United States · Illinois

How to issue shares in Illinois corporations

Illinois is a major commercial jurisdiction with the Illinois Business Corporation Act of 1983. While the IBCA tracks the MBCA framework, Illinois has its own state-specific quirks including a notable franchise tax (one of the higher rates) and specific Illinois Securities Law requirements administered by the Illinois Securities Department.

Governing statute
Illinois Business Corporation Act of 1983, 805 ILCS 5/
805 ILCS 5/6.05Authorization of shares; issuance
805 ILCS 5/6.10Consideration for shares
805 ILCS 5/6.35Stock certificates
805 ILCS 5/7.75Corporate records
805 ILCS 5/7.85Inspection of records
815 ILCS 5/4Illinois Securities Law
At a glance
  • Authorized by the board under 805 ILCS 5/6.05
  • Future services and promissory notes permitted as consideration (5/6.10)
  • Uncertificated shares permitted under 5/6.35
  • Inspection rights under 5/7.85 with proper-purpose standard
  • Illinois Securities Law under 815 ILCS 5/4 et seq.

Board authorization under 805 ILCS 5/6.05

Stock issuance is authorized by the board under the Illinois Business Corporation Act § 6.05. The board determines consideration under § 6.10. Illinois follows MBCA pattern on most issuance matters.

Consideration: MBCA pattern with Illinois-specific franchise-tax implications

Illinois permits the broad MBCA consideration framework. Note: Illinois has a notable franchise tax based on paid-in capital, which means the consideration recorded at issuance has direct tax consequences. Illinois corporations often issue shares for nominal consideration to minimize franchise-tax exposure (subject to other constraints).

Uncertificated shares

805 ILCS 5/6.35 permits uncertificated shares by board resolution.

Corporate records and inspection

805 ILCS 5/7.75 requires MBCA-pattern records. 5/7.85 grants inspection rights on written notice with purpose described, similar to the MBCA proper-purpose standard.

Illinois Securities Department and the IL franchise tax

The Illinois Securities Law (815 ILCS 5/4 et seq.) governs offerings to Illinois residents, administered by the Illinois Securities Department. Illinois also assesses a franchise tax based on paid-in capital — Illinois corporations track paid-in capital separately for tax purposes. The Illinois franchise tax has been progressively reduced and is being phased out under recent legislation, but corporations should confirm current rates.

Common mistakes

Common Illinois-specific failure points in share issuance:

  • Ignoring the Illinois franchise-tax implications of paid-in capital at issuance
  • Missing Illinois Securities Department notice filings
  • Not maintaining the 5/7.75 corporate records inventory
  • Treating IL case law on corporate disputes as undeveloped (the Cook County Commercial Calendar has developed substantial authority)
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FAQ

Common questions in Illinois

Illinois assesses a franchise tax based on the corporation's paid-in capital allocated to Illinois. The tax is being phased out under recent legislation, with annual reductions; corporations should confirm current rates and exemptions. Historically, Illinois had one of the higher state franchise taxes, which influenced corporate decisions on capital structure.

Less common than Delaware for institutional-investor-backed startups. Chicago-headquartered corporations sometimes incorporate in Illinois to maintain alignment with state operations, but the historical franchise-tax structure made Delaware comparatively attractive. With franchise-tax phase-out, Illinois may become more competitive.

Yes, the Cook County Commercial Calendar (in Chicago) handles complex commercial disputes including corporate-governance matters. Illinois business case law has developed substantially since the Commercial Calendar's creation, though Delaware Chancery remains the dominant authority for cross-jurisdictional matters.
Records that comply with IBCA
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