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Business Law

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What the Business Services Department Can Do for You

By Lin Hanson

Online filing? Advance review of filings? Those features and much more are available from the business services department.

Recently, I asked ISBA transactional e-mail discussion group members what they'd like to hear more about in this column. Many requested tips for dealing with the Illinois Secretary of State's Department of Business Services. I've been interacting with these folks since 1961, and from 1981 through 2005 I dealt with them officially as part of the Illinois Secretary of State's Business Laws Advisory Committee.

Two points: (1) The business services department is staffed by friendly, helpful people who will go out of their way to assist you, and (2) there are no secret rules or hidden practices to unearth.

For his help in assembling the material for this column I'm grateful to Chuck Moles, the administrator of the unincorporated entities section of the department of business services.

Online filing

The department of business services Web site is home to a wealth of useful information. It's at http://www.cyberdriveillinois. com/departments/business_services/home.html.
From there you can launch a UCC lien or tax lien search, search for digests of corporate and LLC files, order certificates of good standing, and download fillable forms for creating and revising corporations, LLCs, partnerships, and the like.

The site has an important new feature - it permits users, with some limitations, to file both corporate and LLC annual reports online. Although there is no "expedited filing" fee, there is a $6.25 convenience fee for this service.

In the case of corporations, you can't file an online annual report if the corporation owns out-of-state property or transacts business outside Illinois. Also, you can't file online if there have been any changes in the authorized shares, issued shares, and/or paid-in capital. You can only enter six officers and six directors on the electronic filing.

In the case of LLCs, online reports can only be filed if the company has eight or fewer managers or, if it is member managed, eight or fewer members. Series LLCs cannot file online. The online report must be filed by a manager or member named in the report, who is a natural person, not another LLC, corporation, or the like.

Soon (probably about September 15th) you should also be able to file articles of incorporation and articles of organization online, although "real time" responses won't be possible because of the trickiness in determining a name (see below). These filings will require the $100 expedited-filing fee.

Choosing corporate names

While there are no "secret" rules for dealing with the department there are rules, and you should know how to find them. In 1977 the Illinois legislature created the Joint Committee on Administrative Rules (JCAR) to oversee rules established by various state agencies, including the office of the secretary of state. There is a good discussion of administrative rules in Tom Gaylord's article, "Beyond the Regs: Illinois Administrative Law Online," in the July 2007 Journal.

To find rules applicable to the department of business services, go to the General Assembly web-site at www.ilga.gov , drop down to "Rules and Regulations," and choose "Administrative Code." Once there, select Title 14, Commerce, then pick the rules that apply to your inquiry.

To illustrate how to use these rules, let's consider the process of choosing a company name. We all sometimes have problems getting the name a client wants for a new corporation or LLC. Some years ago Illinois amended the respective acts to provide that a name is available if "distinguishable upon the records" of the secretary of state. 805 ILCS 5/4.05(a)(3); 805 ILCS 180/1-10(d). If the statute were the final word, you could search for a name on the Secretary of State's Web site at http://www.ilsos.gov/corporatellc/ and, if you found no matches, consider the name available.

But the statute isn't the final word. You also have to consider the administrative rules. Here we find that a name (for a corporation, see section 150.440; for an LLC, see section 178.135) is only distinguishable when the Secretary of State or his designee finds some basis that makes it distinguishable.

So, the purely mechanical test that appears to be mandated by the statute is modified by the rules to require human intervention. This can trip you up if you're filing to create a new company, and will also delay the process of electronic filing to create new companies once that procedure is implemented (see above).

You've got a friend

The number one reason for rejection of proposed filings is a missing or otherwise defective signing. Many documents are filed unsigned and must be rejected. When a document is filed by an entity other than a natural person, the authority of the person signing must be proved. When a member or a manager of an LLC is not a natural person, for example, under the administrative rules, title 14, section 178.20, a "Certificate of Existence" must be filed. For trusts, a statement of trust is required, and in other cases a power of attorney may be required to authenticate a signature.

While many secretary of state filings are routine, others are more complex, as are mergers. The good news: if you have an unfamiliar task like a merger to perform, you can prepare your forms and submit them to the secretary of state's office for an advance determination. If you've missed the mark with your drafting, the department of business services can tell you exactly what you need to change. How much better it is to get it right the first time than to go back to the client with revisions and explain why your filing got "bounced."

In short, you've got a friend in Springfield, willing and able to lend a helping hand with unfamiliar projects. Just give them a call at (217) 782-6961, or mail your work for an advisory opinion to Secretary of State, Department of Business Services, Howlett Building, 501 South Second Street, Springfield, IL 62756. And if you're in Springfield, they are right across the street from the ISBA's headquarters on Second Street. Drop by and visit. You'll be amazed at how few people it takes to run this important state agency.