Sunday, April 10, 2011

Illinois Incorporation Requirements

Incorporating on your own - what to think about before filing your Articles of Incorporation

Incorporating a business may seem daunting to those not familiar with the Secretary of State requirements, however, it is not impossible to prepare the filings yourself if you have a general idea of what is expected and what should be thought out prior to your formation. Today I am focusing on Corporations, there is just too much information to combine the procedures for Illinois Incorporations and Illinois Limited Liability Company formations into one neat tidy package. I have provided links to theIllinois forms for Articles of Incorporation and Application for Authority to do business in Illinois .

Sometimes just knowing what is expected from the State of Illinois will help you to think about what you should be considering when it comes to starting a business, such as your company name, what is your company's true purpose, who accepts your service of process and correspondence from the State of Illinois, who is your incorporator, how will you deal with stock, how many shares and class of stock do you want to issue and what is its initial value... Just by defining the above mentioned items, you have defined the basics of your company's structure and a general operating premise.

The following are things that belong in the Illinois Articles of Incorporation and are required to be included in your corporate filing:

1. Company Name. A corporation must have one of the following endings: Corporation, Incorporated, Company or Limited and may be an abbreviation of any of those endings.

2. Purpose. Each company must specify a purpose for organization. The State of Illinois will accept a standard purpose clause which is: "The transaction of any or all lawful businesses for which corporations may be incorporated under the Illinois Business Corporation Act of 1983, as amended".

3. Registered Agent. The address of the initial registered office and its initial registered agent. (This is where we hope you will use our services, we are the most reasonable on the web!

4. Incorporator. The name and address of your incorporator (Incorporator refers to the person filling out and filing the Articles of Incorporation forms for you).

5. Authorized Shares of Stock. The number and class or series of shares you intend to authorize and the consideration to be received for each class and share of stock. (Keep in mind that you will be paying franchise tax on the paid-in- capital from the initial issuance of stock. If you authorize 100 shares of stock at $1.00 per share, your franchise tax base will be $100.00. If you increase the value of the shares to $50.00 per share, your franchise tax base would then be $5000.00).

6. Issued Shares of Stock. The number and class of shares you intend to issue and the consideration to be received for each class and share of stock.

7. Designation of Class of Stock. You only need to consider this if your shares are divided into classes, the designation of each class and a statement of designations, preferences, qualifications, limitations, restrictions or special or relative rights associated with that particular class of stock. (This type of designation is more complex and you may want to discuss with an attorney the implications of issuing various classes of stock.) If you are not issuing stock with specific classes, you will not need to address this issue in your Articles of Incorporation.

8. Series of Stock. You will only need to consider this if you are issuing preferred or special class in a series, then the designation of each series and a statement of the variations in the relative rights and preferences of the different series, if the same are fixed in the articles of incorporation, or a statement of the authority vested in the board of directors to establish a series and determine the variations in the relative rights and preferences of the different series. This too should be discussed with an attorney to understand the implications of issuing various class and series of stock.

Items that can be included in the Articles of Incorporation, but are not required by statute:

1. Directors. You may include the names and addresses of the individuals who are to serve as the initial directors.

2. Provisions not inconsistent with law with respect to: (for items listed below, I would suggest you discuss their inclusion in the Articles of Incorporation with an attorney)

Managing the business and regulating the affairs of the corporation;
Defining limiting and regulating the rights, powers and duties of the corporation, its officers, directors and shareholders;
Authorizing and limiting the preemptive right of a shareholder to acquire shares whether then or thereafter authorized;
An estimate, expressed in dollars, of the value of all the property to be owned by the corporation for the following year (wherever located)
An estimate, expressed in dollars, of the value of the property to be located within Illinois during the same year;
An estimate, expressed in dollars, of the gross amount of business which will be transacted by it during the first year;
An estimate, expressed in dollars, of the gross amount thereof which will be transacted by the corporation in Illinois for the first year.

3. Corporate Action. superseding any provision of the Illinois Business Corporation Act that requires for approval of corporate action a two-thirds vote of the shareholders by specifying any smaller or larger vote requirement not less than a majority of the outstanding shares entitled to vote on the matter and not less than a majority of the outstanding shares of each class of shares entitled to vote as a class on the matter.

4. Limiting Director Liability. A provision eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, provided the provision does not eliminate or limit the liability of a director for breach of duty of loyalty to the corporation or its shareholders, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or for any transaction from which the director derived an improper personal benefit.

5. Other Provisions. Any provision under the Illinois Business Corporation Act is required or permitted to be set forth in the Articles of Incorporation or the corporation's by-laws. The Articles of Incorporation need not set forth any of the corporate Powers enumerated in the Illinois Business Corporation Act.

6. Duration of Corporation. The duration of the corporation is perpetual unless otherwise specified in the Articles of Incorporation.

Illinois Registered Agent, Inc.