What is a Corporation?: Illinois Business Corporation Act – Corporations in Illinois Explained
When starting a business, it is important to consider the type of business structure you would like to create. Many people are anxious to get their ideas and products into the market place and they do not stop to consider whether they should create a business entity. Others are confused as to what type of business entity they should create. Corporations, Limited Liability Companies, Partnerships, and Limited Liability Partnerships are all different types of business entities in Illinois.
Many first time business owners are too overwhelmed or simply too busy to learn the differences between the different types of entities in Illinois. This article will set forth some of the benefits and drawbacks of creating a Corporation in Illinois for a new business venture.
A corporation is an entity separate from its owners and shareholders. A corporation can buy and sell property. A corporation may be the owner of record for real property. Also, a corporation can sue or be sued. The owners of a corporation are called shareholders. Shareholders can be individuals, corporations, or partnerships.
The shareholders of a corporation are generally not liable for the debts and obligations of the corporation. In fact, by and large, the only risk facing shareholders is their initial investment in the corporation. For example, if a corporation is subjected to a personal injury lawsuit, the shareholders personally will probably not have to pay for the damages awarded in the lawsuit.
However, this limited liability could be lost if the corporation is not properly maintained as required by Illinois law. The corporate functions and finances must be distinctly separate from the finances of the owners of the corporation. Additionally, it is important to properly maintain the books and records of the corporation.
A corporation sets forth its officers in its “bylaws.” Many corporations have a president, secretary, and treasurer. Each office may be held by the same person. The officers may be different than the shareholders or the owners of the corporation.
Creating a Corporation in Illinois
In Illinois, if you decide to create a corporation, you must complete the necessary registration with the Illinois Secretary of State. The registration forms are called “Articles of Incorporation.” The Articles of Incorporation are the corporate charter. The State of Illinois also provides many helpful guides for starting a small business. There is an initial fee to create a corporation in Illinois and an annual fee to maintain the corporation.
Illinois law permits state licensed professionals to create a corporation for their business. In the past, accountants, lawyers, and doctors created partnerships for their businesses. Illinois now permits licensed professionals to take advantage of the corporate structure. In addition to the general corporate requirements, the shareholders, officers and directors must be licensed professionals.
The attorneys at the Hays Firm have a combined total of 30 years-experience with advising new business owners. Our attorneys are available to discuss the different types of business entities and to help you determine whether a corporation will fit your business needs. Contact one of our attorneys for a free 30 minute consultation to discuss your new business!