Start Your Own Business in Illinois: Seven Steps You Need to Take

From licenses and permits to taxes and insurance, learn what you need to do to start a business in Illinois.



Here’s an overview of the key steps you’ll need to take to start your own business in Illinois.

Step 1. Decide on a Legal Structure

The most common legal structures for a small business are:

  • sole proprietorship
  • partnership
  • limited liability company (LLC), and
  • corporation.

There also are special versions of some of these structures, such as limited partnerships and S corporations. You’ll want to consider which business entity structure offers the type of liability protection you want and the best tax, financing, and financial benefits for you and your business. Check  Choose Your Business Structure  on Nolo’s website for more information on how to choose the best ownership structure for your business.

Step 2. Choose a Name

For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the Illinois Secretary of State (SOS). You can check for available names by doing a  name search  on the SOS website. You can reserve an available name for 90 days by filing an  Application for Reservation of Name. There are certain name requirements for LLCs and corporations (like including a word such as “LLC” for LLCs or “Company” for corporations). See  How to Form an LLC in Illinois  and  How to Form a Corporation in Illinois  for more information.

Is your business a sole proprietorship or partnership that uses a business name that is different from the legal name of the business owner (for a sole proprietorship) or surnames of the individual partners (for a partnership)? If so, you must register an assumed business name with the county clerk in the county where you transact business. In addition, you must publish your assumed name filing. Check the website for the relevant county for more information.

If you plan on doing business online, you may want to register your business name as a domain name. See  Choose and Register a Domain Name  for more information. In addition, to avoid trademark infringement issues, you should do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See  How to Do a Trademark Search  for more information.

Step 3. Create Your Business Entity

  • Sole proprietorship:  To establish a sole proprietorship in Illinois, you don’t need to file any organizational documents with the state. For more information, see  How to Establish a Sole Proprietorship in Illinois.
  • Partnership:  To create a general partnership in Illinois, you don’t need to file any organizational documents with the state. Although not legally required, all partnerships should have a written partnership agreement. The partnership agreement can be very helpful if there is ever a dispute among the partners. For more information, see  How to Form a Partnership in Illinois.  To form a  limited liability partnership  (often used by professionals), you must file a Statement of Qualification with the Illinois SOS. For more information, seeHow to Form a Limited Liability Partnership in Illinois.
  • LLCs:  To create an LLC in Illinois, you must file  Articles of Organization  with the Illinois SOS. You will also need to appoint a  registered agent  in Illinois for service of process. In addition, while not required by law, you should prepare an  operating agreement  to establish the basic rules about how your LLC will operate. The operating agreement is not filed with the state. For more information, see  How to Form an LLC in Illinois  andHow to Form a Professional LLC in Illinois  (for professionals).
  • Corporations:  To create a corporation in Illinois, you must file  Articles of Incorporation  with the Illinois SOS. You will also need to appoint a  registered agent  in Illinois for service of process. Although not legally required, you also should prepare  bylaws  to establish your corporation’s internal operating rules. Bylaws are not filed with the state.  S Corporations  must also file IRS Form 2553,  Election by a Small Business Corporation,  with the IRS. For more information, see  How to Form a Corporation in Illinois.

Step 4. Licenses and Permits

Tax Registration.  If you will be selling goods in Illinois, you must register with the Department of Revenue (DOR) to collect sales tax. If your business will have employees, you must register with the DOR for employer withholding taxes. You can register for both types of tax, as well as other business taxes, either online via the  MyTax Illinoiswebsite or on paper using  Form REG-1,  Illinois Business Registration Application.

EIN.  If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.

Regulatory licenses and permits.  These can cover areas such as:

  • health and safety
  • the environment
  • building and construction; and
  • specific industries or services.

Different regulatory licenses are issued by different state agencies. For example, environmental permits may be issued by the Illinois Environmental Protection Agency and employment-related licenses may be issued by the Illinois Department of Labor. Check the  Registration, Licenses, & Permits  section of the state government’s illinois.gov website for more information. For information about local licenses and permits, check the websites for any cities or counties where you will do business.

Professional and occupational licenses.  These cover people who work in various fields. Nearly all of these professions and occupations are regulated by the Illinois Department of Financial and Professional Regulation (IDFPR). (Each profession and occupation also is more directly regulated by its related state regulatory board.) The IDFPR website has a section covering  Professions Regulated by IDFPR.

Step 5. Business Location and Zoning

You’ll need to pick a location for your business and check local zoning regulations. That includes if you work from home. You may be able to find zoning regulations for your town or city by checking  municode.com.

Step 6. Taxes and Reporting

Illinois taxes every kind of business. More specifically, Illinois has a corporate income tax, a corporation franchise tax, and a personal property replacement tax. Most businesses (except sole proprietorships) will be subject to at least one of these three taxes. See  Illinois State Business Income Tax  for more information on state business taxes in Illinois.

Sole proprietorships.  Pay state taxes on business income as part of their personal state income tax returns (Form IL-1040).

Partnerships.  Partners pay state taxes on partnership income on personal tax returns. In addition, Illinois partnerships also must file  Form IL-1065,  Partnership Replacement Tax Return.

LLCs.  Members pay state taxes on their share of LLC income on personal tax returns. In addition, LLCs themselves have to file an additional state tax form — either a partnership return or a corporation return. The specific form used will depend on how the LLC is classified for federal tax purposes. Illinois LLCs also are required to file anannual report  with the Illinois SOS. See  Illinois LLC Annual Filing Requirements  for more information.

Corporations.  Shareholders must pay states taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on his or her personal state tax return. Moreover, the corporation itself is subject to various Illinois  corporation taxes. And, finally, corporations must file an  annual reportwith the Illinois SOS.

If you have employees, you must also deal with state  employer taxes.

And, apart from Illinois taxes, there are always federal income and employer taxes. Check IRS Publications 334,Tax Guide for Small Business, and 583,  Taxpayers Starting a Business, available at irs.gov.

Step 7. Insurance

Insurance is a good idea for most kinds of business. While insurance often is regulated at the state level, the types of business insurance available are usually similar across the fifty states. Check  Obtaining Business Insurance  for more information.

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