How to Form a Professional Corporation in Illinois (2024 Guide)

If you would like to start and learn how to form a corporation in Illinois, there are a few things that you should do now. However, in a professional corporation, professionals must create a special organizational structure to establish a professional or service corporation. Among the appropriate professions to organize a professional corporation in Illinois are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in Illinois or any business organization needs a certain number of steps. In this article, Webinarcare Editorial Team is going to share those steps. Keep in mind that these are general procedures. Depending on local law, it may be modified. For instance, your professional corporation may be subject to city or county-based rules.

Form a Professional Corporation in Illinois

On this page, you’ll learn about the following:

What is a Professional Corporation in Illinois?
How to Form a Professional Corporation in Illinois
Main Characteristics of a Professional Corporation
FAQs

What is a Professional Corporation in Illinois?

A professional service corporation (PSC), often known as a professional corporation (abbreviated as PC), is a particular type of organization that is permitted by state law to allow owners of specifically licensed professions to practice in the Illinois. A professional corporation’s owner is answerable for their own negligence or wrongdoing but is not held personally liable for the actions of other owners. The abbreviation PC or P.C. is frequently used to denote professional corporations.

This structure allows professionals to enjoy some of the benefits and protections of a traditional corporation while maintaining their professional status and abiding by the regulations of their respective licensing boards.

LegalZoom is the recommended corporation formation if you are thinking of forming a professional corporation from scratch. However, you can always start an LLC in Illinois, if you changed your mind.
– WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in Illinois

To form a Professional Corporation in Illinois 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
Accountants
Lawyers and others

To provide your service, you must be qualified and have a license. In most cases, you can now form a professional corporation after finishing your studies, passing the exam, and receiving your license. If you work in an industry that does not provide a license or professional certification, you should consider starting an LLC or corporation.

Step 2: Name your Professional Corporation in Illinois

After you have decided to form a professional corporation in Illinois, you must choose a name for your corporation. Here are some pointers to consider when 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)
Limit of restricted words that need a license.
A unique name is needed with no match
No confusion with a government entity name.

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. You must file a name reservation application in the Illinois Secretary of State to keep the name.

If not already present, a professional corporation, professional association, service corporation, or professional service corporation must be included in the name. You may register your business under a different legal name if your preferred legal name is unavailable. Once you’ve decided on a name, you can apply for Illinois DBA (doing business as). This way, you can run a clinic or law firm under your name.

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Step 3: Choose the Illinois Registered Agent

The next step in forming a professional corporation is hiring a Registered Agent, who accepts legal paperwork for 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 Registered Agent if you have the time. Usually, in Illinois, a Registered Agent costs is ranging from $50 – $200. To make it easier, you can hire Illinois Registered Agent Services for your professional corporation.

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Step 4: File the Articles of Incorporation in Illinois

After you hire a 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. Include the names of all co-owners as well. All owners must demonstrate that they have the necessary licenses to practice the profession in question.

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 state. 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 in Illinois is a document that contains all of your company’s organizational details. It is optional to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The operating agreement includes information like-

About Business
Members and management
Capital contribution
Profit Distribution
Change of membership
Dissolution

Step 6: Designate the PC Board of Directors in Illinois

The next step is to form the first board of directors for your PC in Illinois. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the Illinois Secretary of State. As a shareholder and owner, you must ensure that a provision for appointing a new director is included in the By-laws. In Illinois, you must have Three directors in forming your Professional Corporation.

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.

Creating comprehensive corporate bylaws requires specific knowledge about the company, its structure, and operations. However, I can provide you with a general outline of what corporate bylaws usually include. It is crucial to consult with Illinois Business Attorney or a legal expert to ensure that your bylaws comply with the laws and regulations governing your jurisdiction and industry.

Name and Purpose of the Corporation
Registered Office and Agent
Shareholders
Board of Directors
Officers
Committees
Indemnification and Insurance
Conflict of Interest
Records and Reports
Amendments
Miscellaneous

Step 8: Hold the First Board of Directors’ Meeting

Gather the board of directors for the first meeting after drafting the corporate bylaws. This meeting will conclude with the appointment of directors to manage the company’s daily operations, approval of the bylaws, selection of the corporation’s financial reporting year, and approval of the stock issue. Minutes should be taken at all board meetings and kept with the company’s records.

Step 9: Request an EIN in Illinois.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in Illinois. The tax ID for your professional corporation will be an EIN. The Internal Revenue Service can provide an EIN (IRS). It has nine digits and is comparable to a social security number. Nevertheless, EIN is different from SSN. Only business-related tasks, primarily filing general taxes, are performed using it. The form needs to be filled out and submitted online to the IRS.

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 four 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 several ways. It will give your professional corporation the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Step 10: Open a Bank Account and Prepare for Taxes.

You should open a business bank account as soon as you have applied for and received your Employer Identity Number because you will use this account for yourself, your clients, and your staff. Check out the Best Banks in Illinois for you to decide on which bank you are going to open an account.

Due to your organization’s increased legality and liquidity, having a US business bank account may make conducting business in Illinois easier. Most banks require an EIN for businesses other than sole proprietorships to open a business bank account. Also, keeping your accounts separate will prevent you from merging your personal and business finances. Also, filing taxes is simpler when you have an EIN. You can expect to pay employee and corporate taxes when you form a professional corporation.

Step 11: Get a Business License in Illinois

Before your professional corporation operates in Illinois, you must have Illinois Business License first. A business license is a formal document issued by a state government agency that allows you to conduct business in the geographic area governed by that agency. The cost of business licenses and permits in Illinois ranges from $50 – $300. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in Illinois

Finally, you’ve arrived at the final process. Remember to file your taxes when you have obtained a business license and are ready to begin operations. To avoid a large tax bill, you should begin paying taxes quarterly as soon as possible. Each state has different tax requirements. Start examining the Illinois tax classification for the taxes that an LLC in Illinois must pay.

Main Characteristics of a Professional Corporation

In forming a Professional Corporation, the main characteristics must be distinguished before forming it. These are the general characteristics of forming a Professional Corporation in Illinois.

Limited Liability Protection: A professional corporation provides its owners, shareholders, or members limited liability protection like a regular corporation. This means the shareholders’ personal assets are generally protected from business debts, obligations, and lawsuits, except in malpractice or professional negligence cases.
Illinois Licensing Requirements: All shareholders must typically be licensed professionals in the same field in a professional corporation. The corporation must also comply with specific state regulations and licensing requirements that govern the profession.
Governance and Management: A professional corporation is governed by a board of directors, who the shareholders elect. The board appoints officers to manage the day-to-day operations of the corporation. All directors and officers must be licensed professionals in the same field as the corporation.
Taxation: Professional corporations are taxed as C corporations, where the corporation pays taxes on its income, and shareholders pay taxes on dividends received from the corporation. However, some professional corporations may be eligible for S corporation status, allowing pass-through taxation. Income, losses, deductions, and credits flow to the shareholders, who report this information on their income tax returns.
Restrictions on Ownership and Transfer of Shares: Professional corporations often restrict the ownership and transfer of shares to ensure that only licensed professionals in the same field can become shareholders. This helps maintain the professional nature of the corporation and adheres to state licensing requirements.
Malpractice Liability: While a professional corporation provides limited liability protection for general business debts and obligations, it does not shield shareholders from liability for their own malpractice or professional negligence. Shareholders can still be personally liable for their actions in providing professional services.

In summary, a professional corporation is a specialized corporate structure designed for licensed professionals, offering limited liability protection and a formal governance structure while adhering to state licensing requirements and regulations.

Maintain Professional and Business License in Illinois

You must maintain or renew your professional license regularly now that you have established your professional corporation. Even if your company is well-established, it is only meaningful if you have a valid operating license. And it makes no difference if your professional license is still valid for a year or two, but your business license has already expired.

Make time at least once a year to check the status of your licenses. You won’t miss anything important this way. You can address any issues that arise.

Filing Annual Report in Illinois

In Illinois, you must submit a report. 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 the report every 1 year (before the anniversary month starts) in the Illinois Secretary of State.

FAQs

What is a professional corporation in Illinois?

A professional corporation in Illinois is a type of corporation formed by licensed professionals who want to provide professional services without assuming personal responsibility for the acts of others in the corporation.

Are all professionals eligible to form a professional corporation in Illinois?

No, only certain licensed professionals such as doctors, lawyers, and accountants are eligible to form a professional corporation in Illinois.

What are the benefits of forming a professional corporation in Illinois?

Some benefits of forming a professional corporation in Illinois are limited liability protection, tax advantages, and the ability to raise capital through the sale of stock.

Is it expensive to form a professional corporation in Illinois?

The cost of forming a professional corporation in Illinois varies depending on the type of professional service you provide and where you are located in the state.

What is the process for forming a professional corporation in Illinois?

The process for forming a professional corporation in Illinois involves filing articles of incorporation with the Secretary of State, obtaining any necessary licenses, and creating bylaws.

Do I need to hire an attorney to form a professional corporation in Illinois?

No, you do not need to hire an attorney to form a professional corporation in Illinois, but it is recommended to ensure that you complete all necessary steps correctly.

Can I form a professional corporation in Illinois on my own?

Yes, you can form a professional corporation in Illinois on your own, but it is recommended to seek professional advice to ensure that you create the corporation correctly.

Can an out-of-state professional form a professional corporation in Illinois?

Yes, an out-of-state professional can form a professional corporation in Illinois as long as they meet the eligibility requirements and follow the proper steps for formation.

How long does it take to form a professional corporation in Illinois?

The time it takes to form a professional corporation in Illinois can vary but typically takes several weeks to a few months.

What is the minimum amount of shareholders required for a professional corporation in Illinois?

The minimum amount of shareholders required for a professional corporation in Illinois is one.

Can a professional corporation have non-licensed shareholders in Illinois?

No, a professional corporation cannot have non-licensed shareholders in Illinois.

What is the liability protections of a professional corporation in Illinois?

A professional corporation in Illinois offers limited liability protections for shareholders, meaning their personal assets are not at risk if the corporation is sued or goes bankrupt.

Do shareholders in a professional corporation in Illinois have personal liability?

Shareholders in a professional corporation in Illinois typically do not have personal liability, but there are exceptions in cases of misconduct or negligence.

What is the required capitalization for a professional corporation in Illinois?

The required capitalization for a professional corporation in Illinois varies depending on the type of services provided and the location of the corporation.

How often do you need to renew a professional corporation in Illinois?

A professional corporation in Illinois needs to renew its business registration every year with the Illinois Secretary of State.

What are the tax implications for a professional corporation in Illinois?

A professional corporation in Illinois is typically taxed at a lower rate than a sole proprietorship, but shareholders may be subject to double taxation.

How many directors are required for a professional corporation in Illinois?

There is typically no minimum or maximum number of directors required for a professional corporation in Illinois.

Can I change my professional corporation’s name in Illinois?

Yes, you can change your professional corporation’s name in Illinois by filing a certificate of amendment with the Secretary of State.

Can I dissolve my professional corporation in Illinois?

Yes, you can dissolve your professional corporation in Illinois by filing articles of dissolution with the Secretary of State.

Can I form a nonprofit professional corporation in Illinois?

Yes, you can form a nonprofit professional corporation in Illinois if you meet the eligibility requirements and follow the proper steps for formation.

Are ongoing fees required to maintain a professional corporation in Illinois?

Yes, ongoing fees are required to maintain a professional corporation in Illinois such as filing an annual report and paying an annual franchise tax.

What are the securities laws governing professional corporations in Illinois?

Professional corporations in Illinois must follow state and federal securities laws when issuing and selling stock to shareholders.

Are there any restrictions on who can be a shareholder in a professional corporation in Illinois?

Shareholders in a professional corporation in Illinois must typically be licensed professionals in the same field as the corporation’s primary purpose.

Can I have different classes of stock in my professional corporation in Illinois?

Yes, you can have different classes of stock in your professional corporation in Illinois as long as it is described in the corporation’s articles of incorporation.

Can I merge my professional corporation with another as a merger acquisition in Illinois?

Yes, you can merge your professional corporation with another as a merger acquisition in Illinois as long as you follow the proper procedures for merging corporations.

Can I convert my existing business to a professional corporation in Illinois?

Yes, you can convert your existing business to a professional corporation in Illinois by filing articles of incorporation with the Secretary of State.

Is it necessary to outsource accounting for professional corporations in Illinois?

No, it is not necessary to outsource accounting for professional corporations in Illinois, but it is recommended to seek professional advice to ensure that your finances are handled correctly.

How long can an Illinois Professional Corporation’s meeting last for?

There is no standard for the length of time an annual meeting of the shareholders can last, unless it sets a time restriction in the notice of the meeting.

Can lawyers invest fees earned in an Illinois Professional Corporation in real estate?

Yes, lawyers, accountants, or doctors of an Illinois Professional Corporation can invest the corporation’s profits into real estate as an asset, however, if an employee is accepting the compensation he/she may follow through ethical and professional guidelines.

What is a professional corporation?

A professional corporation (PC) is a type of business entity that gives licensed professionals protection from personal liability resulting from malpractice or negligence claims.

Can anyone form a professional corporation?

No, only licensed professionals in certain fields such as medicine, law, and engineering can set up a professional corporation.

Can a non-Illinois licensed professional form a professional corporation in Illinois?

No, a professional corporation in Illinois can only be formed by Illinois licensed professionals.

What is the minimum number of shareholders required to form a professional corporation in Illinois?

At least one licensed professional must be a shareholder in a professional corporation in Illinois.

How do I choose a name for my professional corporation in Illinois?

The name of your corporation must include “Professional Corporation”, “Chartered”, or the abbreviation “P.C.” and must not be deceptively similar to another business’s name.

How do I register my professional corporation in Illinois?

You need to file Articles of Incorporation with the Illinois Secretary of State and obtain a Certificate of Good Standing from the Illinois Department of Financial and Professional Regulation.

What information should be included in the Articles of Incorporation?

The Articles of Incorporation should contain the corporation’s name and purpose, the number and kinds of authorized shares, the name and address of the registered agent, and the names and addresses of the initial directors.

What is the fee for filing Articles of Incorporation in Illinois?

The fee for filing Articles of Incorporation in Illinois for a professional corporation is $150.

Do I need to have a registered agent in Illinois for my professional corporation?

Yes, you are required to have a registered agent with a physical address in Illinois to receive legal documents on behalf of your corporation.

Can I be my own registered agent for my Illinois professional corporation?

Yes, however, this may not be practical as the registered agent must always be available at the registered address during normal business hours.

Once I have filed Articles of Incorporation, how long will it take for my Illinois professional corporation to be formed?

The processing time for Articles of Incorporation in Illinois usually takes a few business days to several weeks depending on the workload of the Secretary of State’s office.

Do I need to file a tax identification number for my Illinois professional corporation?

Yes, you are required to obtain a tax identification number from the Internal Revenue Service (IRS) for your corporation to pay federal taxes.

Can two licensed professionals who are married form a professional corporation in Illinois?

Yes, two licensed professionals who are married can form a professional corporation together in Illinois.

Can my professional corporation engage in any business?

No, professional corporations in Illinois are limited to only providing services related to the licensed profession of the shareholders.

Can a shareholder who is not a licensed professional work for the professional corporation in Illinois?

Yes, as long as the majority of the shareholders are licensed professionals, non-licensed shareholders can work for the professional corporation.

Can I form a professional corporation alone as the only licensed professional in Illinois?

Yes, you can form a professional corporation alone in Illinois as long as you hold the appropriate license for the type of services provided.

Does forming a professional corporation limit my personal liability in Illinois?

Yes, forming a professional corporation in Illinois can shield licensed professionals from personal liability associated with malpractice or negligence committed by other shareholders or employees.

Can I open a bank account in the name of my Illinois professional corporation?

Yes, you can open a bank account in the name of your professional corporation to keep corporate funds separate from personal funds.

how do I get my professional license in Illinois?

To get a professional license in Illinois, contact the Illinois Department of Financial and Professional Regulation and meet all the licensing requirements.

Is there a deadline for submitting the Articles of Incorporation for my professional corporation in Illinois?

No, there is no specific deadline for submitting Articles of Incorporation for a professional corporation in Illinois.

How often do I need to file annual reports for my Illinois professional corporation?

Annual reports for professional corporations in Illinois are filed every year before the first day of the firm’s anniversary month.

What happens if I miss the deadline for filing annual reports for my professional corporation in Illinois?

Late filing fees will be applied, which can range from $25 up to $500, depending on how late the annual report is submitted.

What are the ongoing requirements for maintaining a professional corporation in Illinois?

A few of the ongoing requirements for professional corporations in Illinois include filing annual reports, obtaining insurance, and following ethical codes of conduct.

Can I change the name or address of my professional corporation in Illinois after it has been formed?

Yes, you can change the name or address of your professional corporation. Generally, you would file Articles of Amendment with the Illinois Secretary of State.

How can I dissolve my professional corporation in Illinois?

To dissolve your professional corporation in Illinois, you must file Articles of Dissolution with the Illinois Secretary of State and pay associated fees.

Can I convert my professional corporation in Illinois to a different type of business entity?

Yes, you can convert your professional corporation in Illinois to a different type of business entity by filing the appropriate forms with the Secretary of State.

What is the initial cost associated with forming a professional corporation in Illinois?

The initial cost associated with forming a professional corporation in Illinois includes the filing fee of $150 for the Articles of Incorporation, the cost of a registered agent, attorney fees if hiring a lawyer, and any other associated fees required for obtaining required licenses.

How is a professional corporation in Illinois taxed?

Professional corporations in Illinois are considered S-corporations by the IRS and are generally not subject to federal corporate income tax.

What type of insurance should I get for my professional corporation in Illinois?

You should consider getting malpractice insurance to protect against any claims of malpractice or negligence.

How to Save Money While Forming Illinois Professional Corporation

One of the first ways to save money when forming an Illinois professional corporation is to do your research. Before diving headfirst into the process, take the time to explore all the options available to you. From comparing different incorporation services to understanding the fees and requirements involved, being informed can help you make more cost-effective decisions.

When it comes to incorporation services, there are many affordable options available that can help you navigate the process smoothly. Look for reputable services that offer competitive pricing and transparent fee structures. Be wary of hidden charges or unnecessary add-ons that can drive up costs.

Another way to save money while forming your professional corporation in Illinois is to handle some of the paperwork yourself. Many online resources provide templates and guides for filling out the necessary forms, making it easy to complete the process without the need for expensive legal assistance.

Consider also whether you truly need all the bells and whistles that some incorporation services offer. While additional services like registered agent representation or tax ID numbers can be useful, they may not always be essential for your business. By focusing on the essentials, you can keep costs down without compromising on the quality of your professional corporation.

When it comes to ongoing expenses, one of the most significant costs associated with running a professional corporation is maintaining compliance with state regulations. To avoid costly fines and penalties, be diligent in keeping up with all required filings and reports. Set up reminders for important deadlines to ensure that you meet all regulatory requirements on time.

Additionally, consider utilizing technology to streamline your business operations and reduce overhead costs. By leveraging software solutions for tasks like accounting, invoicing, and client management, you can save time and money while staying organized and efficient.

Finally, one of the best ways to save money while forming an Illinois professional corporation is to collaborate with other professionals. Consider forming a partnership or joint venture with colleagues who have complementary skills or services. By sharing resources and pooling your expertise, you can lower costs and expand your business opportunities.

In conclusion, forming a professional corporation in Illinois does not have to break the bank. By doing your research, choosing affordable incorporation services, handling some of the paperwork yourself, prioritizing essential services, staying compliant with regulations, leveraging technology, and collaborating with like-minded professionals, you can save money while establishing a legitimate and successful business. With careful planning and a proactive mindset, you can create a professional corporation in Illinois that is both cost-effective and competitive in today’s market.

Conclusion

In conclusion, forming a professional corporation in Illinois is a strategic decision for licensed professionals who seek to combine their expertise and services under a single corporate entity. This business structure offers limited liability protection, a formal governance structure, and compliance with state licensing requirements. However, it also comes with certain restrictions on ownership, transfer of shares, and personal liability for professional malpractice. By carefully considering the advantages and disadvantages of a professional corporation, professionals can determine whether this structure aligns with their business goals, regulatory requirements, and risk management needs, ultimately contributing to a more organized, secure, and compliant professional practice.