Similar to forming any other corporation, close corporations must be incorporated in Illinois. Selecting a name for the corporation that is not already in use by another company is the first step. The terms “close corporation” or “closely held corporation” or an acronym of those terms must also appear in the name. The articles of incorporation, which contain information about the corporation such as its name, purpose, and the number of shares authorized to be issued, are then submitted to the Illinois Secretary of State.
The particular requirements of the firm will determine whether an LLC or a single proprietorship is the best option. The simplest and most affordable business structure is a sole proprietorship, but it also provides little protection for personal assets. On the other hand, an LLC gives flexibility in management and tax treatment as well as more security for personal assets.
The articles of incorporation are crucial because they establish the corporation’s legitimacy and lay out its governance structure. The corporation’s organizational details, including the number of authorized shares and the shareholders’ rights and preferences, are detailed in the articles of incorporation.
Contrarily, shareholder contracts are agreements between the shareholders that control their relationship with the firm. Only insofar as they do not contradict with the articles of incorporation can shareholders agreements take precedence over those documents. Shareholders agreements can cover topics including share transfers, earnings and losses allocation, and business administration.
In conclusion, an Illinois close company is the best type of corporate form for small enterprises that need close shareholder ties. A close corporation can be formed in a manner similar to other corporations. The particular requirements of the firm will determine whether an LLC or a single proprietorship is the best option. The shareholders agreements regulate the relationship between the shareholders and the corporation, whereas the articles of incorporation establish the legal existence of the corporation and provide a framework for its functioning.
How many shares should be permitted for incorporation is a general subject that is not specifically addressed in the article “Illinois Close Corporation: What You Need to Know”. However, it does make note of the fact that close organizations sometimes have a small number of shareholders and might have limitations on share transfers. The size and type of the business, the number of shareholders, and the company’s objectives are only a few of the variables that may affect the number of authorized shares. It is advised to seek advice from a legal or financial expert when figuring out the right number of authorized shares for a particular company.