Start a Business in Illinois

Entrepreneur’s guide to forming a business in Illinois

Illinois is one of the most culturally vibrant states in the nation. The state has been witnessing a major shift in business activity with many companies moving to this state. If you are a first time business owner then one of the primary aspects to consider is the overall business climate. This state has just the right business climate and its small business support ecosystem makes it easier to register a business in Illinois. You can leverage location factors like lower operational costs, access to skilled labor, world class infrastructure, and favorable tax incentives.

Why do companies prefer to register business in Illinois?

There are several key factors that have driven entrepreneurs to start a business in Illinois including its thriving economy. The Real Gross Domestic Product (GDP) of the Prairie State was $875.57 billion in 2023. Today, the state has successfully developed a robust startup and innovation ecosystem. It is also home to world-renowned research universities. There are several advantages the state has and some of them are –

• Transportation and Logistics Infrastructure – One of the top reasons why entrepreneurs prefer to start a small business in Illinois is the world-class transportation and logistics infrastructure. The state is home to airports, seaports, and inland waterways connecting you with other states and globally.
• Tax Incentives and Credits – Once you register an Illinois business online, you can benefit from the wide variety of small business incentives and tax credit programs. The benefits can vary from deriving tax exemptions to getting tax credits and even tax-exempt Industrial Development Revenue Bonds (IRBs).

Want to start a new company in Illinois?

Steps to start a business in Illinois

It is never easy to start a business as there are several areas to focus on simultaneously. There are processes, state laws, and compliances to meet to operate a company in a streamlined manner. Hence, preparing before starting a business in Illinois is important. Let’s look at some of the core areas that will have a decisive impact on business registration and operations.

1. Prepare Illinois Business Plan

Every business has an operational objective and a financial goal. It is important to remember that no two businesses are alike. So, where do you start? The first step is to always prepare a business plan. It is often considered a strategic plan and may contain several other sub-categories, like a marketing or financial plan. It plays a critical role in organizational management and is a must-have on your Illinois business checklist. It will also help you focus on all important factors to help you achieve your short-term and long-term objectives. Your business plan should ideally contain the following –

• Executive summary
• Ownership, & management
• Industry & market analysis
• Products and services
• Competitive analysis
• Branding and marketing
• Logistics and operations
• Financial statements and projection

2. Attend Entrepreneurial Training or Development Programs in Illinois

Illinois has a diverse economy, and it is competitive, too. If you want to stay ahead of the competition or want your company to achieve the break-even point quickly, then entrepreneurial training or development programs can be quite helpful. Developing entrepreneurial competence is integral to the success of your business. These programs are focused on helping you develop the spirit of self-employment while facilitating strategic decision-making. In fact, you can choose from a wide variety of entrepreneurial and business development programs in the state. Some programs will also outline the steps required to register a business in Illinois.

3. Choose Business Structure for Illinois Business

An important point in your Illinois business checklist is choosing the right business structure. There are several implications of this like for tax purposes, an LLC is a better structure as compared to a corporation. Again, when it comes to getting venture capital, a corporation is considered the best option. Basically, each business structure has its unique characteristics and limitations. You should consider several aspects before choosing an entity structure, such as legal, tax, employment, marketing, and registration. You can start a business in Illinois by choosing any of the following structures –

• Sole Proprietorship
• Domestic and foreign LLC
• Domestic and foreign corporations
• Professional Limited Liability Company
• General partnership
• Limited partnership
• Limited liability partnership (LLP)
• Nonprofit corporations
• Professional Service Corporation
• Benefit Corporation
• Professional associations

4. Naming Your Illinois Business

One of the important requirements for registering a business in Illinois is choosing and reserving a proper business name. This process is mandatory for all forms of entities, including sole proprietorships. A business name is like the identity of any company and is used in all areas, from marketing to finances. Hence, it is important to consider several aspects when choosing a name. They are –

• It is important to follow the state naming requirements and guidelines. These are governed by 2023 Illinois Compiled Statutes, Chapter 805 – Business Organizations.
• The business name should be distinguishable from any other company in Illinois. You also need to ensure that you do not use restricted words like bank or trust. You cannot use words similar to the names of various government agencies.
• Once you have chosen a name, it is important to conduct a Business Entity Search also known as name availability search.
• The state of Illinois requires you to reserve a business name by filing the Application For Reservation of Name.
• It is important to note that the name reservation form is different for different entities.
• If you don’t want to use your legal name then you will need to register an assumed name. This name is also known as DBA (Doing Business As).

5. Choose Your Location for Illinois Business

If you have taken a decision to start a small business in Illinois then identifying the right location is of utmost importance. When we say location, it may refer to a city, county, or simply an industrial district. Choosing the right area is important as it will influence various aspects of your business like operations, profitability, scalability, risk, competition, and expenses among others. There are some key factors that you need to consider when choosing a location and they are:

• Accessibility – Accessibility should be right at the top of your mind. It refers to how easily your client can approach you. It also includes ease of parking or parking space nearby and proximity to your vendors or other businesses. If you start a business in Illinois in the manufacturing industry then choosing an opportunity zone, industrial zone or foreign trade zone can be beneficial.
• Growth Potential – One of the overlooked areas is growth potential. Yes, this is connected to other aspects of choosing a location like accessibility, nearby markets, transportation infrastructure, competition, commercial space, and industrial hubs. So, you need to ask yourself if your chosen location has growth capabilities or not.
• Operating and other related costs – When you register Illinois business online, one of the areas that will impact your business the most is the operational costs. There are several components of operational costs and each affects the company in a different way. These are basically ongoing expenses that will be incurred by you during every day running of the business. Some of the common operating cost components include rent, equipment, marketing, inventory costs, payroll, and property taxes among others. Hence, it’s important to choose an area that helps lower your operating costs.
• Local zoning ordinances – Zoning rules can actually have a detrimental effect on the operations and growth of a business. You need to check in advance the local ordinances in the zone you have selected for your business. You need to check whether your business can operate from the chosen zone, if the said property can be expanded in the future, and the type of signage that is acceptable.

6. Register Your Illinois Business

The most important process is that of registering your company. The process will vary according to the type of entity structure you choose. The processes will also be different for domestic and foreign entities. Accordingly, you must file necessary or relevant documentation with the state. The documentation and the filing fee must be submitted to the office of the Illinois Secretary of State, Department of Business Services. Let’s look at an example to understand this.

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7. Get Your EIN

Once you register a business in Illinois, you will be required to file taxes at the federal and state levels. An Employer Identification Number (EIN) can be very useful. This is also known as a Federal Tax ID number and is required by most entity structures. An EIN allows the Internal Revenue Service (IRS) to identify different businesses for tax reporting. An EIN can also increase your company’s credibility and open a business banking account.

8. Open a Business Bank Account

Finance is at the heart of any successful company. Whether purchasing equipment, paying wages, taking commercial space on rent, or receiving profits from the business, handling these finances can be quite the headache. The one thing that can make your financial audits and bookkeeping easier is a business bank account.

9. Obtain Business Licenses and Permits

New businesses have several requirements they need to fulfill, and each state has different business requirements. If you start a business in Illinois, you must ensure conformity to standards and operational requirements as specified by Illinois Compiled Statutes. One of the most essential requirements is a business license and permits. Licenses are mandatory for transacting business in this state. Although there is no requirement for a statewide general business license, other licenses and permits are necessary. The licenses, according to the Illinois Secretary of State, are categorized as follows –

• Business Sector or Activity – If you incorporate in Illinois and operate in a specific industry or undertake certain activities then you will need to apply for a small business license through state agencies.

  Example: If you register a business in Illinois specializing in liquor manufacturing, you need to apply for a license with the Liquor Control Commission. The license application and fee will vary according to the type of business the fee for a Retailer license is $10 per location, while that of a manufacturer is $250. Similarly, if your business is importing livestock into Illinois, then the relevant license or permit will be issued by the Department of Agriculture.

• Professional or Occupational Licenses – This license type will be required if a specific profession or occupation drives your business. The office of the Illinois Secretary of State lists more than 100 different professions. You will need a business license or permit, and it will be issued by the Illinois Department of Financial and Professional Regulation (IDFPR). Some professions include architect, clinical & prescribing psychologist, marriage & family therapist, cosmetologist, and pharmacist. The form and fee will be different for each type of license.
• County or City Licenses – The third business license category is local license or permit. When starting a business in Illinois, the office will be in a specific city or county. You need to check with the local authorities for any applicable licenses. The licensing regulations, forms, and fees will vary from one city or county to another. You may even need zonal permits in certain jurisdictions.

  Example: If you start a small business in Illinois in the City of Chicago, you will need to check for relevant licenses. Licensing information is available at the city clerk’s office. The office is also responsible for the issuance of business licenses. Similarly, if your office is in the Town of Normal, you will need to apply for a Town license and a Town of Normal Business License. The Deputy Clerk’s office will issue the license.

10. Register for Taxes

Once you register a business in Illinois, you will need to meet all annual requirements of this state. One such requirement is filing taxes. There are different types of business taxes that may be applicable. Hence, it is recommended that you register with the Illinois Department of Revenue (IDOR). All forms of entities including sole proprietorships need to register here if they withhold Illinois income tax for their employees. You can register online on the MyTax Illinois portal. Alternatively, you can fill and submit the REG-1 form for Illinois Business Registration Application.

11. Obtain Business Insurance

Your Illinois business checklist is incomplete if it doesn’t contain business insurance. Although, many first time business owners feel that it is not necessary but why take an unwarranted risk. An insurance policy for your company will help you to cover any costs that are associated with property damage and liability claims. You can always start by applying for a small business insurance policy as it will help you in protecting your company and assets. If you don’t have basic insurance coverage then your company finances may be at risk.

• General liability insurance
• Business Owner’s Policy (BOP)
• Product liability insurance
• Commercial umbrella insurance
• Professional liability insurance
• Commercial property insurance
• Workers’ compensation insurance

12. Annual and Ongoing Requirements

Different states in the USA have different annual requirements and fulfilling them will ensure good standing in the state. Once you incorporate in Illinois, you will need to file an annual report. This report will be different for different entity structures and has to be filed by both domestic and foreign companies. The filing fee will also be different based on the type of company. The annual report fee for a domestic LLC is $76.69, while a foreign corporation’s will be $75 plus franchise tax. This report has to be filed with the Illinois Secretary of State – Business Services Department each year. You must also renew business licenses each year and file state business taxes.

Some Important Quick Resources for an Illinois Business

Starting a business translates into putting in motion an idea and an entire organization with employees. Access to resources and information is the most important aspect of starting and running a company. The resources and relevant support will help you register a business in Illinois and assist with business licenses, taxes, annual reports, and small business development programs, among others. Let us look at some of the important resources.

Illinois Secretary of State

The office of the Illinois Secretary of State provides important information and resources of new business formation. You can find a guide to starting a business in this state. You can download registration forms and search business records.

• Illinois Secretary of State
  Illinois Secretary of State
  213 State Capitol Springfield,
  IL 62756
  Phone – 217-785-3000
  Website – https://www.ilsos.gov/

Illinois Department of Revenue

Once you start a small business in Illinois, you may be required to file some form of tax. The Illinois Department of Revenue (IDOR) provides various tax resources and support to individuals and businesses. This includes information on filing a return, types of taxes applicable for businesses, registering for taxes using MyTax Illinois, payment plans in case of tax delinquency, tax-exempt organizations, and audit information, among others.

• Illinois Department of Revenue
  Suite 1100
  555 West Monroe Street
  Chicago, Illinois 60661
  Phone – 800-732-8866
  Email – REV.TA-BIT-WIT@illinois.gov
  Website – https://tax.illinois.gov/

Illinois Department of Labor

After you start a business in Illinois, you may need to hire employees or a skilled workforce. There are certain rules and regulations that you need to follow even when hiring employees. You will get information on Child Labor Law, the Illinois On-Site Safety and Health Consultation Program, the Equal Pay Act, and the Prevailing Wage Act and Rates, among others. You can also find information and resources on various licenses and permits issued by the Illinois Department of Labor, such as the Private Employment Agency License.

• Illinois Department of Labor
  524 S. 2nd Street, Suite 400
  Springfield, IL 62701
  Phone – (217) 782-6206
  Website – https://labor.illinois.gov/

Illinois Department of Commerce and Economic Opportunity

The Illinois Department of Commerce and Economic Opportunity (DCEO) is also known as the code department. It is responsible for sponsoring statewide economic development while emphasizing increasing minority entrepreneurship. It also provides valuable resources related to promoting the tourism industry and business investment.

• Illinois Department of Commerce and Economic Opportunity
  555 W. Monroe St, 12th floor
  Chicago, IL 60661
  Phone – 312 814 7179
  Website – https://dceo.illinois.gov/

Illinois State Chamber of Commerce

The Illinois Chamber of Commerce is a business advocacy group that represents the interests of various types of businesses across the state. Once you register an Illinois business online, you can find a wide variety of resources. Their Business Services Division provides various programs for new and existing businesses. This includes seminars and webinars, custom on-site training, a Women in Business conference, and a Workers’ Compensation and Safety conference.

• Illinois State Chamber of Commerce
  215 E. Adams St.,
  Springfield, IL 62701
  Phone – 217 522 5512
  Website – https://www.ilchamber.org/

Illinois Small Business Development Center

The primary objective of the Illinois Small Business Development Center (SBDC) is to provide valuable assistance at any stage of your business or entrepreneurial journey. You can benefit from business guidance and training to develop business plans. They also provide assistance with financial analysis and planning and access to various business financing programs. They have several centers spread across the state.

• Illinois Small Business Development Center
  Illinois Small Business Development Center
  Small Business Growth Corporation,
  2401 W White Oaks Dr,
  Springfield, IL 62704
  Phone – 217-522-2772
  Website – https://www.illinoissbdc.com/

Ready to Start a Business in Illinois?

There are plenty of reasons to start a business in Illinois or move your existing business to this state. The state boasts of a robust transportation and logistics network and provides industrial diversity. Small businesses can derive healthy community support. A reputable Illinois registered agent like IncParadise can provide valuable assistance in business formation or incorporation in this pro-business state.