Any business entity that is formed in Illinois, or is doing business in Illinois, is subject to certain annual reporting and record-keeping requirements. While often times these requirements are skipped over as they are seen as burdensome and providing no immediate benefit, it is important to understand the requirements and how they affect your business.
Illinois requires any business formed in Illinois or doing business in Illinois to file an annual report. This applies to most types of entities, including C-Corporations, S-Corporations, Limited Liability Companies and Non-Profits. This report is required to be filed by the first day of the entity’s anniversary month (either the month of formation or the month where a certificate of authority was filed), however it can be filed up to sixty days prior to the anniversary date, and can be filed either via paper form or electronically.
If the annual report is not filed on time, your entity will be classified as “not in good standing” with the Secretary of State’s office. Essentially, this means that your entity is delinquent in filing, and may not be provided the same protection and rights it would normally be afforded under the laws of Illinois. Luckily, this can be remedied by filing any late or missing annual reports and paying any applicable fees and penalties. If an annual report remains delinquent, at some point the Secretary of State will begin the process of dissolving your entity in Illinois. Penalties and fees will continue to accrue during this time. If your entity has been dissolved, it can be reinstated, but this can be a costly and time consuming process. It is a good policy to file annual reports in a timely manner to maintain good standing within the state.
Shareholder/Member Meetings and Minutes
Shareholder meetings and minutes, more so than annual reports, are business entity requirements with which many small businesses often struggle to comply. C-Corporations and S-Corporations both have explicit requirements to hold shareholder meetings and record minutes on at least an annual basis. There is no statutory requirement for LLCs to hold meetings and record minutes, but LLCs can implement rules into their operating agreement that require such meetings. These meetings are meant to provide a platform for all shareholders or members to discuss the entity, as well as to make and approve important business decisions, such as electing the board of directors.
Maintaining minutes of these meetings can be very important in litigation, as lawsuits against business entities will often try to “pierce the corporate veil” inferring that there isn’t a real separation between the company and its owners, and that the business is being operated as if the corporation or LLC did not actually exist. Essentially, this would result in the liability protection of a business entity being disregarded, making the shareholder or member personally liable for any legal judgment being enforced. A contributing factor to decisions made by the courts on this issue can be how well corporate records are maintained and whether or not minutes are kept of shareholder/member meetings.