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Corporate Formalities and Franchise Tax for Tax Planners
Owners who incorporate in this state answer to the Illinois Business Corporation Act of 1983, found at 805 ILCS 5. It sets out how such a for-profit company is created, operated and kept in good standing. Filings and franchise tax go through the Secretary of State, while income tax belongs to the Department of Revenue. For owners choosing C or S status, it supplies the state costs. Our checklist is the Quill-and-Seal Annual Round, below. Read the Act at ilga.gov.
The short version
- In 2026 articles of incorporation cost $150 and the annual report $75.
- The franchise tax is 0.1 percent of paid-in capital attributed to Illinois, with the first $10,000 of tax exempt starting in 2025.
- A single director is enough; directors need not live in Illinois unless the articles or bylaws say so.
- Dissolution can follow a missed report once a 90-day notice period runs out; reinstatement costs $200.
What it asks of you
| Requirement | What it means |
|---|---|
| Annual report | Officers, directors, shares, paid-in capital and the franchise tax computation |
| Share or capital changes | Form BCA 14.30 ($5) travels on paper with the report |
| Franchise tax paid late | A 10 percent penalty on the tax, none when no tax is due |
The numbers
| Item | Amount | Year |
|---|---|---|
| Articles; annual report; reinstatement | $150; $75; $200 | 2026 |
| C corporation tax | 21% federal; 7% Illinois plus 2.5% replacement tax | 2026 |
| S corporation | 1.5% Illinois replacement tax, no entity income tax unless it elects the 4.95% pass-through tax | 2026 |
Source: Secretary of State form BCA 14.05 and 805 ILCS 5/15.35
Whether the exemption also reaches the initial franchise tax is unclear; ask the Secretary of State.
The Quill-and-Seal Annual Round
- Mark the anniversary month; the report window opens 60 days earlier.
- List current directors and officers.
- Total the paid-in capital and compute 0.1 percent less the $10,000 exemption.
- Note any share or capital changes for Form BCA 14.30.
- Test solvency and net assets before any dividend.
What it means for year-round planners
- A C corporation pays 21 percent federally and its owners are taxed again on dividends; an S election passes income through. See choosing a business structure.
- Franchise tax follows paid-in capital, not profit.
- S corporation owner pay is covered in small business basics.
Mistakes people make
- Believing that zero tax owed means no report is needed; the $75 fee and the report remain due.
- Forgetting Form BCA 14.30 when shares or paid-in capital changed.
- Thinking the 100-shareholder cap comes from Illinois; it is the federal S election limit.
Bylaws, shareholder agreements, director liability and stock issuance are for an attorney to handle.
Common questions
Has Illinois repealed its franchise tax?
No. A bill, House Bill 2846, would end the tax, but it has not become law. Its last action was March 21, 2025, and the statute still imposed the tax when we checked on October 29, 2026.
Does a corporation owing no franchise tax still file a report?
Yes. A corporation with no franchise tax still owes the annual report and its $75 fee. When Illinois paid-in capital is $10 million or less, the exemption leaves no annual franchise tax.
Can a corporation have just one director?
Yes. The Act requires one or more directors.