Illinois Corporation
Advantages and Disadvantages



Illinois Corporation Advantages and Disadvantages

Illinois Corporate Income Tax Illinois Corporation Advantages and Disadvantages -Illinois ranks 25th in State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Wisconsin (38th), Iowa (43rd), Missouri (15th), Kentucky (39th) and Indiana (12th).

Illinois Corporation - Articles of Incorporation must be drafted and submitted to the Illinois Secretary of State, Corporations Division. Once articles of incorporation have been successfully filed, your Illinois Corporation hasbeen formed and this begins its existence as a Illinois corporate entity.

Should I Incoprorate in Illinois ?

A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity,
separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.

Advantages and Disadvantages of a Corporation

Advantages of a Corporation

  • Shareholders have limited liability for the corporation's debts or judgments against the corporations.
  • Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
  • Corporations can raise additional funds through the sale of stock.
  • A corporation may deduct the cost of benefits it provides to officers and employees.
  • Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
  • A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 - $75,000; 34% tax on income from $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
  • A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.

Disadvantages of a Corporation

  • The process of incorporation requires more time and money than other forms of organization.
  • Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
  • Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.
Federal Tax Forms for Regular or "C" Corporations
  • Form 1120 or 1120-A: Corporation Income Tax Return
  • Form 1120-W Estimated Tax for Corporation
  • Form 8109-B Deposit Coupon
  • Form 4625 Depreciation



Illinois' Corporate Income Tax

Illinois' corporate tax consists of a flat rate of 9.5% on all corporate income . Among states levying corporate income taxes, Illinois' rate ranks among the highest. In 2008, state-level corporate tax collections were $243 per capita, which ranks 10th highest nationally.

Illinois' Individual Income Tax System

Illinois' personal income tax system consists of a flat five percent rate on federal adjusted gross income. That rate is among the lowest among states that levy individual income taxes. Illinois' 2008 state-level individual income tax collections were $806 per person, which ranked 31st highest nationally.

Illinois' Business Tax Climate Ranks 23rd - 2011

Illinois ranks 23rd in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.

Illinois' State and Local Tax Above National Average

Illinois' 2009 state and local tax burden of 10.0% of income is above the national average of 9.8%. Illinois' tax burden has decreased overall from 10.4% (16th nationally) in 1977 to 10.0% (13th nationally) in 2009.




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