Illinois Business Corporation Act: Guide for Owners
Plain-English guide to the Illinois Business Corporation Act: who can incorporate, the annual report, franchise tax, 2026 fees and dissolution, with slides.
Last reviewed October 29, 2026 · General information, not legal advice
General information only, not legal advice. CPA Tax Payroll and Accounting Corp is a CPA firm, not a law firm. Laws change: confirm with the official source or a licensed attorney before you act. Read the full notice.
The Illinois Business Corporation Act of 1983 (805 ILCS 5) is the state law for forming and running a for-profit corporation in Illinois. The Secretary of State takes the filings, annual reports and franchise tax, and the Department of Revenue handles income tax. This page is for founders and owners weighing a corporation against an LLC, and for those keeping a corporation in good standing.
Slide show: The Illinois Business Corporation Act in seven slides
What the law does
It sets how a for-profit corporation is formed, run and kept in good standing in Illinois.
Who it covers
One or more incorporators, each an adult or another corporation. One director is enough.
The core rule
The name includes corporation, company, incorporated or limited. The corporation keeps a registered agent and files an annual report.
The numbers
In 2026 the fees are $150 for articles and $75 each year. The annual franchise tax is 0.1% of Illinois paid-in capital, with the first $10,000 of tax exempt.
The deadline
The report is filed in the 60 days before the anniversary month.
The penalty
A late report adds a 10% penalty on any franchise tax due. A default not fixed within 90 days of the state's notice can end in dissolution, and reinstatement costs $200.
A practical tip
File the report even when no tax is due. With Illinois paid-in capital up to $10 million, only the $75 fee is due.
Who is covered
Question
Answer
Section
Who can incorporate?
One or more incorporators, each 18 or older or a corporation
2.05(a)
What can it do?
Any lawful purpose except banking or insurance, with narrow exceptions
3.05
Directors
At least one; no Illinois residency or share ownership needed unless the articles or bylaws say so
8.05(b), 8.10(a)
Officers
As the bylaws provide; one person may hold several offices if the bylaws allow
8.50
Shareholders
A holder's only duty on the shares is paying their full issue price
6.40
Medical and professional corporations
Organized under this Act, together with their own acts
3.05
S corporation limits
The 100-shareholder cap and other S rules are federal tax rules, not part of this Act
Federal law
How it touches your taxes and payroll
A C corporation is its own federal taxpayer at a flat 21% (2026), and profit is taxed again when paid out as dividends. An S election lets income pass to shareholders, with federal limits on who may own shares; see S corporation taxes and payroll for S corporation owners. In 2026 Illinois taxes a C corporation at 7% income tax plus 2.5% replacement tax, and an S corporation at 1.5% replacement tax with no entity-level income tax.
The franchise tax is a separate state tax on corporations, paid to the Secretary of State with the annual report. The LLC Act fee list has no franchise tax.
