Starting a Professional Corporation in Illinois 2024: Ultimate Guide

Licensed professional? Level up your business with Illinois professional corporation! Enjoy unique benefits like Illinois LLC, such as limited liability, tax perks, and a polished image. Our step-by-step guide unravels the essentials for smooth compliance and the right fit. LLCBase has your back with expert guidance, so make an informed decision and triumph in Illinois with your professional corporation today!

This guide will review the requirements for starting a professional corporation in Illinois, explore the advantages and disadvantages of this business structure, and help you determine if it is the right fit for your business goals.

What is a Professional Corporation

A Professional Corporation (P.C.) is a unique type of corporation designed for licensed professionals, such as doctors, dentists, lawyers, architects, and accountants. Forming a P.C. allows licensed professionals to offer their services through a corporate structure, providing them with the benefits of a traditional corporation, such as limited liability protection and tax advantages. Forming a professional corporation in Illinois is a popular choice due to the thriving professional landscape and business-friendly environment. When starting a professional corporation, choose a reliable formation service in Illinois.

The primary purpose of Illinois Professional Corporation is to protect its owners from personal liability for the corporation’s actions. The shareholders’ personal assets are protected if the professional corporation faces legal issues. Moreover, Illinois professional corporations can offer certain tax benefits, such as deducting employee benefits and operating expenses. These advantages make forming a professional corporation an attractive option for many professionals in Illinois.

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Who Can File Under Professional Corporation Laws

Under Illinois Professional Corporation laws, only certain licensed professionals are eligible to form a professional corporation. The specific professions allowed to form a P.C. may vary slightly by state, but in Illinois, the following professionals can typically form a professional corporation:

Each profession has its governing licensing board, which sets specific rules and regulations for forming and operating a professional corporation. It is essential to check with the relevant board and state laws to ensure that your profession is eligible to form a professional corporation and to understand the specific requirements associated with your profession.

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Structure of a Professional Corporation

• Shareholders: Illinois Professional Corporation’s shareholders must be licensed professionals in the same field as the corporation’s purpose. For example, if a professional corporation is formed to offer legal services, all shareholders must be licensed attorneys. This requirement ensures that the professional corporation’s management comprises qualified individuals with relevant expertise.
• Directors: The directors of a professional corporation in Illinois are responsible for overseeing the corporation’s operations and making high-level decisions. The directors must also be licensed professionals in the same field as the corporation’s purpose. The number of directors required depends on the specific licensing board’s regulations, but typically a minimum of one director is needed.
• Officers: The officers of Illinois Professional Corporation manage the professional corporation. Officers typically include a President, Secretary, and Treasurer. However, additional officers can be appointed as needed. While not all officers must be licensed professionals, the President must hold a valid license in the same field as the corporation’s purpose.

Starting a Professional Corporation in Illinois: A Guide

Here is a detailed guide to starting a professional corporation in Illinois that you should follow.

Step 1: Appointment of Registered Agent

The first step in forming a Professional Corporation is appointing Registered Agent in Illinois. This individual or company will act on behalf of the corporation, receiving official notices and legal documents. The agent must have a physical address in Illinois and be available during regular business hours.

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Step 2: Choosing the Name of the Corporation

Selecting a name for your Illinois Professional Corporation is crucial. The name must be unique and appropriate, including the words “professional corporation” or the abbreviation “P.C.” It must also comply with the rules and regulations of the governing licensing board and should not be confusingly similar to an existing corporation’s name.

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Step 3: Drafting of By-laws

By-laws are the internal rules and regulations governing the management and operations of the professional corporation. These should include provisions related to the appointment of directors, issuance of shares, and any restrictions imposed by the licensing board.

Step 4: Appointment of Board of Directors

The board of directors oversees the management and operations of the Illinois Professional Corporation. Directors must be licensed professionals in the same field as the corporation’s purpose.

Step 5: Conduction of Board Meetings

Regular board meetings are essential for maintaining the proper functioning and compliance of the professional corporation. The by-laws should specify the frequency, notice requirements, and procedures for conducting these meetings.

Step 6: Issuance of Corporate Shares

Shares represent ownership in the corporation. The professional corporation must issue shares to its shareholders, who must be licensed professionals in the same field. Share issuance should comply with the by-laws and any restrictions imposed by the licensing board.

Step 7: Comply with State Requirements

Forming Illinois Professional Corporation requires compliance with specific state requirements, such as obtaining necessary permits and licenses, paying fees, and adhering to rules and regulations the governing licensing board sets forth.

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Step 8: Filing of Statement of Information

Illinois professional corporations must file an annual report with the Illinois Secretary of State. This document includes essential information about the corporation, including its name, address, Registered Agent, and directors.

Step 9: Getting Tax Permits from the State

The professional corporation must obtain the necessary tax permits from the Illinois Department of Revenue, such as an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Step 10: Opening of a Bank Account

Finally, open a separate bank account for the Illinois Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in Illinois

Here are some of the most common fees when starting a professional corporation in Illinois.

• State Laws and Regulations: To form a professional corporation in Illinois, it is crucial to comply with the state laws and regulations governing professional corporations. The Illinois Compiled Statutes Chapter 805 and the specific licensing board’s regulations for each profession outline the requirements and restrictions for professional corporation formation. Before starting the process, professionals should consult with their licensing board to ensure they meet the necessary qualifications.
• Incorporation Process: Once the licensing requirements are met, the next step to form a professional corporation in Illinois is to draft and file the Articles of Incorporation with the Illinois Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Articles of Incorporation requires a filing fee currently $150 for most professions. However, it is essential to check with the Illinois Secretary of State for the specific fee associated with your profession.
• Naming Requirements: You must follow specific rules when choosing a name for a Professional Corporation in Illinois. The name must include the words “Professional Corporation,” “P.C.,” or “Prof. Corp.” Additionally, the name cannot be misleading or too similar to an existing corporation’s name. Conducting a name search with the Illinois Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Articles of Incorporation requires a reservation fee of Not available online and $300 mail.
• Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in Illinois. It outlines the corporation’s essential information, such as the name, address, purpose, and number of authorized shares. The Articles must also include a statement that the corporation is a professional corporation and the specific profession it practices. Once completed, the Articles of Incorporation must be filed with the Illinois Secretary of State, accompanied by the appropriate filing fee.
• Additional Fees and Costs: In addition to the filing fees mentioned above, forming Professional Corporation in Illinois may involve other costs, such as:
  • Annual Report: professional corporations must file an initial Statement of Information with the Illinois Secretary of State every Anniversary month of the corporation of filing the Articles of Incorporation. The filing fee for this form is $75.
  • Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
  • Registered Agent Fee: Hiring of Registered Agent service will likely involve an annual fee of $50 – $200, which can vary depending on the service provider.
  • Legal and Accounting Fees: Forming a professional corporation may involve consulting with attorneys and accountants, which can result in additional professional fees.

Advantages of a Professional Corporation

• Limited Liability Protection: One of the main benefits of a professional corporation is its limited liability protection to its shareholders. This means the shareholders’ assets are protected from the corporation’s debts and liabilities.
• Tax Benefits: Professional Corporations enjoy specific tax benefits, such as deductions for business expenses and the ability to retain earnings within the corporation.
• Business Credibility: Operating as a professional corporation can enhance the credibility and reputation of the professional services, demonstrating a commitment to compliance and professionalism.
• Continuity of Operations: A professional corporation has a perpetual existence, ensuring the continuity of operations even if the shareholders or directors change.

Disadvantages of a Professional Corporation

• Complexity and Cost of Formation: Forming a professional corporation can be more complex and costly than other business structures, such as sole proprietorships or partnerships.
• Ongoing Compliance Requirements: professional corporations must adhere to ongoing compliance requirements, including regular board meetings, filing annual reports, and maintaining proper records.
• Limited Flexibility in Management: professional corporations may need more flexibility in management, as the board of directors must consist of licensed professionals in the same field.

Taxation of Professional Corporations

Here are the taxes that your professional corporation must pay in Illinois:

Federal income tax

A professional corporation in Illinois is subject to federal income tax on its net earnings. However, a P.C. can elect to be taxed as an S corporation, which allows the corporation’s income, deductions, and credits to pass through to the shareholders. This can result in significant tax savings by avoiding double taxation.

State taxes

Illinois Professional Corporation is also subject to state taxes, such as the Illinois franchise tax, which is based on the corporation’s annual net income. Additionally, depending on the nature of its operations, the professional corporation may be subject to other state and local taxes, such as payroll and sales taxes permit in Illinois.

Tax deductions and exemptions

A professional corporation in Illinois can take advantage of various tax deductions and exemptions, such as deductions for employee benefits, operating expenses, and depreciation. These deductions can help reduce the corporation’s taxable income, ultimately leading to tax savings for the P.C. and its shareholders.

Alternatives to Professional Corporations in Illinois

If you decide that a professional corporation is not for you, then you might consider the following alternatives.

• Sole Proprietorships: A simpler business structure is where an individual operates the business under their name without limited liability protection.
• Partnerships: Two or more individuals join to operate a business, sharing profits, losses, and responsibilities.
• Limited Liability Companies (LLCs): A hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a partnership.
• S-corporations: Starting an S Corp in Illinois avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.

FAQs

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How to Save Money While Forming Illinois Professional Corporation

One of the first steps in forming a professional corporation is selecting a business entity type. While a professional corporation offers certain legal protections, it may not be the best option for everyone. Before jumping into establishing your business as a professional corporation, consider consulting with a business attorney or financial advisor to explore all of your options. This can help you avoid unnecessary expenses and make a more informed decision about the structure of your business.

Another way to save money when forming a professional corporation is to take advantage of available resources and assistance. There are many online resources and guides that can help you navigate the process of starting a business in Illinois. Utilizing these tools can save you time and money by providing you with valuable information and step-by-step instructions for completing necessary paperwork.

Additionally, consider seeking out free or low-cost services offered by local organizations or government agencies to help you get your business off the ground. These resources may include small business development centers, mentoring programs, and workshops that can provide you with guidance and support as you navigate the complexities of forming a professional corporation.

When it comes to hiring professionals to assist with the formation of your professional corporation, be sure to shop around and compare prices. While it may be tempting to hire the first attorney or accountant you come across, taking the time to get quotes from multiple professionals can help you find the best deal for your budget. Look for professionals who specialize in working with small businesses and have experience with professional corporations to ensure you are getting the best service for your money.

Once you have formed your professional corporation, remember to keep an eye on your expenses and make smart financial decisions. Avoid unnecessary spending on things like fancy office space or expensive equipment until your business is established and generating revenue. Consider outsourcing tasks like bookkeeping or marketing to save money on payroll expenses and focus on growing your business.

In conclusion, forming a professional corporation in Illinois doesn’t have to break the bank. By being mindful of your expenses, taking advantage of resources, and making smart financial decisions, you can save money during the formation process and set your business up for success. With careful planning and a frugal mindset, you can create a thriving professional corporation without draining your bank account.

Conclusion

Illinois Professional Corporation can offer several benefits for licensed professionals. However, it is essential to carefully consider the proper structure and compliance requirements before proceeding. Seeking professional guidance in forming a professional corporation can help ensure a smooth process and enable professionals to focus on providing their services. Visit LLCBase for more information about starting a professional corporation in Illinois.