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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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.

Illinois Registered Agent, Inc. has links to Illinois LLC and other Illinois entity forms on its website http://www.illinoisregisteredagent.com/. Illinois Registered Agent, Inc. offers the most reasonably priced and reliable Illinois agent representation on the web!

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Forming an Illinois Limited Liability Company

A limited liability company is structurally much different than a corporation and the decision to chose one entity type over the other was discussed in my article "To incorporate or not to incorporate: Taxing Considerations, posted on February 14, 2009. The differences between the two types of entities revolves around the articles filed with the Secretary of State and the appropriate document that identifies the authorized powers that manage the company's affairs. For a corporation those documents would be the Articles of Incorporation and the company by-laws, for a limited liability company those documents would be the Articles of Organization and the Operating Agreement (or limited liability company agreement). Organizational forms can be found on our website by following the links highlighted above.

Today I am focused on forming a limited liability company and what to keep in mind when preparing your forms for filing. I will reiterate that before you begin preparing your form, be sure to check your company name availability. I have a link on my website that will take you directly to the name availability check on the Illinois Secretary of State website.

The following are things that belong in the Illinois Articles of Organization and are required to be included in your limited liability company filing:

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 or symbols capable of being readily reproduced by the office of the Illinois Secretary of State.

The name of the company cannot 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 or the company adopts an assumed name, and the name can not contain any word or phrase that indicates or implies that it is organized for any purpose other than those permitted by the Illinois Limited Liability Company Act. (Refer to the Illinois Limited Liability Company Act for additional requirements if your company is a bank, fiduciary or trust.)

The company name must be distinguishable from other companies that have filed articles of incorporation or articles of organization with the Illinois Secretary of State, including companies from other states that have been admitted to transact business in Illinois, any name that has filed for an exclusive right to that name (name reservation) with the Secretary of State, any assumed name that has been filed with the Secretary of State. The Secretary of State determines whether your company name is distinguishable or not. Sometimes the best thing to do is to call the Secretary of State to verify availability of the name you choose for your company. We have links to the Illinois Secretary of State Name Availability check on our website.

2. Address of Principal Place of Business where records of the company will be kept: The principal office may, but need not be a place of business in Illinois.

3. Articles of Organization are effective on: Choose the effective date of your Articles of Organization. This typically means the date your business is established in the eyes of the Secretary of State. Common effective dates are the date the entity is filed, however you do have the option of choosing a date in the future but not to exceed 60 days after the actual filing date.

4. 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. This is where we are hopeful you will choose Illinois Registered Agent, Inc. for your agent representation. We are the least expensive and most reliable agent representation for Illinois on the Web!

5. Purpose(s) for which the Limited Liability Company is organized: 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 purposes for which the limited liability company is the transaction of any or all lawful business for which limited liability companies may be organized under the Illinois Limited Liability Company Act.

6. Latest date, if any, upon which the company is to dissolve: Most entities leave this blank to indicate the duration of the company will be perpetual unless there is a specific event that is specified in the company's operating agreement then that date may be entered.

7. (Optional) Other provisions for the regulation of the internal affairs of the Company. This could be any other provision, not inconsistent with law, that the members elect to set out in the articles of organization for the regulation of the internal affairs of the limited liability company, including any provisions that are, under the Illinois Limited Liability Company Act, required or permitted to be set out in the operating agreement of the limited liability company.

8. The Limited Liability Company is either managed by the managers or has management vested in the members. This is quite the topic. I will go into this in more detail in another forum, but for the purposes of completing Articles of Organization you will need to know how this decision will affect the management of your company. In a nutshell, if the company is manager managed, the members have chosen a manager or managers to direct the operations of the company. This is typically reflected in the operating agreement. If the company is member managed, 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 and is specified in the operating agreement. Managers are designated, appointed, elected, removed or replaced by a vote or consent of a majority of the members, while members acquires a membership interest directly from the limited liability company.

This field requires the names and addresses of your managers or members - depending on which management method you choose.

9. Names and Addresses of Organizer(s). The name and address of your organizer (Organizer refers to the person filling out the Articles of Organization forms for you).

Illinois Registered Agent, Inc. is a registered business in Illinois. We provide the most reasonably priced ($75 domestic, $85 foreign) and reliable registered agent representation for Illinois that you will find on the Web. We hope you will visit our site and follow our blog for future postings.

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Once you have filed your Articles of Incorporation

By-Laws

The articles of incorporation identify your company's structure while the by-laws spell out how your company will be operated. A corporation's by-laws may contain any provisions for the regulation and management of the affairs of the corporation not inconsistent with law or the articles of incorporation.

Illinois by-laws should outline everything that you could consider as essential for the legal (corporate compliance with the Illinois statutes) management of your company. Listed below are items that you should consider as pertinent to your company's operations.

REGISTERED AGENT
1. Identify your principal office in the State of Illinois, and determine if that office can be changed from time to time by the board of directors, if you do not have a physical location and your representation is through a Registered Agent, identify their principal office location and address and your registered agent's name.

SHAREHOLDERS
2. Identify shareholder information pertaining to annual and special meetings, location and times, how the shareholders will be notified of such meetings, and whether the actions of the shareholders can be taken without a meeting and by written consent. If your company pays dividends, you may want to fix a record date to determine shareholders entitled to notice of a vote at a meeting, identify a quorum, proxies and identify voting shares as set forth in your articles of incorporation. This section also may address voting procedures.

DIRECTORS
3. Identify director information pertaining to how many directors, tenure and their qualifications and if and how the number of directors can be increased or decrease, replaced, removed or retired and addresses vacancies in general. Annual, regular and special meetings and notice for such meetings should be outlined, and reference to what constitutes a quorum. This section should identify informal actions (actions by the board of directors without a meeting and documented by written consent), compensation, presumption of assent and resignation procedures.

OFFICERS
4. Identify the number of officers your company may have, their title, how they are to be elected and their term of office, removal, vacancies and a description of each officer's role within the company. Officer elections are typically handled at the annual meeting, with documentation evidencing their election by written consent.

COMMITTEES
5. If your company will have committees, identifying how they will be appointed, what constitutes a quorum, how they will act (unanimous consent in writing without a meeting or by meeting with appropriate notice given).

CONTRACTS, LOANS AND BANKING
6. Identify who authorizes and signs on behalf of the corporation and what actions need written consent of the board of directors.

CERTIFICATE FOR SHARES
7. Identify whether the issued shares of the corporation will be represented by certificates, who will sign the certificates, documentation of issuance's, how you will deal with lost or transferred shares and address any restrictions on transfer of any shares.

FISCAL OR CALENDAR YEAR
8. You can choose to identify whether your company will have a calendar or fiscal year end, or you can specify that this will be determined by resolution of the board of directors.

CORPORATE SEAL
9. Identify if your company will use a corporate seal. Having a corporate seal is no longer mandatory by Illinois statute, but including this language will document the fact that the company either does or does not use a seal.

WAIVER OF NOTICE
10. Identify whether notices of meetings can be waived in writing.

INDEMNIFICATION OF OFFICERS AND DIRECTORS
11. This is probably the most important aspect of your company by-laws. Identify who this indemnification covers and to what extent, specify authorization by directors, legal counsel of shareholders, repayment of expenses related to same, insurance, and shareholder notification.

AMENDMENTS
12. Identify that the by-laws may be amended by written consent of the shareholders entitled to vote and by written consent of the directors.
Illinois Registered Agent can assist you with the regulation (corporate compliance) of your company's written consents that will effectively avoid your company's piercing the corporate veil. We offer a resolution preparation service that is very reasonably priced.

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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 Incorporation and Illinois Limited Liability Company formation's into one neat tidy package. I have provided links to the Illinois 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 identifying 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 reasonably priced 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.

Concept, structure, name... What next? Taxing Issues!

You have your concept, you've thought about your tax structure and you know what type of entity it is you want to form and have reserved the company name with the Secretary of State. Now, you say, what's next...

So far things have flowed pretty easily, or have you forgotten something... It is easy to get so involved in the start-up details that you completely forget about what to expect when you have that first sale.

At least that is where I was at. I was so focused on my visibility on the web that I completely forgot about the basic function of accounting. I was not 100% certain that I would ever get anyone to look at my site let alone make that first sale. You will make that first sale... Believe me...

You will need a bank account and an EIN number (employer identification number) for tax purposes. Sole proprietors can use their social security number as a tax identifier, but I would suggest applying for an EIN to avoid co-mingling your money with your company's. In the long run, it will make your year end accounting less painful. You can find out about EIN numbers by following this link to the IRS website: http://www.irs.gov/businesses/small/article/0,,id=98350,00.html . The IRS also has a fill-able SS-4 Form that you can fill out and file in a matter of minutes to retrieve your EIN number.

You will need this EIN number for your bank account and tax filings. You will need to specify whether or not you intend to have employees on your EIN application. They will also ask your intended business start date and how you are to be taxed (S-Corp, C-Corp, Partnership or as a disregarded entity -sole proprietor). The Department of Revenue will be notified by the information you provide on the EIN application as to employees and will contact you by mail with their tax and filing requirements. You should take the initiative and be ahead of the game by contacting them first. They will give you an indication as to how they would assess your employer situation. Follow this link to the Illinois Department of Revenue website: http://www.revenue.state.il.us/ElectronicServices/Businesses/index.htm.

The Illinois Department of Employment Security is another taxing body that you will need to get your head around if you are going to have employees. I found this pamphlet from IDES to be a useful informational tool: http://www.ides.state.il.us/pdf/employers/FastFacts.pdf. Lastly, check with your local municipality to see what their requirements are. The City of Chicago makes everyone jump through a multitude of hoops, some local villages and townships do the same, either way, you should ask what is required whether you have a brick and mortar business or an on-line business.

Illinois Registered Agent, Inc.