An Illinois professional corporation is formed by filing Articles of Incorporation with the Secretary of State, registering the corporation with the Illinois Department of Financial and Professional Regulation (IDFPR), and making sure every owner, director, and officer holds a valid license in the profession the corporation practices. The Secretary of State filing fee is $150, and the obligations do not stop there: annual reports, dual-agency renewals, and state and federal tax filings continue for as long as the corporation exists. One point deserves attention before anything else. A PC does not protect you from personal liability for your own professional mistakes. Illinois law preserves that individual accountability inside the corporate structure, and no amount of paperwork changes it.
How to Form the Corporation
Start with the name. Under the Professional Service Corporation Act, the corporate name must end with one of these designators: “Chartered,” “Limited,” “Ltd.,” “Professional Corporation,” “Prof. Corp.,” or “P.C.”1Justia Law. Illinois Code 805 ILCS 10 – Professional Service Corporation Act The name can incorporate the full or last name of one or more shareholders, or a fictitious name if the profession’s regulating authority does not prohibit that.
Next comes the filing itself. You submit two identical copies of the Articles of Incorporation on Form BCA 2.10(PSCA) to the Illinois Secretary of State, along with the $150 fee.2Illinois Secretary of State. Domestic and Foreign Corporations Publications and Forms The Articles must state the corporation’s name, purpose, authorized shares, and the name and address of a registered agent. The registered agent must be an Illinois resident or a corporation authorized to do business in the state.3Illinois Secretary of State. Guide for Organizing Domestic Corporations
Filing with the Secretary of State is only half the job. You also register the corporation with IDFPR, submitting a copy of the filed Articles with the application. A separate application is required for each Illinois business location, and any “doing business as” name used at a different address needs its own application too.4Illinois Department of Financial and Professional Regulation. Professional Service Corporation New Application Checklist
You will also need a federal Employer Identification Number. Apply online through the IRS using Form SS-4 at no cost; the number is typically issued immediately.5Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN) If the responsible party for the corporation ever changes, report the change to the IRS within 60 days on Form 8822-B.
What Services the Corporation Can Offer
An Illinois PC is limited to one category of professional service and work directly related to it. The people delivering those services must be licensed in the same profession.1Justia Law. Illinois Code 805 ILCS 10 – Professional Service Corporation Act A corporation formed by attorneys offers legal services and nothing else. A CPA firm handles accounting, auditing, and tax work, but not unrelated consulting outside its licensing scope.
There is one exception. The Act allows a single PC to combine four healthcare professions: medicine, podiatry, dentistry, and optometry.4Illinois Department of Financial and Professional Regulation. Professional Service Corporation New Application Checklist Outside that combination, mixing professions under one corporate roof is not permitted.
Who Can Own and Run the Corporation
Every shareholder must hold a valid license in the same profession the corporation practices. The corporation cannot issue stock to anyone who does not meet that requirement, and no shareholder can transfer voting rights to an unlicensed person through a proxy or voting trust.1Justia Law. Illinois Code 805 ILCS 10 – Professional Service Corporation Act Outside investors, venture capital firms, and unlicensed family members are all shut out of ownership.
No unlicensed person may have any role in the ownership, management, or control of the corporation.6Illinois General Assembly. Illinois Code 805 ILCS 10/3.4 Two narrow exceptions apply: the corporate secretary and the registered agent do not need to be licensed, so long as neither is also a shareholder, director, or officer. All directors and officers must be licensed in the corporation’s profession, and directors must also be shareholders.4Illinois Department of Financial and Professional Regulation. Professional Service Corporation New Application Checklist
Mandatory Share Buy-Back
Illinois law requires every PC to have a mechanism for buying back shares when a shareholder dies or becomes disqualified, such as by losing their professional license. The provision can sit in the Articles of Incorporation, the bylaws, or a separate shareholder agreement. If none of those documents fixes a price or a valuation formula, the default is book value as of the end of the month immediately before the death or disqualification.7Illinois General Assembly. Illinois Code 805 ILCS 10 – Professional Service Corporation Act
Book value often undercounts what a departing shareholder’s interest is really worth. Practices built on goodwill, client relationships, or recurring revenue tend to be worth substantially more than the accounting records show. Getting a valuation method into the shareholder agreement before you need one is among the highest-value early moves a new PC can make.
What the Corporate Shield Does and Does Not Cover
The most common misconception about professional corporations is that they insulate their owners from malpractice claims. They do not. Under Section 8 of the Act, every officer, shareholder, agent, and employee remains “personally and fully liable” for their own negligent or wrongful acts committed while providing professional services through the corporation. That liability also extends to the acts of support staff working under your direct supervision.8Illinois General Assembly. Illinois Code 805 ILCS 10/8
The corporation itself is also liable, up to the full value of its property, for the professional negligence of its people. Its liability for the acts of its agents is capped at the same level as an ordinary business corporation. In practice, a malpractice plaintiff can reach both the individual professional who caused the harm and the corporation’s assets. Other shareholders are generally not personally liable for a colleague’s mistake.8Illinois General Assembly. Illinois Code 805 ILCS 10/8
Where the corporate structure does help is with ordinary business debts. If the PC signs a lease, opens a line of credit, or faces a contract dispute, individual shareholders are generally not personally on the hook, the same as with any other corporation. Business debts get the shield; professional malpractice does not. That is why professional liability insurance for every shareholder is not optional.
Corporate Formalities That Preserve the Shield
In small practices, the same two or three people often serve as directors, officers, and sole shareholders. That overlap is legal, but it tempts owners to skip governance steps, and skipping them is how liability protection erodes.
After incorporation, the initial board should hold an organizational meeting to adopt bylaws, elect officers, authorize a bank account, and issue stock certificates. Bylaws in particular govern how shares transfer, how meetings are called, and how disputes between shareholders are resolved.
Keep a minute book. It is unglamorous work, and neglecting it is one of the easier ways to lose the corporate shield. A court can pierce the veil and hold shareholders personally responsible for corporate debts if the corporation fails to maintain a separate identity. At a minimum, the minute book should hold the Articles of Incorporation and any amendments, the bylaws, meeting minutes, a shareholder ledger tracking issuances and transfers, officer and director lists, and copies of annual report filings. Annual shareholder and board meetings should actually happen and actually be documented. A one-page set of minutes recording that the board reviewed financials, reelected officers, and authorized routine business is enough. The formality matters more than the length.
How the Corporation Is Taxed
An Illinois PC that does not elect S corporation status is taxed as a C corporation. At the federal level, C corporations pay a flat 21% income tax on net earnings and file Form 1120 annually.9Internal Revenue Service. Instructions for Form 1120 At the state level, Illinois imposes a 7% corporate income tax plus a 2.5% personal property replacement tax, for a combined state rate of 9.5%.10Illinois Department of Revenue. What Is the Tax Rate for Businesses, Trusts, and Estates?
C corporation status creates double taxation: the corporation pays tax on its profits, and shareholders pay again when profits are distributed as dividends. Many professional practices elect S corporation status to avoid the corporate-level tax entirely, passing profits and losses through to shareholders’ individual returns. Shareholder-employees typically split their compensation between a reasonable salary (subject to payroll taxes) and distributions (which are not), which lowers the overall tax burden.
Because shareholders usually draw salaries, the corporation carries standard employer payroll obligations. The employer share of Social Security tax is 6.2% on wages up to $184,500 in 2026, and the employer share of Medicare is 1.45% on all wages with no cap. Employees earning above $200,000 individually, or $250,000 for married couples filing jointly, owe an additional 0.9% Medicare surtax on wages above those thresholds. Form 941 is filed quarterly, Form 940 for federal unemployment and Forms W-2 are due by January 31 of the following year, and timely deposits earn an extra 10 calendar days to file.11Internal Revenue Service. Employment Tax Due Dates
Ongoing Compliance
Illinois corporations file an annual report with the Secretary of State updating officers, directors, registered agent, authorized and issued shares, and paid-in capital. The minimum total due is $75, covering the report and a base franchise tax.2Illinois Secretary of State. Domestic and Foreign Corporations Publications and Forms Corporations with higher paid-in capital allocated to Illinois owe additional franchise tax, calculated at 0.1% of Illinois capital above a $10,000 exemption. Late reports trigger a 10% penalty on the franchise tax amount.12Illinois Secretary of State. Form BCA 14.05 Domestic Corporation Annual Report
Missing the annual report can lead to administrative dissolution, which strips the corporation of its authority to do business in Illinois. Reinstatement is possible but expensive and messy, and the gap it creates in your corporate existence can raise questions about liability protection for the lapsed period.
IDFPR Renewal Runs on Its Own Schedule
The IDFPR registration renews separately from the Secretary of State annual report. Medical corporation registrations, for example, expire every December 31 regardless of when they were first issued.13Illinois Department of Financial and Professional Regulation. Medical Corporation New Application Checklist Other professional categories run on their own IDFPR schedules. Keeping one filing current while letting the other lapse is a common mistake, and both must stay active for the corporation to operate lawfully.
Federal Filings and BOI Status
A PC taxed as a C corporation files Form 1120 by the 15th day of the fourth month after its tax year ends, which is April 15 for calendar-year filers. The minimum late-filing penalty for returns more than 60 days overdue is the lesser of the tax due or $525 for returns required to be filed in 2026.9Internal Revenue Service. Instructions for Form 1120
As of March 2025, FinCEN exempted all U.S.-formed entities from Beneficial Ownership Information reporting under the Corporate Transparency Act. Only entities formed under foreign law and registered to do business in a U.S. state currently need to file BOI reports.14FinCEN.gov. Beneficial Ownership Information Reporting Illinois PCs do not need to file under the current rules, though the Corporate Transparency Act has shifted several times and is worth watching.