Querrey & Harrow is here to
help you and your business understand the process of registering as a corporation
qualified to do business in
Illinois. The Business Corporation Act (BCA) provisions
apply to all corporations. Foreign corporations
enjoy the same rights and benefits as
Illinois
corporations, and have the same restrictions, penalties, duties, and liabilities
imposed as
Illinois
corporations of like character. (BCA §805 ILCS 5/13.10). To determine whether your corporation must apply
for "Authority to Transact Business in Illinois" requires a legal opinion based on
careful analysis of the Business Corporations Act (§805 ILCS 5/13.05) and various
court decisions
At Querrey & Harrow our Corporate
and Commercial Practice Group offers a variety of services to help determine the
appropriate business entity for you. The
basic alternatives include the creation of a Partnership (General or Limited), Corporation
(C or Subchapter S) and Limited Liability Company (including “Series” Limited Liability
Companies).
Factors that become important in determining the appropriate entity are the avoidance of “double taxation,” minimizing the personal liability of owners, the number and background of investors, and the comparative costs of formation and annual fees mandated by the Illinois Secretary of State and the BCA. When making the business entity determination questions to ask include
Partnerships
All partnerships enjoy pass-through tax treatment. The
creation of a General Partnership does not requiring anything to file or record.
As a result, the comparative costs are minimal in comparison to other entities. Each General Partner may participate in management,
is jointly and severally liable, and can bind or obligate other General Partners
to third parties. This entity is easy to upkeep; however, given the risks, you may
lose substantially more than your initial obligation.
Limited Partnerships, by definition, must have at least
one General Partner who is fully liable. Limited partners retain their limited liability stations so long as they
do not participate in management. The comparative
costs include a $150 formation fee, and a $100 annual fee.
Corporations
In a “C” Corporation shareholders have limited liability. One of the drawbacks is that the “double” taxation
principal is applied. Meaning that the entity
itself is taxed and the shareholders are taxed on distributions/ dividends that
are received
In “S” Corporations the shareholders also have limited
liability, but are given pass-through tax treatment. In this instance there is no tax on the “S” Corporation
itself. The disadvantages include the restriction
on the number of shareholders, and there can be only one class of stock, although
a division of voting and non-voting shares is allowed. Additionally, shareholders cannot include corporations,
partnerships, non-resident aliens, pension plans or certain trusts.
The comparative cost for both “C” and “S” corporations include a $150 + franchise tax as a formation fee, and a $100 + franchise tax annual fee ( Illinois franchise tax is $1.50 per $1,000 of paid-in capital, with a minimum of $25).
Limited Liability Companies
A Limited Liability Company (LLC) entity provides the most flexibility for its members. There are no limits to the number or type of members. Thus, corporations, partnerships, and foreign investors are allowed as members. Members enjoy limited liability as shareholders would in corporations. There is flexibility provided for the allocation of income and losses. Members are allowed to take part and directly participate in the management of the entity. Thus, very flexible organizational and management arrangements are permitted (e.g. voting and non-voting members). Additionally, the entity enjoys pass-through taxation like partnerships. The comparative costs for a LLC include a $500 formation fee and a $250 annual fee.The newest formation under this entity is called a Series
LLC. These allow multiple cells (separate business ventures) of an LLC to operate
under one “Umbrella” LLC. The comparative
cost of a Series LLC include a $750 formation fee for the “Umbrella” LLC and a $50
fee for each cell. Annual cost for the umbrella
LLC is $250 and for each cell $50. All fees are provided by the Illinois Secretary
of State. It should be noted that the fee for expedited filing is an additional
$100 ($50 for each LLC cell)
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Querrey & Harrow attorneys have ample experience setting up business ventures, both large and small. If you have any questions regarding the proper format for your business venture, or corporate law questions generally, please feel free to call Terrence Guolee at 312-540-7544, or via tguolee@querrey.com, for referral to one of the many attorneys in our Business Services practice groups.
