To start an S corp in Illinois, you file Articles of Incorporation with the Illinois Secretary of State (minimum cost $175), get a federal Employer Identification Number, then file IRS Form 2553 to elect S status by the 15th day of the third month of the tax year you want the election to apply to. A separate registration with the Illinois Department of Revenue follows, because Illinois charges S corporations a 1.5% replacement tax at the entity level even though income otherwise passes through to shareholders.
The order matters. The state filing creates the corporation; the IRS filing changes how it’s taxed. Miss the federal deadline and you’re a C corporation for the year, whatever you intended.
Pick a Name That Meets Illinois Rules
Your corporate name has to include “Corporation,” “Company,” “Incorporated,” or “Limited,” or an abbreviation of one of those words, and it has to be distinguishable from every business already on file.1Justia. Illinois Code 805 ILCS 5 Article 2 – Formation of Corporations Check the Secretary of State’s online business name database first. If the name is available but you’re not ready to file, you can reserve it for 90 days.
Appoint a Registered Agent
Illinois requires every corporation to name a registered agent with a physical street address in the state. The agent accepts lawsuits, tax notices, and other official documents on behalf of the corporation.1Justia. Illinois Code 805 ILCS 5 Article 2 – Formation of Corporations You can serve as your own agent if you have an Illinois address, or hire a commercial service, which typically runs $100 to $300 per year for single-state coverage.
File the Articles of Incorporation
The Articles of Incorporation legally create the corporation. Illinois uses Form BCA 2.10, which you can file online through the Secretary of State’s business services portal or mail to the Department of Business Services in Springfield.2Illinois Secretary of State. Incorporate a Business Online filing is faster and gives you immediate confirmation.
The form asks for:
- The corporate name with one of the required designators
- The registered agent’s name and Illinois street address
- The total number of authorized shares and, if applicable, their par value (Illinois allows no-par-value shares)
- A corporate purpose; most filers use a general-purpose clause covering any lawful business activity
- Duration, almost always perpetual
- Names and addresses of the incorporators
Keep the share structure simple. S corporations can issue only one class of stock. Different voting rights are allowed, but any difference in economic rights — a preferred dividend rate, for example — will disqualify you from S status.3Office of the Law Revision Counsel. 26 USC 1361 – S Corporation Defined
What You’ll Pay
The base filing fee is $150. On top of that, Illinois charges an initial franchise tax of $1.50 per $1,000 of paid-in capital represented in the state, with a $25 minimum. For a corporation with modest capitalization, that puts the minimum total at $175.4Illinois Secretary of State. Form BCA 2.10 Articles of Incorporation Expedited processing is available for an additional fee. Once approved, you’ll receive a file-stamped copy of your Articles. That’s your proof the corporation exists.1Justia. Illinois Code 805 ILCS 5 Article 2 – Formation of Corporations
Get an EIN from the IRS
Your corporation needs an Employer Identification Number before it can open a bank account, hire anyone, or file tax returns. Apply online at irs.gov and the number issues immediately at no cost.5Internal Revenue Service. Get an Employer Identification Number You can also apply by fax or mail using Form SS-4, but those take days or weeks.6Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN)
Get the EIN before you file your S election. On the SS-4, indicate that the corporation will file Form 1120-S so the IRS expects an S corporation return.7Internal Revenue Service. Instructions for Form SS-4 (Rev. December 2025)
File Form 2553 to Elect S Status
Filing the Articles only creates a C corporation for federal tax purposes. To get pass-through treatment, file Form 2553 (Election by a Small Business Corporation) with the IRS.8Internal Revenue Service. About Form 2553, Election by a Small Business Corporation
Who Qualifies
The corporation must be a domestic entity with no more than 100 shareholders. Shareholders can only be individuals, certain trusts, or estates — not partnerships, other corporations, or nonresident aliens. The one-class-of-stock rule applies, with the voting-rights exception noted above.9Internal Revenue Service. S Corporations
The Deadline
Form 2553 must reach the IRS no later than the 15th day of the third month of the tax year you want the election to apply to. For a calendar-year corporation, that’s March 15. You can also file it anytime during the preceding tax year.10Office of the Law Revision Counsel. 26 USC 1362 – Election; Revocation; Termination Every shareholder has to sign to show unanimous consent. File by fax or mail to the IRS address in the form’s instructions.
The IRS mails an acceptance letter after processing, typically four to eight weeks later. Keep that letter in your permanent corporate records. You may need it for bank applications, financing, or if your status comes up during an audit.
If You Miss the Deadline
Late relief is available on Form 2553 itself if you can show reasonable cause and file within three years and 75 days of the intended effective date. All shareholders must have reported their income consistently with S status for the affected years.11Internal Revenue Service. Instructions for Form 2553 Past that window, you need a private letter ruling, which carries a substantial user fee. On-time filing is much cheaper than cleanup.
Adopt Bylaws and Hold an Organizational Meeting
With the legal filings done, the corporation needs its internal framework. The board of directors should hold an organizational meeting to adopt bylaws, appoint officers, authorize a bank account, and issue stock to the initial shareholders. Record the decision to elect S status in the meeting minutes so there’s a clear paper trail linking the board’s intent to the Form 2553 filing.
Bylaws don’t get filed with the state, but they govern how the corporation runs day to day: how meetings are called, how votes work, what officers can do. If a dispute ever reaches a courtroom, a judge will look at whether the corporation actually followed its own bylaws.
Register with the Illinois Department of Revenue
The Secretary of State filing and the federal S election don’t automatically register your business for Illinois taxes. File Form REG-1 (Illinois Business Registration Application) with the Department of Revenue. Check the box for “S Corp,” provide your federal EIN, business address, officer information, and a description of your business activities.12Illinois Department of Revenue. REG-1 Illinois Business Registration Application If you’ll have employees, register for Illinois withholding tax on the same form.
The 1.5% Replacement Tax
Illinois imposes a 1.5% Personal Property Replacement Tax on the net income of every S corporation, paid at the entity level. It’s separate from and in addition to the individual state income tax shareholders pay on their pass-through shares.13Illinois Department of Revenue. Personal Property Replacement Tax The corporation reports and pays this tax on Form IL-1120-ST. Factor it into your projections — new owners often miss it.
The Elective Pass-Through Entity Tax
Illinois also offers an elective pass-through entity (PTE) tax that can benefit shareholders who itemize federal deductions. When the S corporation elects to pay the PTE tax at the 4.95% state income tax rate, each shareholder gets a dollar-for-dollar credit against their own Illinois income tax liability. The state tax effectively gets paid at the entity level, which can help shareholders work around the $10,000 federal cap on state and local tax deductions. The election is made on Form IL-1120-ST and applies to all shareholders; it isn’t shareholder-by-shareholder.14Illinois Department of Revenue. Pass-through Entity Information It’s irrevocable after the extended due date for the tax year, so talk to your accountant before checking the box.
Carry Workers’ Compensation If You’ll Have Employees
Illinois law requires workers’ compensation insurance if your corporation has any employees, including a single part-time worker. There’s no small-employer exception. An employer that knowingly fails to obtain coverage faces fines of up to $500 per day without insurance, with a minimum penalty of $10,000, and corporate officers can be held personally liable if the corporation doesn’t pay.15Illinois Workers’ Compensation Commission. Insurance
Corporate officers can exempt themselves from coverage by notifying the carrier in writing, though officers who opt out and later suffer a work-related injury have no workers’ compensation claim to fall back on.15Illinois Workers’ Compensation Commission. Insurance
Stay in Good Standing
Every Illinois corporation files an annual report with the Secretary of State. The filing fee is $75,16Illinois Secretary of State. Domestic Corporation Annual Report and the report is due before the first day of your corporation’s anniversary month, meaning the month you originally filed the Articles.
Don’t let it slide. The Secretary of State sends a notice, and if the corporation doesn’t correct the default within 90 days, the state administratively dissolves it. A dissolved corporation loses its right to conduct business in Illinois, and reinstating means paying all back fees, taxes, and penalties that piled up during the lapse.17Justia. Illinois Code 805 ILCS 5 Article 12 – Dissolution and Remedies
Watch the federal side too. S eligibility is easier to lose than to gain. Adding a 101st shareholder, issuing a second class of stock with different economic rights, or bringing on an ineligible shareholder like a nonresident alien or another corporation automatically terminates the election.9Internal Revenue Service. S Corporations Once terminated, the corporation generally cannot re-elect S status for five years without IRS consent. Review the shareholder roster and stock structure at least annually.