When Does My Business Need Foreign Qualification in Illinois?

"Doing business" in Illinois varies and may require legal consultation. Key signs you need to qualify include having a physical location, employees, binding contracts, regular client meetings, or significant revenue in the state. Understanding exclusions like isolated transactions is crucial.

Updated on
May 21, 2024
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Starting a Company
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Generally, whether a business is considered to be "doing business" in a state depends on its capacity to initiate or be subject to lawsuits, which is why businesses must have a registered agent within the state to handle legal and state communications.

For companies outside Illinois looking to operate within the state, the question often arises: "Do I need to officially qualify my business with the Illinois Secretary of State?"

Qualifying your business in Illinois involves submitting specific corporate, financial, and organizational details on prescribed forms, alongside verified documents from your home state showing your company's compliance with its domestic requirements.

The process also includes filling out the BCA 13.15 form, which is often rejected due to vague initial tax requirements and errors in the attached supporting documents. This form is crucial but challenging to pass through the Illinois Secretary of State due to its stringent requirements.

What does NOT constitute "doing business" in Illinois:

Activities that do not qualify as doing business include:

  • Engaging in isolated transactions completed within 120 days that are not repeated,
  • Maintaining passive bank accounts or offices solely for internal corporate management,
  • Holding meetings related to internal affairs,
  • Selling through independent contractors,
  • Soliciting orders that are accepted outside of Illinois,
  • Owning property passively,
  • Engaging in activities related to maintaining or transferring the company's own securities.

These exclusions mean that not all activities necessitate formal qualification as doing business in Illinois

Questions to consider foreign qualification filing in Illinois:

In general, if you answered “yes” to any of the following, you should consider foreign qualification in Illinois.

  • Physical location. You have a physical location, such as a warehouse, office, store or restaurant, in the state. (But, simply owning real property, or holding mortgages on real property, generally isn’t considered doing business.)
  • Employees. You have employees in the state. (Many states don’t consider using independent contractors in the state an activity that constitutes doing business.)
  • Regular binding contracts. You regularly enter into binding contracts in the state. (Entering into contracts that must be approved by an office located outside of the state before becoming binding is often listed as an activity that is not considered "doing business.")
  • Regular client or customer meetings. You regularly meet with clients or customers to conduct business with them in the state. (Phone meetings and email alone are less likely to rise to the level of doing business.)
  • Significant revenue stream. You have a steady and significant revenue stream from activities in the state. (Isolated transactions generally are not considered doing business.)

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Frequently Asked Questions

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What are the consequences for failing to file foreign qualification in Illinois?
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Corporations (Inc., Corp., Ltd. ...)

  • Among other, indirect consequences, a corporation that fails to file within 60 days after it begins to do business in Illinois will be liable (in addition to all required fees, franchise taxes, penalties, and other charges) for a penalty of the greater of
    • 10% of the filing fee, license fee, and franchise taxes; or
    • $200 plus $5 for each month (or fraction of each month) in which it has continued to do business in Illinois without authority.

Limited Liability Companies (LLC., L.L.C. ...)

  • Among other, indirect consequences, an LLC that fails to file within 60 days after it begins to do business in Illinois will be liable (in addition to all required fees) for a penalty of $2,000 plus $100 for each month (or fraction of each month) in which it has continued to do business in Illinois without being admitted to do so.
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