Key Takeaways:

  • An Illinois corporation not in good standing has failed to comply with the state’s reporting or fee requirements.
  • The consequences include personal liability for owners, fines, and public visibility of the corporation’s status.
  • Good standing can be reinstated by resolving outstanding compliance issues with the Illinois Secretary of State.
  • Maintaining good standing requires filing annual reports, appointing a registered agent, and paying franchise taxes.
  • Tools like Illinois's business entity database allow real-time status checks for corporations.

Illinois corporation not in good standing refers to a corporation in the state of Illinois that has failed to comply with the state's requirements for reporting and paying fees.

Corporate Status

When business owners elect to create an LLP, corporation, or LLC, they need to file the correct formation papers with their state. If a business owner wants to do business in a state other than their home state, they will also need to file the formation papers with these states.

The state will then grant the corporation the right to conduct business. The corporation will become a statutory business entity and will enjoy all of the advantages that this entails. 

In order to maintain this right to conduct business, the business will become subject to a number of business laws and requirements.

Some examples of these business rights and requirements include the following:

  • Appointing a registered agent
  • Paying franchise taxes and fees
  • Filing required forms in a timely manner

A business is considered to be in good standing for the records of the state as long as the business is in compliance with these requirements. Being in good standing allows the business to keep their rights and privileges as a business that is considered a statutory entity.

However, if an entity doesn't remain in compliance with its various obligations, the entity can lose their good standing status. The business will then be considered suspended, delinquent, dissolved, or void.

Both the severity and meaning of these terms differ from state to state. The duration of the lack of compliance and which compliance requirements were not met also have an impact on the severity and meaning of these terms.

In almost every state, corporations are required to file annual reports that provide information about the continued activity of the corporation and the corporation itself.

The content of the annual report differs from state to state. However, the purpose of the annual report is usually the same — to make sure that the corporation is active and has paid the fees necessary to the state.

If a corporation doesn't file the annual report in a timely manner, it could lose its good standing with the state. There are serious consequences that a corporation or any other entity could face for not being in good standing with the state

One potential consequence is the personal liability of the owners of the corporation that is not in good standing.

Even if the corporation resolves the issue so that the corporation is in good standing with the state, a disgruntled party could use this short period of time of not being in good standing against the corporation when filing a lawsuit. The disgruntled party could sue the owners of the corporation.

Another consequence of a corporation not being in good standing is the fees and penalties from the failure to file the annual report in a timely manner.

Yet another consequence is a result of anyone being able to check the status of a corporation in real-time on the Internet. The vast majority of states have websites where people can check the status of a corporation.

This means that competitors, business partners, and attorneys who are curious about the status of your corporation can check it by searching the online database of the state.

In a recent case in which an organization failed to file its annual report with the state of Illinois on time, this consequence reared its head. Illinois is one of the many states that updates its database regarding the status of corporations immediately. Therefore, the database indicated that the company was not in good standing with the state for a brief period of time.

The company didn't owe too much money to the state and the company was only late in filing the report by a few days. However, while the company was not in good standing with the state, a business partner had noticed by checking the state's database. This caused the business partner to suspend its transaction with the said company until the company was able to obtain a status of good standing with the state.

Consequences of Not Maintaining Good Standing

Failing to maintain good standing status as a corporation in Illinois can have several severe repercussions:

  • Loss of Legal Protections: Corporations not in good standing may lose the liability protections that shield owners from personal responsibility.
  • Inability to Conduct Business: A corporation might be prohibited from legally entering contracts or conducting transactions.
  • Difficulty in Securing Financing: Financial institutions often require proof of good standing before approving loans or extending credit.
  • Public Visibility: Business status is easily searchable online, which can harm your reputation and deter potential partners or customers.
  • Legal Actions: Owners may face lawsuits or penalties for operating without compliance.

To avoid these consequences, corporations should proactively address compliance issues and regularly monitor their status.

Steps to Reinstate Good Standing in Illinois

If your Illinois corporation is not in good standing, follow these steps to restore compliance:

  1. Determine the Reason for Noncompliance: Check the corporation’s status via the Illinois Secretary of State's business entity database.
  2. Address Outstanding Issues: This includes filing missing annual reports, paying overdue franchise taxes or penalties, and resolving other compliance violations.
  3. Appoint a Registered Agent (If Necessary): Ensure the registered agent's information is up to date.
  4. Submit Reinstatement Forms: Complete and file reinstatement forms, such as the Application for Reinstatement.
  5. Pay Required Fees: Fees vary based on the duration of noncompliance and any penalties incurred.

Once all obligations are satisfied, the corporation will be reinstated and regain its good standing status.

Certificates of Good Standing

A Certificate of Good Standing serves as official proof that a corporation complies with Illinois's regulations. It may be required for:

  • Securing loans or investments
  • Registering to do business in other states
  • Confirming compliance to partners or clients

To obtain this certificate:

  • Search the Illinois business entity database to verify compliance.
  • Submit a request online or by mail, paying the applicable fee ($25 for corporations and $5 for not-for-profits).
  • Download or print the certificate after receiving confirmation.

Businesses should periodically review their compliance to avoid interruptions when needing this certificate.

Frequently Asked Questions:

  1. What does "not in good standing" mean in Illinois?
    It means the corporation has failed to meet the state's compliance requirements, such as filing reports or paying fees.
  2. How do I check my corporation's standing in Illinois?
    Use the Illinois Secretary of State’s business entity database to verify your corporation's status.
  3. What are the penalties for not being in good standing?
    Penalties include fines, loss of liability protection, and inability to legally operate.
  4. How can I regain good standing in Illinois?
    File missing reports, pay overdue fees, and submit reinstatement forms to the Illinois Secretary of State.
  5. Why do I need a Certificate of Good Standing?
    This certificate is essential for securing loans, doing business in other states, and establishing credibility with clients.

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