Complete Guide to Forming an S-Corp in Illinois

Understanding S-Corporation Structure

What is an S-Corporation?

An S-Corporation is not a separate business entity type—it's a federal tax election that allows eligible corporations to avoid double taxation. According to the IRS, S corporations pass corporate income, losses, deductions, and credits through to shareholders for federal tax purposes.

Key Benefits of S-Corp Election

• Pass-through taxation: Avoids double taxation on corporate profits
• Self-employment tax savings: Owners can take salary + distributions
• Limited liability protection: Personal assets protected from business debts
• Professional credibility: Corporate structure enhances business image
• Illinois tax advantages: Optional pass-through entity tax election available through 2025

Step 1: Verify S-Corporation Eligibility

IRS S-Corporation Requirements

Before beginning formation, ensure your business meets IRS S-Corporation eligibility requirements:

• Domestic corporation: Must be U.S.-based entity
• Maximum 100 shareholders
• Eligible shareholders only: Individuals, certain trusts, and estates (no partnerships, corporations, or non-resident aliens)
• One class of stock: Different voting rights permitted, but only one class of stock
• Calendar tax year: Generally required (fiscal years require special approval)
• Not an ineligible corporation: Cannot be financial institution, insurance company, or domestic international sales corporation

Step 2: Choose and Verify Corporate Name

Illinois Corporate Name Requirements

The Illinois Secretary of State requires corporate names to:

• Include corporate identifier: Must end with "Corporation," "Incorporated," "Limited," "Company," "Corp.," "Inc.," "Co.," or "Ltd."
• Be distinguishable: Must differ from existing Illinois entities in the state database
• Maximum 80 characters: Including punctuation and spaces
• Avoid prohibited words: Cannot include restricted terms without authorization

Name Verification and Reservation Process

Step 3: Appoint Registered Agent and Directors

Illinois Registered Agent Requirements

Illinois law requires every corporation to maintain a registered agent who:

• Must have an Illinois street address (P.O. boxes not accepted)
• Must be available during business hours to receive legal documents
• Can be an individual Illinois resident or authorized business entity
• Acts as official contact for service of process and state correspondence

Director Requirements

• Minimum one director required for Illinois corporations
• Must be at least 18 years old
• No residency requirement for directors
• No maximum number of directors specified

Step 4: File Articles of Incorporation with Illinois Secretary of State

Required Information for Articles of Incorporation

The Illinois Secretary of State requires these details in Articles of Incorporation:

• Corporate name (as verified in Step 2)
• Registered agent name and Illinois street address
• Number of authorized shares (must specify common stock)
• Monetary consideration to be received for shares
• Incorporator information (person filing the Articles)
• Corporate purpose: "The transaction of any or all lawful purposes for which corporations may be incorporated under the Illinois Business Corporation Act"

Filing Methods and Fees

Franchise Tax Calculation

Illinois imposes an annual franchise tax on corporations based on paid-in capital:

• Rate: 0.15% of paid-in capital for amounts up to $1 million
• Rate: 0.10% of paid-in capital for amounts over $1 million
• Minimum Tax: $25
• Maximum Tax: $2 million annually
• 2025 Exemption: First $10,000 of calculated tax is exempt

Step 5: Obtain Federal Employer Identification Number (EIN)

EIN Requirement

The Internal Revenue Service requires all corporations to obtain an EIN for:

• Federal tax filing purposes
• S-Corporation election filing
• Opening business bank accounts
• Hiring employees

EIN Application Process

Online Application Steps

1. 1. Visit IRS EIN Assistant at IRS.gov
2. 2. Complete application with corporation information
3. 3. Provide responsible party SSN or ITIN
4. 4. Receive EIN immediately upon approval

Step 6: File IRS Form 2553 for S-Corporation Election

S-Corporation Election Process

Critical Filing Deadlines

Required Information for Form 2553

• Corporation name (exactly as filed with Illinois Secretary of State)
• Federal EIN (from Step 5)
• Business address
• Tax year information
• All shareholders must consent by signing the form

Form 2553 Filing Process

1. 1. Download Form 2553 from IRS website
2. 2. Complete all required sections including shareholder consent
3. 3. Obtain signatures from all shareholders
4. 4. Mail or fax to appropriate IRS service center
5. 5. Keep copies for your records

Step 7: Register with Illinois Department of Revenue

Illinois Business Registration

Registration Requirements

• Federal EIN (from Step 5)
• Illinois business address
• Business activity description
• Anticipated start date

Registration Process

1. 1. Access MyTax Illinois online
2. 2. Complete Form REG-1, Illinois Business Registration Application
3. 3. Submit registration
4. 4. Receive state tax ID and registration confirmation

Timeline and Cost Summary

Total Formation Timeline

• Illinois incorporation: 5-10 business days online, 10-15 days mail
• IRS EIN: Immediate online
• S-Corp election processing: 60-90 days typical
• Illinois tax registration: Same day

Total Formation Costs

Frequently Asked Questions

Official Resources and Contact Information

Primary Authorities

Online Resources

• Illinois Corporation Formation: ilsos.gov/departments/business_services/incorporation/
• Articles of Incorporation Online: apps.ilsos.gov/corparticles/
• Illinois Business Search: ilsos.gov/corporatellc/
• MyTax Illinois Registration: mytax.illinois.gov
• IRS S-Corporation Information: IRS.gov/businesses/small-businesses-self-employed/s-corporations
• Form 2553 Instructions: IRS.gov/instructions/i2553