corporation in Illinois must have bylaws, which outline how the corporation will be managed, such as the roles of directors and officers, the rules for meetings, and other related matters.
Are there any special tax considerations for a Professional Corporation in Illinois?
Yes, Professional Corporations in Illinois may be eligible for certain tax benefits, such as deductions for business expenses and tax deferral for owners with pass-through income. Additionally, owners who are also employees of the corporation may be eligible for certain tax credits.
Is it possible to convert a regular corporation to a Professional Corporation in Illinois?
Yes, it is possible to convert a regular corporation to a Professional Corporation in Illinois. The process typically involves filing an amendment to the Articles of Incorporation with the Secretary of State and obtaining any additional licenses or permits required by the local government.
Is it possible to dissolve a Professional Corporation in Illinois?
Yes, it is possible to dissolve a Professional Corporation in Illinois. The process typically involves filing a Certificate of Dissolution with the Secretary of State, giving notice to any creditors, and paying any outstanding debts or liabilities.
What happens to the assets of a dissolved Professional Corporation in Illinois?
Upon dissolution, any assets of a Professional Corporation in Illinois must be distributed to creditors and shareholders in accordance with the corporation’s Articles of Incorporation and applicable laws.
Is it possible to transfer ownership of a Professional Corporation in Illinois?
Yes, it is possible to transfer ownership of a Professional Corporation in Illinois. The process typically involves filing an amendment to the Articles of Incorporation with the Secretary of State and obtaining any additional licenses or permits required by the local government.
What is the process for changing the name of a Professional Corporation in Illinois?
The process for changing the name of a Professional Corporation in Illinois typically involves filing an amendment to the Articles of Incorporation with the Secretary of State and obtaining any additional licenses or permits required by the local government.
Are there any special requirements for Professional Corporations in Illinois that are owned by non-residents?
Yes, non-resident owners of a Professional Corporation in Illinois must obtain a Certificate of Authority from the Secretary of State, appoint a registered agent, and file an annual report.
Does a Professional Corporation in Illinois need to have a registered agent?
Yes, a Professional Corporation in Illinois must have a registered agent in the state, who will be responsible for receiving legal documents and service of process on behalf of the corporation.
Can a Professional Corporation in Illinois conduct business outside of Illinois?
Yes, a Professional Corporation in Illinois can conduct business outside of the state, but may be required to obtain additional licenses or permits, depending on the type of business and the jurisdiction.
Is it possible to merge two Professional Corporations in Illinois?
Yes, it is possible to merge two Professional Corporations in Illinois. The process typically involves filing an amendment to the Articles of Incorporation with the Secretary of State, obtaining any additional licenses or permits required by the local government, and giving notice to any creditors.
Does a Professional Corporation in Illinois need to have an operating agreement?
Yes, a Professional Corporation in Illinois must have an operating agreement, which outlines the ownership and management of the corporation, including rules for meetings, voting rights, and other related matters.

Also Read

Why Illinois Professional Corporation is So Important

First and foremost, Illinois Professional Corporation provides a level of credibility and legitimacy to professionals in certain industries. By operating as a professional corporation, individuals can gain the trust and confidence of clients and partners who prefer to work with established and reputable businesses. This added credibility can be crucial in securing new clients, attracting top talent, and growing the business.

Additionally, Illinois Professional Corporation offers a layer of protection for professionals looking to shield themselves from personal liability. By incorporating as a professional corporation, individuals can separate their personal assets from their business assets, mitigating the risk of losing everything in the event of a lawsuit or bankruptcy. This can provide peace of mind and financial security for professionals operating in industries with inherent risks.

Moreover, Illinois Professional Corporation allows professionals to take advantage of certain tax benefits and incentives. By structuring their business as a professional corporation, individuals can potentially lower their tax liability, claim deductions for business expenses, and access special tax treatments that are unavailable to sole proprietors or general partnerships. This can result in significant savings and improved financial stability for professionals.

Furthermore, Illinois Professional Corporation enables professionals to formalize their business structure and establish a clear framework for decision-making, governance, and succession planning. By incorporating as a professional corporation, individuals can delineate roles and responsibilities, set protocols for decision-making, and establish a clear path for the future of the business. This can create a sense of stability and continuity that is essential for long-term success.

Additionally, Illinois Professional Corporation fosters innovation, collaboration, and growth within the professional community. By providing a platform for professionals to come together, share resources, exchange ideas, and collaborate on projects, professional corporations can drive creativity, productivity, and progress in various industries. This collective approach can lead to new opportunities, partnerships, and advancements that benefit both the professionals and the communities they serve.

In conclusion, Illinois Professional Corporation is a cornerstone of the state’s business landscape, offering a wide range of benefits and advantages for professionals in certain fields. From enhancing credibility and protection to providing tax benefits and fostering collaboration, professional corporations play a critical role in supporting the success and growth of professionals across various industries. As such, it is clear to see why Illinois Professional Corporation is so important.

Conclusion

In forming a professional corporation in Illinois, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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