TLDR
Starting an Illinois nonprofit means filing Articles of Incorporation as an Illinois not-for-profit corporation under the General Not For Profit Corporation Act of 1986 ($50), obtaining a federal EIN, applying to the IRS for 501(c)(3) status (Form 1023 at $600 or 1023-EZ at $275), registering with the Illinois Attorney General Charitable Trust Bureau using Form CO-1 ($15), and applying for state sales tax exemption with the Illinois Department of Revenue. Illinois requires audited financial statements with the annual AG990-IL filing when contributions exceed $300,000 — one of the lower audit thresholds nationally. Annual reports go to the Secretary of State separately.
Why Form a Nonprofit in Illinois
Illinois is one of the larger states for nonprofit activity in the Midwest, with strong institutional philanthropy, a robust pass-through funding ecosystem from Illinois state agencies, and well-established legal infrastructure for charitable organizations. The state hosts approximately 60,000 to 70,000 registered 501(c)(3) public charities. Cook County alone is home to thousands of nonprofits operating across human services, arts, education, and health.
Illinois’s regulatory regime is moderately strict: the Attorney General Charitable Trust Bureau actively monitors registered charities, the audit threshold ($300,000) is lower than most states, and the AG990-IL filing deadline is unusual at six months after fiscal year end. None of these are insurmountable, but they require a precise compliance calendar.
Step 1: Decide on the Corporate Form
Most Illinois nonprofits incorporate as Illinois not-for-profit corporations under the General Not For Profit Corporation Act of 1986 (805 ILCS 105). Other forms — unincorporated associations, charitable trusts — exist but are less common for operating organizations.
Key requirements under the Act:
- At least three directors (805 ILCS 105/108.10)
- Members are optional; most public charities are non-membership organizations governed by directors
- Articles of Incorporation must include the corporate purpose, registered agent, and dissolution clause
Step 2: File Articles of Incorporation
File Articles of Incorporation Form NFP 102.10 with the Illinois Secretary of State, Business Services Department. The fee is $50. Online filing is available through the Illinois SOS portal; processing is typically 1 to 10 business days.
The Illinois standard form does not include all IRS-required 501(c)(3) language by default. Add explicitly:
- Purpose clause — limited to one or more 501(c)(3) exempt purposes
- Inurement prohibition — no part of net earnings inures to the benefit of any private individual
- Political activity prohibition — no substantial part of activities is carrying on propaganda; no participation in political campaigns
- Dissolution clause — assets distributed to another 501(c)(3) or to a government unit upon dissolution
Without these, IRS Form 1023 review will require an amendment to Articles before determination.
Step 3: Recruit Directors and Adopt Bylaws
Recruit at least three directors. For governance and IRS recognition, the majority should be unrelated by family or business interest. Adopt bylaws covering:
- Director qualifications, terms, and removal
- Officer roles and responsibilities
- Committee structure (executive, finance, audit, governance)
- Conflict of interest policy
- Meeting procedures and quorum
- Indemnification provisions
Hold the organizational meeting once Articles are filed. Elect officers, approve the bylaws, authorize the bank account, and approve the IRS Form 1023 filing.
Step 4: Obtain a Federal EIN
Apply for the Employer Identification Number on irs.gov. The online application takes about 10 minutes and the EIN issues immediately. Free.
Step 5: File IRS Form 1023 or 1023-EZ
For most Illinois nonprofits, the choice is between:
- Form 1023-EZ ($275) — streamlined application for organizations with projected annual gross receipts of $50,000 or less in each of the next three years and total assets of $250,000 or less. Eligibility worksheet on irs.gov.
- Form 1023 ($600) — full application for everyone else. Detailed narrative, three-year financial projections, board policies, and supporting documents.
Form 1023-EZ processing typically takes 2 to 6 weeks. Form 1023 typically takes 3 to 9 months.
While the 1023 is pending, the organization can begin operations. Solicitation in Illinois requires CO-1 registration regardless of IRS determination status.
Step 6: Register with the Illinois AG Charitable Trust Bureau
File Form CO-1 (Charitable Organization Registration Statement) with the Illinois Attorney General Charitable Trust Bureau. The fee is $15. CO-1 is required before any charitable solicitation in Illinois.
CO-1 attachments:
- Articles of Incorporation
- Bylaws
- IRS Form 1023 (or determination letter if issued)
- List of officers and directors
- Most recent financial statements (or budget if newly formed)
The Charitable Trust Bureau accepts CO-1 by mail or, for some categories, through the AG’s online portal. Processing typically takes 30 to 60 days.
Step 7: Apply for Illinois Sales Tax Exemption
Once the IRS determination letter is issued, apply for Illinois sales tax exemption by filing Form STAX-1 with the Illinois Department of Revenue. The Department issues an exemption (E) number — a five-digit number used with vendors to claim sales tax exemption on qualifying purchases.
Filing is free. Processing typically takes 4 to 8 weeks.
Step 8: Build the Annual Compliance Calendar
Three filings recur annually:
- Illinois SOS annual report — due on the anniversary of incorporation. Fee is $10 for not-for-profit corporations. File online through the SOS portal.
- Federal Form 990, 990-EZ, or 990-N — due 4.5 months after fiscal year end. May 15 for calendar-year filers. Filed with the IRS.
- Illinois AG990-IL — due 6 months after fiscal year end (June 30 for calendar-year filers). Note this is unusual — most state filings calendar off the same date as Form 990. Illinois adds 6 weeks. Attached: a copy of Form 990 and audited or reviewed financial statements at threshold.
Audit and review thresholds for AG990-IL:
- $300,000 or more in contributions: audited financial statements by an independent CPA
- $25,000 to $300,000: CPA-reviewed financial statements (interpretation varies; verify with practitioner)
- Under $25,000: internal financials acceptable
Step 9: Sales Tax, Property Tax, and Other State Filings
Beyond charitable registration, Illinois nonprofits may need:
- Property tax exemption — separate application to the local County Board of Review or Department of Revenue if the nonprofit owns real property
- Sales tax exemption — STAX-1 covers most purchases; some categories require additional certificates
- Employer withholding — register with Illinois Department of Revenue for state income tax withholding once employees are hired
- Unemployment insurance — register with Illinois Department of Employment Security
- Workers’ compensation — required for most employers under Illinois law
Step 10: Plan for the Audit Threshold
Illinois’s $300,000 audit threshold is one of the lower thresholds nationally. Organizations crossing $250,000 in contributions should:
- Engage a CPA firm 6 to 12 months before the threshold is crossed
- Implement audit-grade financial controls (segregation of duties, monthly reconciliation, board financial review)
- Adopt formal accounting policies (revenue recognition, restricted fund tracking, allocations)
- Schedule the audit by November of the prior fiscal year — auditors are at capacity January through April
The audit cost is typically $15,000 to $40,000 for a first audit, $10,000 to $25,000 for repeat engagements with a stable scope.
Practical Sequence Summary
- Reserve corporate name with Illinois SOS
- Recruit minimum three directors
- File Articles of Incorporation with Illinois SOS ($50)
- Adopt bylaws; hold organizational meeting
- Obtain federal EIN (free)
- File Form 1023 or 1023-EZ with the IRS ($600 or $275)
- File Form CO-1 with Illinois AG Charitable Trust Bureau ($15) before any solicitation
- Apply for Illinois sales tax exemption with STAX-1 (free) after IRS determination
- Calendar SOS annual report (anniversary), Form 990 (May 15), AG990-IL (June 30 for calendar-year filers)
- Engage CPA when approaching $300,000 in contributions
How GrantPipe Supports Illinois Nonprofits
GrantPipe’s grant pipeline management handles the funder side of an Illinois nonprofit’s compliance work. Restricted fund tracking keeps grant revenue separated for AG990-IL audit attachments. Grant calendar deadline alerts surface CO-1 renewal, AG990-IL deadlines, and federal filings in one calendar.
For specific Illinois compliance, see the Illinois charitable registration workflow and the Illinois AG990-IL filing guide. For the funder landscape, see Illinois top foundation grants.
Start a free trial to wire Illinois state filings into the same calendar as your active grant reports.
Free resource
Get the Nonprofit Grant Compliance Checklist
A practical checklist for post-award grant compliance: restricted funds, reporting cadence, audit prep, and common failure points. Delivered by email.
- Illinois not-for-profit corporation
- A corporation organized under the Illinois General Not For Profit Corporation Act of 1986 (805 ILCS 105). The standard corporate form for Illinois nonprofits.
DEFINITION
- Charitable Trust Bureau
- The Illinois Attorney General office unit that administers charitable organization registration and oversight under the Charitable Trust Act and Solicitation for Charity Act.
DEFINITION
- Form CO-1
- Charitable Organization Registration Statement filed with the Illinois Attorney General Charitable Trust Bureau as initial registration. $15 fee.
DEFINITION
- Form AG990-IL
- Illinois Charitable Organization Annual Report filed with the Attorney General. Due six months after fiscal year end, with attached IRS Form 990 and audited or reviewed financial statements at threshold.
DEFINITION
“Illinois's $300,000 audit threshold is well below the federal Single Audit threshold and below most state thresholds. Plan for the additional CPA cost as soon as the organization is on track to cross that line.”
“The CO-1 is straightforward, but the AG990-IL deadline is what trips people up. Six months after fiscal year end is unusual — most state filings calendar off four-and-a-half months.”
Q&A
Does Illinois require a minimum number of directors?
Illinois General Not For Profit Corporation Act requires at least three directors (805 ILCS 105/108.10). Best practice is a majority of unrelated directors to support IRS recognition and good governance.
Q&A
How does Illinois handle out-of-state charities?
Charities formed outside Illinois that solicit Illinois donors must register with the Illinois AG Charitable Trust Bureau using Form CO-1 before solicitation. The corporate filings happen with the home state; the charitable registration is an Illinois requirement.
Q&A
Are religious organizations required to register with Illinois?
Some religious organizations are exempt from Illinois charitable registration under 760 ILCS 55/3, but the exemption is specific. Religious organizations should verify exemption with the Charitable Trust Bureau rather than assume it applies.
Frequently asked