Banking and Business February 2013

Secretary of State Filing Fees and Foreclosure News



A.        Illinois Secretary of State Filing Fees for Subchapter S Corporations and LLCs


            I ran across an op-ed piece in the February 4, 2013 edition of Crain’s Chicago Business from Elliot Richardson, CEO of the Small Business Advocacy Council, lobbying for a change in the Illinois Secretary of State’s filing fees with respect to limited liability companies (LLCs) to make them more like those for corporations.  He correctly points out that various filing fees for LLCs are substantially higher than those for corporations.  To wit:


Type of Entity


Annual Report






















            While filing fees may be a factor in the choice of entity issue for startups, it should be only one of many factors, both non-tax and tax, that are considered by counsel in recommending a particular entity type.  If you are involved with a startup and need assistance with the choice of entity issue, feel free to contact me for a free initial consultation.  Many of my colleagues old enough to remember when the Illinois LLC Act was originally passed thought that the higher fees were meant as a revenue-raiser for the State given the perception at the time that LLCs would come to dominate the choice of entity for small businesses.  Given the overall flexibility of LLCs and the fact that they can provide pass-through tax treatment without the IRS’ structural requirements for Subchapter S corporations, perception has become reality.


            Legislation in the form of HB 65 was introduced in the Illinois House on January 9, 2013 to correct this disparity in filing fees.  Last week the bill was assigned to the House Appropriations - Elementary & Secondary Education Committee.  Stay tuned.  It will be interesting to see if the State is willing to forego this revenue raiser in the name of treating LLCs and corporations the same for filing fee purposes.


B.        Foreclosure News


            According to various news reports I have seen, Chicago continues to lag national trends concerning reduced foreclosure activity.  Home foreclosure filings rose 30% in the Chicago area last year, a sign that the backlog of distressed residential property here isn’t going away anytime soon.  Our area ranked ninth in foreclosure activity in 2012 among 212 metropolitan areas tracked by RealtyTrac Inc.  The region had 125,598 filings, or one for every 30 housing units, the most activity among Midwestern cities.  While the Chicago area has the most homes that are lender-owned or facing foreclosure on an absolute basis (more than 120,000), when compared to sales volume, it has only a three-year supply of foreclosed homes, trailing places like New York (about eight years) and Philadelphia (three-and-a-half ), according to RealtyTrac.  Sales of foreclosed properties in the Chicago area accounted for 30% of total residential sales last year.  On average, foreclosed properties here sold at a 46% discount to non-foreclosed ones.


            Similarly, according to the Woodstock Institute, a Chicago-based public policy and research group, more than 35,000 homes and small multifamily buildings in the Chicago area completed the foreclosure process last year, the highest number since the housing crisis began, and the vast majority of them became bank-owned.  An increase in foreclosure auctions was expected since lenders shelved many foreclosure cases while state and federal authorities investigated allegations of faulty foreclosure processes.  Still, the heightened level of auctions — 35,244 in 2012, compared with 20,281 in 2011 — along with an increase in initial foreclosure filings, shows the local housing market has a long road to recovery.


            Nationally, the figures are better.  The number of U.S. homes in the foreclosure process and lost to foreclosure both saw double-digit year-over-year declines in December, according to a report from data aggregator CoreLogic released on February 1.  Completed foreclosures fell 21% on an annual basis and 3% on a monthly basis in December, to 56,000.  Foreclosure inventory -- the number of homes in some stage of the foreclosure process -- came in at about 1.2 million homes in December, down 19.5% compared to December 2011 and down 4.2% compared to November.  Foreclosure inventory in December represented about 3% of all homes with a mortgage, CoreLogic said.


            We continue to see distressed properties, representing both lenders and borrowers.  If you are involved with a distressed property and need advice as a lender or borrower, feel free to contact me for a free initial consultation.