Illinois Annual Report Filings

The Importance of a Timely Annual Report Filing
and the Consequences of Non-compliance.

Most states require a company to file some type of information yearly to confirm to the state that the company is viable and active. These filings also generate income for your domestic or foreign state where the company has a presence, and let’s face it; annual reports are a huge revenue maker for those states.

Think about it - how many businesses are there in your state? It is easy to understand why the various Secretaries of State place such an emphasis on these filings because of the revenue annual report filings generate.

Annual reports are also the only way a company can tell the world that they are in compliance with their local jurisdictions. Without this evidence of compliance, the state can hinder your business activities in a variety of ways. First and foremost, without a good standing certificate to evidence your annual report compliance, a company cannot sell itself, merge with another entity, or qualify to do business in another state and in some instances, cannot open a bank account, apply for credit or enter into some contracts or agreements with other companies. To learn how to complete the Corporation Annual Report follow this link:  https://www.illinoisregisteredagent.com/how-to-fill-in-an-annual-report.

The consequences of non-compliance with the Illinois Secretary of State annual report filing can be quite costly. By not filing your annual report by its due date, your company will begin to accrue penalties and interest and eventually lead to involuntary dissolution and the possible loss of your company name. The penalties and interests accrue until the issue is resolved. If your company has been administratively dissolved, your company will still accrue penalties and interest from the moment your company was in non-compliance until the moment you reinstate and pay those penalties and fines.

Penalties and Interest Calculations - Non-compliance by an LLC

Your annual report is due by the last day of the month prior to your initial formation month (i.e. if your formation date in Illinois was January 15, 2009, your annual report due date would be December 31, 2008).

Sixty days past your annual report due date, you will receive a notice that states if you do not comply your entity will be administratively dissolved in 60 days. At this point your late penalty is $300.00 on top of your annual report fee of $250.00, which also requires an additional filing of an LLC 50.15.

If you do not file the annual report at this point, the state will begin the process to administratively dissolve your company and you will receive notice of this immediately after the 60 days previously mentioned have lapsed. Reinstating a company after administrative dissolution is an additional $500.00 filing fee associated with the filing of the form LLC 35.40 / 45.65 plus the $300.00 penalty and the filing of the form LLC 50.15 as well as the $250.00 owed for annual report fee and filing. The reinstatement process is expensive and time consuming.

Penalties and Interest Calculations - Non-compliance by a Corporation

Your annual report is due by the last day of the month prior to your initial formation month (i.e. if your formation date in Illinois was January 15, 2009, your annual report due date would be December 31, 2008).

To determine the penalty accrued to a late filed annual report, multiply the corporation’s franchise tax by 10% (.10) per month. To determine the interest due on a late filed annual report, multiply the corporation’s franchise tax by 2% (.02) per month. The amount due to the Secretary of State will be the sum of the total penalty and the total interest added together with the corporation’s franchise tax. Payment and acceptance of the annual report by the Secretary of State will bring your company back into good standing.

Failure to file an annual report within thirty days past your annual report due date will trigger a notice of delinquency. Failure to act upon this notification will trigger a second notice 120 days after your annual report due date that the corporation in non-compliance will be administratively dissolved.

To bring your company back into good standing after being administratively dissolved, the corporation must file form BCA 12.45/13.6 Application for Reinstatement Domestic/Foreign Corporation together with the annual report and pay the accrued penalties and interest as well along with the franchise tax due for each year the corporation failed to file their annual report.

Illinois Registered Agent, Inc. provides links to the Illinois annual report forms on our website for your domestic or foreign corporation along with other topics relating to Illinois entities.

What Constitutes Doing Business in Illinois

What Constitutes Doing Business in Illinois?

Companies located outside of Illinois that have an interest in pursuing business ventures here in the State of Illinois have all asked this same question -Do I really need to qualify my company with the Secretary of State to transact business in Illinois?

What do I mean by qualify in Illinois? Simply put, qualifying means that your company is required to provide some corporate financial, organizational and officer information to the Secretary of State on their prescribed forms and obtain and attach copies of the certified evidence of your company’s filing history and provide evidence of your company’s status with your domestic state. Status may include your standing with filings of annual reports, business taxes and any other annual filings that are specified as required from your domestic state.

Corporations filing the application for authority to do business in Illinois, the BCA 13.15 form is one of the most frequently rejected forms due to the vagueness of the initial franchise tax requirements and calculations, improper supporting evidence from the domestic state that is either not certified, not attached or not in its entirety, by conflicting information presented on the Illinois form that does not match the supporting documentation from the domestic state, or the purpose clause. Needless to say, it is a hard form to get past the Illinois Secretary of State filing clerks. (Information regarding the content of the applications for authority can be found in earlier articles posted on this blog).

What constitutes doing business in any state (or exceptions to doing business) is truly interpretive and if you have any question at all after reading this article, I would suggest enlisting professional legal help to determine if the nature of your business is one that would trigger the state’s qualification requirements. An attorney will be able to interpret these exceptions and apply them in the proper context to your business purposes. In general, what constitutes doing business or qualifying to do business revolves around the ability to sue and be sued.

Activities That Do Not Constitute Transacting Business in Illinois - Corporations(Pursuant to the Illinois Business Corporation Act of 1983)

1. Maintaining, defending or settling any proceeding;
2. Holding meetings of the board of directors or shareholders or carrying on other activities concerning internal corporate affairs;
3. Maintaining bank accounts;
4. Maintaining offices or agencies for the transfer, exchange, and registration of the corporations own securities or maintaining trustees or depositories with respect to those securities;
5. Selling through independent contractors;
6. Soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if orders require acceptance outside the State before they become contracts;
7. (blank)
8. (blank)
9. Owning, without more, real or personal property;
10. Conducting an isolated transaction that is completed within 120 days and that is not one in the course of repeated transactions of a like nature; or
11. Having a corporate officer or director who is a resident of this State.

Activities That Do Not Constitute Transacting Business in Illinois - LLC's(Pursuant to the Illinois Limited Liability Company Act)

1. Maintaining, defending or settling any proceeding;
2. Holding meetings of the managers or members or carrying on other activities concerning internal company affairs;
3. Maintaining bank accounts;
4. Maintaining offices or agencies for the transfer, exchange, and registration of the limited liability company’s own securities or maintaining trustees or depositories with respect to those securities;
5. Selling through independent contractors; (
6. Soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if orders require acceptance outside the State before they become contracts;
7. Owning, without more, real or personal property;
8. Conducting an isolated transaction that is completed within 120 days and that is not one in the course of repeated transactions of a like nature; or
9. Having a member or manager who is a resident of this State.

Activities That Require Qualification in Illinois

This list is a general representative of the activities conducted in a foreign state that are sufficiently regular, systematic, extensive and continuous to trigger the qualification requirements in most states:

1. Accounting;
2. Advertising;
3. Banking;
4. Construction;
5. Sales; and
6. Third Party Sales.

Foreign Limited Liability Companies

A limited liability company formed in any other state can transact business in Illinois once they complete and submit an Application for Admission to Transact Business in Illinois (“LLC form 45.5”, in duplicate original) to the Secretary of State of Illinois together with original certified copies of the company’s formation documents with any and all amendments that were filed with their domestic state of formation and a certificate of existence from your domestic state (also known as a good standing certificate). All of the information that is required on the LLC form 45.5 will be found in your certified copies that you obtain from your domestic state.

If you have been transacting business in Illinois for more than 60 days prior to filing of your company's application for admission to transact business, be prepared to pay hefty fines and penalties. Illinois is extremely strict when it comes to doing business with authority and the penalize you heavily for not being timely with your filing. The initial penalty is $2000.00 and accrues at $100.00 per month past the initial 60 days. I have outlined their fees in detail in number 8 below. If you have been transacting business without authority, the Secretary of State will not file your application for authority until your company's annual report filing fees, penalties and interest has been satisfied.

Information Required on the Application for Admission to Transact Business in Illinois

(LLC Form 45.5)

1. Limited Liability Company Name: The company name must contain the terms "Limited Liability Company, LLC or L.L.C., and must be in the English alphabet, Arabic or Roman numerals, can not contain the following terms: "Corporation, Corp, Incorporated, Inc., Ltd., Co., or Limited Partnership or L.P. " The company name is the name the company will be doing business as in the State of Illinois and must be distinguishable from other companies that have filings with the Illinois Secretary of State;

2. Assumed Name: If the name the company as it is stated on the organizational documents in its domestic state is not available for use in Illinois, list the name under which the company proposes to transact business in the State of Illinois. A foreign limited liability company may be admitted to transact business in this State under any name (whether or not it is the name under which it is formed in the jurisdiction of its formation) that would be available to a limited liability company. However, if the name is different from the name under which it is formed in its jurisdiction of organization, the foreign limited liability company shall also file an assumed name application in accordance with 805 ILCS 180/1-20 of the Illinois Limited Liability Act.

3. Jurisdiction of Organization: The company's state of organization (domestic state);

4. Date of Organization: The date the company was organized in its domestic state;

5. Period of Duration: The date in which the company is to be dissolved or terminated on a certain date or by the occurrence of specific act. If no such date is specified, the company is to have a perpetual duration;

6. Address, including County, of the office required to be maintained in the jurisdiction of its organization or, if not required, of the principal place of business: This will be the principal office address in the original state of formation (domestic state);

7. Registered Agent Name and Registered Office Address: Each limited liability company and foreign limited liability company must continuously maintain a registered agent and registered office in the state of Illinois and must list the name and business address of the proposed registered agent in this State (Illinois Registered Agent, Inc. provides the most cost effective agent representation in Illinois);

8. If applicable, date on which Company first conducted business in Illinois: If your limited liability company has established a presence in Illinois without qualifying to do business, you must enter the date the company first transacting business in Illinois. Illinois allows a 60 day grace period to get your company on file with the Illinois Secretary of State, after that time, the penalties and late fees become quite excessive. Outlined below are the penalties and fines:

* LLC's formed 61 days or longer after transacting business in Illinois the penalty is $2,000.00. The fines assessed for each month past the 60 day grace period is $100.00 per month. Limited liability companies that have transacted business for years without qualifying must pay an additional $250.00 per year for the annual report fees along with a $300.00 penalty for the first year the annual report is late, and an additional $100.00 penalty for each year thereafter for which the company did not file annual reports.

9. Purpose(s) for which the Limited Liability Company is organize and proposes to conduct business in Illinois: The general purpose clause is now included in the Articles of Organization but can be broadened to include your company specifics. Typical general purpose clause language is as follows: "the transaction of any or all lawful business for which limited liability companies may be organized under the Illinois Limited Liability Company Act".

10. The Limited Liability Company is either managed by the managers or has management vested in the members: This will be identified in your operating agreement (in a manager managed company, the members have chosen a manager or managers to direct the operations of the company, in a member managed company, the member has a direct interest in the limited liability company and has equal rights in the management and conduct of the company's business). This field requires the names and addresses of your managers or members - depending on which management method you choose.

11. Designation and appointment of Illinois Secretary of State for Service of Process appointment under specific circumstances set forth in section (b) of Section 1-50 of the Illinois Limited Liability Company Act: This item takes effect upon execution and acceptance of the form by the Secretary of State of Illinois. No further information is required in this field.

12. Attestation that the application is accompanied by a Certificate of Good Standing from the state of organization that is no more than 60 days old: A good standing certificate (or also known as a certificate of existence) can be purchased from the company's domestic state. This certificate certifies that the company has complied with all of its domestic states taxes and renewal fees and has not been involuntarily dissolved.

13. If the period of duration is a date certain and not stated in the Articles of Organization from the domestic state, then a copy of the page from the Operating Agreement (or LLC Agreement) stating that date must also be submitted.

14. Names and Addresses of Organizer(s): The name and address of your organizer (Organizer refers to the person signing the Articles of Organization forms).

Illinois Registered Agent, Inc. strives to help you save some money. If you are filing on your own and have questions, ask us, we are more than happy to help guide you through the documents to achieve a successful filing. If you would rather have Illinois Registered Agent, Inc. do it for you, ask us for a quote - our fees are very reasonable.

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Qualifying a Corporation To Do Business In Illinois

Corporations Obtaining a Legal Presence in Illinois

Any company incorporated in any other state can transact business in Illinois after they complete and submit an Application for Authority to Transact Business in Illinois (“BCA form 13.15”, in duplicate original) to the Secretary of State of Illinois together with original certified copies of the company’s formation documents with any and all amendments that were filed with their domestic state of incorporation.

All of the information that is required on the BCA form 13.15 form will be found in your certified copies of your articles of incorporation from your domestic state.

If you have been transacting business in Illinois prior to filing the application for authority to do so, your company will be held responsible for the franchise tax dating back to the date your company began doing business in Illinois, along with penalties and additional annual report filing fees for those previous years indicated on your BCA 13.15 form. If you have been transacting business without authority, the Secretary of State will not file your application for authority until those back taxes, filing fees and penalties are satisfied.

Information Required on the BCA Form 13.15:

1. (a) Corporate Name: The corporate name must be distinguishable from other companies or assumed company names on record with the Secretary of State and must contain one of the following words or abbreviations: Corp., Corporation, Company, Co., Limited or Ltd., Incorporated or Inc.

1. (b) Assumed Name: If your company name is not available for use in Illinois, your company will need to adopt and agree to transact business under an assumed corporate name. It is always a good idea to check your name availability first.

2. State or country of incorporation and your date of incorporation: The state of incorporation is the state where you filed your original formation documents and the incorporation date must be the month, day and year of your incorporation.

3. Address of principal office where ever located and address of Principal office in this state: List the business address of the company's main office and if the company will have an office in Illinois, the address of its location in Illinois.

4. Name and address of your registered agent and registered office: We hope that you choose Illinois Registered Agent for your agent representation and service of process. We offer the most reasonably priced and reliable agent representation for Illinois on the web. Read more about us here: https://www.illinoisregisteredagent.com/what-we-offer.

5. States and countries in which it is admitted or qualified to transact business: List your incorporation state and any other state that you currently have authority to transact business.

6. Provide the names, addresses, city, state and zip codes of the principal officers and directors.

7. The purpose or purposes for which it was organized which it proposes to pursue in the transaction of business in this state: The general purpose clause is just a bit different from the purpose clause of a domestic entity. The following language is approved by the Secretary of State and reads: “To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of (state), and permitted under the Illinois Business Corporation Act of 1983”. You may include a specific description of the type of business you intend to transact, however, this may limit your company's ability to pursue other types of business activities.

8. Authorized and Issued Shares: The authorized and issued shares, class and par value will be stated in your certified documents. If no additional amendments were filed after the filing of the initial formation documents, the issued and authorized shares will not have changed. If there were amendments filed after the filing of the initial formation documents, check the amendments to be sure these amounts have not changed. If there have been changes, list the most current amount of authorized and issued shares. You will be able to tell the most current by the filing dates documented on each filing.

9. Paid-In-Capital: The amount of money or other property paid to the corporation for issued shares, less expenses incurred with the issuance of shares, plus any cash or other consideration contributed to the corporation.

10. Each foreign corporation is required to disclose a good faith estimated of the amounts of property it expects to own and the amount of business it intends to transact in Illinois and in its domestic state (for the purpose of computing franchise tax, “property” means gross assets of the corporation (i.e. real, personal, tangible, intangible or mixed) without qualification and “business” means gross revenues of the corporation from whatever source derived). The following formula will help to determine your allocation factor and franchise tax:: the sum of b+d divided by the sum of a+c (to the 6th place) multiplied by the paid in capital = Illinois Tax Capital. Multiply Illinois Tax Capital by .0015 = franchise tax. The minimum franchise tax reportable to the state is $25.00.

11. Interrogatories:
(a) Is the corporation transacting business in this state at this time?

· If you are qualifying for authority to transact business after you have established a business presence in Illinois, the Secretary of State will impose penalties as well as back franchise tax and annual report fees for the period of time that your company has been doing business in Illinois.

· The penalty for transacting business without authority is $200.00, plus $5.00 per month or 10 percent of fees and taxes, whichever is greater. In addition, late payment interest of 1% per month accrues against the corporation until qualification. If you are in this situation, you should call the Secretary of State to get a clear idea of what the aggregate cost would be to qualify.

· The corporation’s outstanding tax constitutes a lien on the real and personal property of the corporation. Any corporation doing business in Illinois without authority will not be permitted to maintain a civil action in any court in Illinois until qualified.

(b) if yes, state the exact date on which it commenced to transact business in Illinois.

12. Attestation of the fact that the original certified copies of the formation documents with all amendments from the corporation's domestic state are attached.

13. Date and signature of a current acting officer authorized to sign such documents and restate the name of the corporation as it is shown on the most current certified formation documents that state the current company name.

Illinois Registered Agent, Inc.. can help you through this process or we can do it for you. Contact us with your questions or for a quote to do it for you.

Illinois Corporations & Franchise Taxes

Illinois Corporation's Franchise Tax Calculations

Each domestic and foreign corporation is required to pay franchise tax at the time of filing its first report of issued shares (articles of Incorporation or application for authority) for the privilege of exercising its franchises in the State of Illinois. Additional franchise tax is payable to the Secretary of State whenever the corporation reports a change in its paid-in capitalhttps://www.illinoisregisteredagent.com/corporate-definitions over the amount last reported to the Secretary of State. Some of the documents that generate a change in paid-in capital are:

• a report of the issuance of additional shares;
• a report of an increase in paid-in capital without the issuance of additional shares;
• an amendment to the articles of incorporation increasing or decreasing the amount of shares the corporation is authorized to issue;
• a report of cumulative changes in paid-in capital;
• a statutory merger.

A Note to Foreign Qualifications

If you are a company incorporated in another state and filing an application for authority to do business in Illinois, and you indicate on your application that your company has done business in Illinois prior to the filing date of your application for authority, your company will be held responsible for the franchise tax dating back to the date your company began doing business in Illinois along with penalties and additional annual report filing fees for those previous years accumulated from the date you indicated as your first date of doing business in Illinois.

The Secretary of State will not file your application for authority unless the back taxes, filing fees and penalties are satisfied. You may want to review what constitutes doing business in Illinois if you feel you have had a presence in Illinois prior to filing for authority with the state. See our section on Foreign qualification that specifies how to figure your initial franchise taxes.

Calculating Your Franchise Tax

The Secretary of State gives you two options for calculating your franchise tax. You must select the appropriate option on your annual report. The least painful of the computations is to elect to pay franchise tax on the entire amount of paid-in capital. Of course your choice will be determined on the amount of paid in capital vs the amount of property and sales in Illinois. This option gives most incorporators the incentive to keep the paid-in capital (or par value per share) relatively low.

The Easy Calculation

The Annual Franchise Tax is computed at the rate of 1/10 of 1% (.10 of 1%) for the 12 month period commencing the first day of the anniversary month of the corporation on the proportion of its paid-in capital as of the last day of the third month preceding the anniversary month represented by the ratio of Illinois property and business to total property and business everywhere - minimum tax is $25.00 and maximum tax is $2,000,000. The state has this formula listed on the annual report so that all that is required is a data entry of the paid in capital to calculate the franchise tax.

The Not-So-Easy Calculation

The other choice for calculating your franchise tax is on the basis of the amount represented in this state of its paid-in capital on the last day of the third month preceding the anniversary month. The amount represented would be that portion of its paid-in capital that the sum of the value of its property located in this state (b-below) and the gross amount of business transacted by it or from businesses in this state (d-below), divided by the sum of the value of all of its property wherever located (a-below) and the gross amount of its business where ever transacted (c-below). There are exceptions of course and it is recommended to review the corporate statutes to verify which calculation you should follow.

Value of the property (gross assets):

(a) owned by the corporation, wherever located: ....................... (a) $ ____________

(b) of the corporation located within the State of Illinois: ......... (b) $ ____________

Gross amount of business transacted by the corporation:
(c) everywhere for the above period:............................................. (c) $ ____________

(d) at or from places of business in Illinois for the above period: (d) $ ____________

ALLOCATION FACTOR = b + d = _______________
a + c (6 decimal places)

These guidelines are also found on Illinois Registered Agent, Inc. website.

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Illinois Registered Agent, Inc.

Not-for-Profit Corporations are Not-So-Easy

Are you thinking of forming a not-for-profit (“NFP”) business corporation? At first glance, the Illinois NFP Articles of Incorporation look simplistic, but there are many things that should be considered prior to filing the NFP forms with the Secretary of State.

If you are contemplating this type of business entity and intend to file for an exempt status with the IRS, I recommend that you find a reliable accountant to navigate the IRS Code and a reputable attorney that you can consult with about the language required by the Illinois Secretary of State and the IRS. You will be working with Illinois statutes and the Internal Revenue Code and and in some instances you will have to cite the Liquor Control Act. If you are not a tax attorney or an accountant, this process can be somewhat intimidating.

It is not impossible to prepare the state and tax documents yourself, however, the IRS will be exacting in the language that is presented to them on behalf of your company’s request for exemption. The language set forth in the Articles of Incorporation for your NFP will need to mirror the requirements of the IRS as well as setting forth the description of the limitations imposed by law on the NFP.

If you are looking to educate yourself on the IRS exemption process I would recommend reading the following IRS publications: Publication 557 (06/2008), Tax-Exempt Status for Your Organization, and Chapter 25 - Exempt Organizations Determinations Manual: These two publications together with the 29 page Form 1023 that is required by the IRS to apply for tax exempt status, may just send you running to an accountant or tax attorney.

If you are not trying to obtain tax exempt status, the process becomes much less complicated.

Information required by the Secretary of State in the formation of Not-For-Profit Corporation is quite different from the information required when forming a for-profit corporation. Those differences are reflected in the corporate name, the general purpose clause, the state board of director requirements and the lack of shareholders and stock issuance. The information that is consistently required by the Secretary of State across all entity formations is the information about your registered agent. Who accepts your service of process and correspondence from the State of Illinois?

The Illinois Secretary of State requires the following items listed on the Not-For-Profit Articles of Incorporation and need to be included in your corporate filing:

1. Company Name. A NFP corporation must have one of the following endings: Corporation, Incorporated, Company or Limited and may be an abbreviation of any of those endings. If the corporate name implies the corporation may be organized for any other purpose other than the acceptable specific purpose as set out in the purpose clause, you will be required to include NFP to the corporate name.

2. Illinois 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 reasonably priced and reliable agent representation for Illinois on the web!)

3. Number of Directors. List the number of directors constituting the first board of directors and their names and addresses. (Illinois requires a minimum of 3 directors for a NFP corporation).

4. Purpose. Each company must specify a purpose for organization. The State of Illinois requires the purpose clause to be specific, unlike the for profit corporation requirements that allows for a general purpose, the purpose of a NFP must be focused and to the point. Once you pinpoint your purpose a more descriptive narrative can be included. The following categories are authorized by the Illinois Secretary of State as an acceptable purpose(s) for the formation of NFP corporations:


1) Charitable;
2) Benevolent;
3) Eleemosynary;
4) Educational;
5) Civic;
6) Patriotic;
7) Political;
8) Religious;
9) Social;
10) Literary;
11) Athletic;
12) Scientific;
13) Research;
14) Agricultural;
15) Horticultural;
16) Soil improvement;
17) Crop improvement;
18) Livestock or poultry improvement;
19) Professional, commercial, industrial or trade association;
20) Promoting the development, establishment or expansion of industries;
21) Electrification on a cooperative basis;
22) Telephone service on a mutual or cooperative basis;
23) Ownership and operation of water supply facilities for drinking and general domestic use on a mutual or cooperative basis;
24) Ownership or administration of residential property on a cooperative basis;
25) Administration and operation of property owned on a condominium basis or by a homeowner association;
26) Administration and operation of an organization on a cooperative basis producing or providing goods, services or facilities primarily for the benefit of members who are consumers of such goods, services or facilities;
27) Operation of a community mental health board or center organized pursuant to the Community Mental Health Act for the purpose of providing direct patient services;
28) Provision of debt management services as authorized by the Debt Management Service Act;
29) Promotion, operation and administration of a ridesharing arrangement as defined in Section 1-176.1 of the Illinois Vehicle Code;
30) Administration and operation of an organization for the purpose of assisting low-income consumers in the acquisition of utility and telephone services;
31) Any purpose permitted to be exempt from taxation under Section 501(c) or 501(d) of the U.S. Internal Revenue Code, as now in or hereafter amended;
32) Any purpose that would qualify for tax-deductible gifts under the Section 170(c) of the U.S. Internal Revenue Code, as now or hereafter amended (Any such purpose is deemed to be charitable under subsection (a)(1) of this Section.); and
33) Furnishing natural gas on a cooperative basis.

(If a NFP is organized to function as a club, you must include a statement that the corporation will comply with the State and local laws and ordinances relating to alcoholic liquors).

5. Other. If you are applying for tax exempt status with the IRS you will be required to elaborate on your purpose clause and provide the limitations imposed by law on tax exempt organizations. This section must be written in compliance with the IRS Code and weighs heavily in the determination of your tax exempt status.

6. Incorporator. The name and address of each of your incorporators (Incorporator(s) refers to the person(s) filling out and filing the Articles of Incorporation forms for you).

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

If a NFP corporation is a condominium association, as defined by the Condominium Property Act, a cooperative housing corporation as defined by the Internal Revenue Code, or a homeowner association which administers a common interest community as defined in the Illinois Code of Civil Procedures, the articles of incorporation may include the following provisions not inconsistent with law and with certain limitations as described more fully in the statutes:

• Managing and regulating company affairs, including distribution of assets upon final dissolution;

• Any provision under the Illinois General Not-For-Profit Corporation Act of 1986 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 General Not-For-Profit Corporation Act of 1986.

• The duration of the corporation is perpetual unless otherwise specified in the Articles of Incorporation.

Access the Illinois Articles of Incorporation forms on our website: https://www.illinoisregisteredagent.com/forms

Illinois Registered Agent, Inc.

Once you have filed your Articles of Organization - Operating Agreements

ILLINOIS OPERATING AGREEMENTS for LLC's

The articles of organization identify your company's structure very much the same as a corporation’s bylaws dictate how your company will be operated. A limited liability company’s operating agreement (also referred to as a limited liability company agreement) regulates the affairs of the company and the conduct of its business. An operating agreement also governs relations among the members, managers and the company.

Illinois limited liability company operating agreements can be as structured, or as unstructured, as the members determine necessary. If you are the sole member, your operating agreement may not be as in-depth as those of a company with multiple members where defining parameters to memberships would be more essential and could alleviate any potential for misunderstandings.

The state statutes, in this case, are pretty lax about what should be included in the operating agreement; however, the statutes do outline those items that must not be present in any operating agreement.

Outlined below are items that you should consider when preparing an operating agreement and what items the state statute expressly prohibits.

Illinois operating agreements may not:

1. restrict a right to information or access to records;
2. vary the right to expel a member (specified by statute);
3. vary the requirement to wind up the LLC’s business (as specified by statute);
4. restrict rights of a person, other than a manager, member and transferee of the member’s distributional interests;
5. restrict the power of a member to dissociate (specified by statute);
6. eliminate or reduce a member’s fiduciary duties unless specific types or categories of activities that do not violate these duties are identified in the agreement or the operating agreement specifies the number or percentage of members or disinterested managers that may authorize or ratify a specific act or transaction that would otherwise violate these duties;
7. eliminate or reduce the obligation of good faith and fair dealing; the operating agreement may determine the standards by which the performance of the obligation is to be measured if the standards are not manifestly unreasonable.

The following items are typically portrayed in Illinois operating agreements:

Name; Formation.
State the company name, formation date and formation State of Illinois;

Purpose.
1. Insert the purpose clause used in the articles of organization;

Offices.
2. List the principal office of the limited liability company (you may want to generalize this information to avoid having to amend your operating agreement when you change locations (i.e., the principal office shall be located at such place or places inside or outside of the State of Illinois as the member (manager) may designate from time to time); and

List the initial registered office and registered agent named in the articles of organization. (this too can be generalized to avoid amending the agreement (i.e., the registered office of the company required to be maintained in the State of Illinois shall be the office of the initial registered agent named in the articles of organization as the manager/member may determine from time to time);

Members.3. A statement indicating the member(s) name(s) and address(es) and whether or not this list of members can be amended (this can be a generalization with an attached schedule that lists the members names and address along with the initial contribution);

Duration.
4. Determine if the company’s duration be perpetual or continue until dissolved or terminated;

Management.
5. Specify whether the company will be member managed or manager managed and their respective powers in relation to authorizing various acts, appointing, employing, delegating or contracting with entities or persons for the day to day business transactions, and in a manager managed situation, how the manager is elected;

Member Rights / Meetings.
6. Consent of the members/managers can be defined here, however statutes dictate that for certain actions, consent of all of the members is required which includes the following
a. amendments of the operating agreement;
b. amendments to the articles of organization;
c. the compromise of an obligation to make a contribution to the company;
d. the compromise of an obligation of a member to make a contribution in violation of the Limited Liability Company Act;
e. the making of interim distribution, including the redemption of an interest;
f. the admission of a new member;
g. the use of the company’s property to redeem an interest subject to a charging order;
h. the consent to dissolve the company;
i. waiver of the right to have the company business wound up and the company terminated;
j. the sale, lease, exchange or other disposal of all, or substantially all of the company’s property (merger or acquisition);

Capital Contributions.
7. Describe what contributions are required to be a member of the company and under what conditions a new member may be admitted;

Assignment of Company Interest.
8. Determine whether the members can sell, assign, pledge or transfer or encumber any or all of their interest in the company and if so, what consent is need to effect this transfer and a statement describing the procedures to do so;

Additional Members.
9. Will your company allow additional members and what is required of new members (i.e., such as signing a counterpart to the operating agreement, capital contributions, and who has the right to admit additional members);

Distributions.
10. A description of when and how distributions of cash or other assets of the company will be made, and what factors determine the distributions and the allocations of profit and loss;

Dissolution of the Company.
11. Under what conditions or occurrences would the company be dissolved;

Continuation of the Company.12. Whether the company will continue if a member withdraws and whether the decision to continue after the withdrawal of a member by any remaining members is in writing or by a majority or unanimous consent;

Limitation on Liability.
13. This is a statement that the company bears the liability and that liability is not an obligation of its members or managers.

Indemnification of Officers, Employees, Managers and Agents.14. Identify who this indemnification covers and to what extent, specify authorization by members, managers, legal counsel of contributors, repayment of expenses related to same, insurance, and member notification.

Amendments.
15. Specify whether the operating agreement can be amended and by whom and what are the procedures and under what conditions can the agreement be amended;

Governing Law.
16. This indicates to all the parties of this agreement that the operating agreement is governed by Illinois law and in the case of a legal dispute, Illinois law would be applicable.

Signatures:
17. Signatures of all of the initial members should be present on the operating agreement.

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