Benefits of an S Corporation in Illinois
S corporations in Illinois provide limited liability protection for shareholders. They offer tax benefits that help owners who take annual distributions.
Forming an S Corporation in Illinois
To start an S Corporation in Illinois, form a standard corporation first, elect S corporation status with the IRS, and file incorporation documents with the Illinois Secretary of State.
How to Form a Corporation in Illinois
- Choose a name with required words like Corporation or Incorporated.
- Appoint a registered agent with an in-state address.
- Prepare bylaws and appoint initial directors.
- Hold a board meeting and issue stock to shareholders.
States and S Corporation Recognition
States that Do Not Recognize S Corporation Status
- Tennessee does not recognize the federal S corporation election at the state level.
- Some states, like Colorado, recognize the federal S election but do not require S corporations to pay state taxes.
S Corporation Features and Tax Implications
- An S Corporation provides liability protection and credibility while avoiding self-employment taxes.
- S Corporation owners are considered employees and can access certain benefits such as tax-favored stock options, insurance, profit-sharing, and retirement plans.
- S Corporations pass income, losses, deductions, and credits to shareholders, helping to avoid double taxation of income.