Managing a medical practice in Illinois means navigating compliance requirements that extend far beyond patient care. The state's strict Corporate Practice of Medicine doctrine, dual regulatory oversight from the Illinois Secretary of State and the Illinois Department of Financial and Professional Regulation (IDFPR), and entity-specific filing deadlines create substantial administrative burden. Non-compliance can jeopardize your professional license and entity good standing, making proactive entity management essential.
Illinois law provides healthcare professionals with four distinct professional entity structures, each governed by specific statutory frameworks. Professional Corporations operate under 805 ILCS 10/ (Professional Service Corporation Act), while Professional Limited Liability Companies are governed by 805 ILCS 185/ (Professional Limited Liability Company Act). Professional Associations derive authority from 805 ILCS 305/ (Professional Association Act), and Limited Liability Partnerships operate under 805 ILCS 206/ (Illinois Uniform Partnership Act). Understanding the requirements, restrictions, and ongoing compliance obligations for each structure is critical for maintaining operational continuity.
Professional Corporations represent the traditional structure for physician-owned medical practices in Illinois. 805 ILCS 10/ mandates that all shareholders, directors, officers, and employees rendering professional services must be licensed professionals. The corporation must be organized solely for rendering one category of professional service, preventing multi-discipline ownership arrangements.
Governance requirements for PCs are stringent. According to Illinois Secretary of State guidance, medical professional corporations must explicitly state in their Articles of Incorporation that the organization is for "the study, diagnosis, and treatment of human ailments." Corporate names must include both a professional designator ("Professional Corporation," "Prof. Corp.," or "P.C.") and a standard corporate designator ("Chartered," "Limited," "Ltd.," or "S.C."). Medical or surgical treatment can only be provided by licensed employees under the Medical Practice Act, and all incorporators must be licensed professionals.
PLLCs offer structural flexibility with limited liability protection similar to standard LLCs but require strict single-discipline ownership restrictions. 805 ILCS 185/ requires dual registration with both the Illinois Secretary of State and IDFPR. All members and managers must be licensed in the relevant profession, maintaining the single-discipline ownership requirement that applies to all professional entities under Illinois law.
Name requirements for PLLCs are explicit: entities must include "PLLC," "P.L.L.C.," "Prof. L.L.C.," or similar designation to distinguish them from general LLCs. PLLCs are explicitly available for medicine, dentistry, psychology, social work, veterinary medicine, and other IDFPR-licensed professions.
Illinois actively enforces the Corporate Practice of Medicine doctrine through both statutory law and binding judicial precedent. The Illinois Supreme Court's decision in Berlin v. Sarah Bush Lincoln Health Center, 179 Ill. 2d 1, 688 N.E.2d 106 (1997), remains the most authoritative statement on CPOM enforcement. The court held that while licensed hospitals may employ physicians, employment relationships must comply with CPOM principles protecting physician autonomy.
The Medical Practice Act (225 ILCS 60/3) specifies that only individuals holding valid Illinois medical licenses may practice medicine, while 805 ILCS 185/13 restricts professional practice ownership to licensed professionals in the relevant field. Recognized exceptions include licensed hospitals (subject to Berlin principles), HMOs with statutory exemptions, and academic/government healthcare entities.
Professional Associations (805 ILCS 305/) allow two or more licensed healthcare professionals in the same discipline to practice together. All members must maintain active professional licensure, and the association may engage in professional services only within the licensed discipline of its members. Name requirements for PAs typically require designation as a "Professional Association" or "P.A." to distinguish them from standard corporations or partnerships.
Limited Liability Partnerships (805 ILCS 206/) offer partnership flexibility with liability protection. LLPs protect partners from liability for others' negligence while maintaining personal liability for their own conduct.
Name requirements mandate inclusion of "Limited Liability Partnership," "LLP," or "L.L.P." to identify the entity's legal status. The single-discipline ownership requirement applies equally: medical LLPs may only include physicians licensed under the Medical Practice Act, maintaining Illinois' strict enforcement of the Corporate Practice of Medicine doctrine across all professional entity structures.
Formation procedures for healthcare professional entities involve multiple steps, dual agency coordination, and specific documentation requirements. Understanding the complete process, associated costs, and timing is essential for efficient entity establishment.
Critical procedural requirements demand attention. According to the Illinois Secretary of State Guide C-179, medical and professional service corporations cannot be incorporated online and must submit paper forms with original signatures. Expedited processing costs an additional $100 and requires in-person submission at Department of Business Services offices; expedited applications cannot be mailed.
Payment for expedited services must be by certified check, cashier's check, money order, Illinois attorney's check, or Illinois CPA's check made payable to "Secretary of State." Cash is not accepted for expedited services.
The required sequence for IDFPR registration is critical. You must first file Articles with the Secretary of State, receive the filed Articles back, then submit the IDFPR registration application with the already-filed Articles, licensing information, and $50 fee. IDFPR approval is not required before forming the entity, but the post-formation registration is mandatory.
Managing different deadlines for PCs versus PLLCs, coordinating dual agency filings, and tracking professional licenses across multiple physicians creates persistent compliance anxiety for many practice administrators.
The filing deadline structure differs significantly between Professional Corporations and PLLCs, creating material differences in compliance burden. Professional Corporations must file annual reports before the first day of the anniversary month under 805 ILCS 5/16.05, with no grace period. A PC incorporated in June must file before June 1st each year, creating a strict compliance deadline with no statutory cushion. For step-by-step guidance, see our complete guide on how to file an Illinois annual report.
Professional LLCs operate under a more flexible framework. 805 ILCS 180/50-1 requires PLLCs to file within the 60-day period immediately preceding the first day of the anniversary month. A PLLC formed in June can file between April 1st and May 31st each year, providing a built-in two-month window.
Both entity types pay a $75 annual report filing fee through the Illinois Secretary of State's online filing system. Payment is accepted by credit card or debit card, with no healthcare surcharge regardless of practice size, specialty, or revenue. Illinois is among the states that require an annual report for maintaining good standing.
Immediate Late Fee (Both Entity Types): $50 when reports submitted after statutory deadline
Professional Corporations (Compounding Penalties):
PLLCs (Flat Late Fee): $50 flat fee only
The Illinois Secretary of State may administratively dissolve entities for failure to file annual reports, making the entity name unavailable for three years. This creates additional complexity if you need to reform the LLC or restructure your practice.
Illinois is phasing out its franchise tax through a series of legislative actions. The exemption threshold increased from $1,000 to $5,000 for tax year 2024, then to $10,000 for tax years beginning January 1, 2025 and after (per HB 4951). Illinois Senate Bill 3488, signed into law in 2024, formally eliminates the franchise tax effective January 1, 2026, with the statutory provisions being repealed January 1, 2027. House Bill 2846 codifies this elimination.
For most medical practices, the current $10,000 exemption threshold means no franchise tax is owed. However, you must continue filing annual reports with the $75 fee to maintain good standing. For complete details on current requirements, see our Illinois franchise tax information resource.
Illinois legislation from 2023-2026 shows updates in professional licensing but stability in entity formation law. HB5925 created an International Medical Graduate licensure pathway through two separate Public Acts: PA 103-102 (effective June 16, 2023) established the limited license requirement, while PA 103-725 (effective January 1, 2025) implemented formal supervision protocols.
New APRN continuing education requirements on cultural competency, implicit bias training, and Alzheimer's/dementia care became effective January 1, 2023 through Public Acts 103-0531, 102-0004, and 102-0399.
The Professional Service Corporation Act, LLC Act healthcare provisions, and CPOM doctrine enforcement continue without modification, providing regulatory certainty for new healthcare business structuring. No amendments to entity formation law occurred during 2023-2026.
Physician licensing in Illinois creates a direct nexus with entity ownership eligibility. Under the Illinois Medical Practice Act (225 ILCS 60/), physicians must complete 150 hours of continuing medical education every three years as a condition of license renewal. Within this requirement, a minimum of 60 hours (40%) must be Category 1 CME from formal educational activities accredited by ACCME, AOA, AAFP, or other IDFPR-recognized organizations. Up to 90 hours (60%) may be Category 2 CME from informal activities including teaching, publication, and self-directed learning.
Within each three-year renewal cycle, IDFPR mandates specific continuing education on designated topics: three hours on opioid safe prescribing practices (required for Illinois Controlled Substance License holders), one hour on sexual harassment prevention training, one hour on recognizing dementia and Alzheimer's disease, and one hour on implicit bias in healthcare. Additionally, one hour on child abuse identification and reporting is required once every six years (meaning physicians must complete this requirement once during two consecutive three-year renewal cycles). These mandatory topic hours count toward the total 150-hour requirement and can qualify as Category 1 CME when obtained through appropriately accredited providers.
The license renewal cycle operates on a three-year basis, with the next renewal deadline on July 31, 2026.
Active Illinois medical licensure is mandatory for ownership, officer, and director positions in Illinois medical corporations. Under the Illinois Professional Service Corporation Act (805 ILCS 10/), all officers, directors, and shareholders of medical corporations must hold active Illinois medical licenses.
Loss of active licensure status through failure to renew, lapse in CME compliance, disciplinary action, or voluntary surrender legally disqualifies an individual from maintaining ownership, officer, or director positions in Illinois medical professional corporations. Under the Illinois Professional Service Corporation Act (805 ILCS 10/3.4) and the Medical Practice Act (225 ILCS 60/), all shareholders, directors, and officers must hold valid, active Illinois medical licenses. Any interruption in active licensure status directly threatens the legal capacity to maintain equity positions and governance roles.
Can a non-physician corporation employ physicians in Illinois?
Illinois enforces the Corporate Practice of Medicine doctrine strictly, but with specific exceptions. The Illinois Supreme Court's decision in Berlin v. Sarah Bush Lincoln Health Center (1997) established that licensed hospitals may employ physicians, but employment relationships must comply with CPOM principles protecting physician autonomy. Corporate entities cannot employ physicians in ways that interfere with independent medical judgment. Non-hospital entities require 100% physician ownership through Professional Corporations or PLLCs. Management Service Organizations may provide administrative support only.
What happens if a physician's license lapses while they own equity in a medical professional corporation?
License lapse creates immediate legal disqualification from maintaining ownership positions. Under the Illinois Professional Service Corporation Act 805 ILCS 10/3.4, all shareholders, directors, and officers must be licensed professionals. A lapsed license means the individual no longer meets the statutory requirement for ownership participation. Immediate corrective action is required, such as equity transfer to licensed shareholders or restructuring ownership.
Do Professional Corporations and PLLCs have different annual filing requirements in Illinois?
Yes. PCs must file before the first day of the anniversary month with no grace period (plus 10% surcharge and 2% monthly interest on late filings), while PLLCs file within a 60-day window before the anniversary month with only a $50 flat late fee. Both pay the same $75 annual report fee.
Can physicians form a professional entity with nurse practitioners or physician assistants in Illinois?
No. Illinois law strictly prohibits physicians from co-owning professional entities with nurse practitioners, physician assistants, or other healthcare professionals licensed under different statutory chapters. All shareholders, directors, officers, and employees must be licensed under the same professional licensing act. These are separate statutory chapters, making multi-discipline co-ownership prohibited. Collaborative arrangements are possible through Management Service Organizations (MSOs) that provide non-clinical administrative support while maintaining separate professional entities for each discipline.
Managing dual regulatory oversight from the Illinois Secretary of State and IDFPR, navigating different annual report deadlines for PCs (requiring filing before the anniversary month with no grace period) versus PLLCs (allowing a 60-day filing window), coordinating professional licensing requirements with entity ownership compliance, and tracking mandatory continuing education across multiple providers creates substantial administrative burden for healthcare organizations.
Ready to simplify your healthcare entity compliance? Book a demo with Discern today and discover how we can help you navigate Illinois' complex dual regulatory framework while maintaining compliance with Corporate Practice of Medicine doctrine requirements and annual reporting deadlines.
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