How to start a business in Illinois [Updated 2024]
Illinois is the sixth-largest state in the US and home to its third-largest city, Chicago. Thanks to its bustling economy, entrepreneurs flock to the Land of Lincoln—and 99% of Illinois’s businesses are small businesses. So, if you have a great business idea, Illinois might be just the place to carry it out.
Before you set up shop, though, you’ll need more than a great idea and a business plan. You need to settle on a name, select a business structure, learn about Illinois’s tax requirements, and more. Below, you’ll find a step-by-step guide to help you set up an Illinois business quickly and compliantly.
1. Name your business
First things first: A great new business needs a name. Unfortunately, you can’t always name a company anything you want—states have different regulations and criteria for business names. Here’s what you need to know in Illinois:
- Check the Illinois Secretary of State business entity search to make sure your chosen business name is unique and hasn’t been taken by another business.
- Make sure your chosen business name meets all the legal criteria for a business in Illinois. The requirements depend on the business structure (more on that below).
- Check the US Patent and Trademark Office to make sure no one else has trademarked your business name.
You can lock in your business name by either registering your business with the state or applying to reserve the name. The process is a little different depending on your business structure. If you plan to register an LLC, you’ll need to submit Form LLC-1.15 and a $25 filing fee to reserve your chosen name. If you plan to register a corporation, you can request a reservation for up to three names via an online form.
At this stage, you may also want to register a domain name and corresponding social media accounts, so you can keep your online presence consistent.
In some cases, you may also need to file an assumed name (also known as a DBA or “doing business as”). You’ll have to do this if you plan on conducting business using any name other than the one you register with the state. You can register an assumed name with your local county clerk.
2. Explore your funding options
Illinois offers many opportunities for small business owners to access capital to fund their ventures, from grants to business loans. Here are some to explore:
- Illinois Department of Commerce and Economic Opportunity: DCEO provides statewide small business assistance, including working directly with small businesses to identify and secure financing opportunities to help them grow.
- Small Business Administration (SBA): The Illinois branch of the SBA helps small businesses with funding programs, counseling, federal contracting certifications, and disaster recovery. They also help businesses connect with partner organizations, lenders, and other community groups.
- Federal and local government grants: Federal and local governments allocate money to grants for businesses every year. Learn more and start applying at usgrants.org.
3. Decide on your business structure
Next, you’ll want to decide how you’ll structure your business. There are a few legal structures a business can take in Illinois, which fit broadly into two categories: formal and informal businesses.
- Formal businesses are registered with the state and must follow state rules. They need to submit documents annually to stay in good standing.
- Informal businesses don’t need to register, and they’re less separate from the owner(s) of the business.
The structure you select will depend on your business needs—each type of legal entity offers different types of asset protection, tax liability, and other legal considerations.
Business type
What is it?
Pros and cons
Sole Proprietorship
An unincorporated business with a single owner
✔The owner has full control over the company.
✔All business income is considered to be the owner’s personal income, simplifying taxes and accounting.
✘ The sole proprietor is liable for all business activities—and debts.
General Partnership
An unincorporated business with two or more owners who are jointly and severally liable, and whose profits are taxed as their personal income
✔This is easier and less complex to set up than a formal partnership.
✔Partners can treat business losses as personal losses on their own tax returns.
✘ Partners are liable for each other’s mistakes and debts, as well as the company’s debts.
Limited Liability Company (LLC)
A formal company that can have a single owner, or can be operated by two or more people who agree to equal ownership
✔This is easy and straightforward to set up.
✔Offers different options for tax elections (like an S corp) so you can reduce your individual tax burden.
✔The structure protects owners and their personal assets from business liability.
✘ Owners are still subject to self-employment taxes.
Limited Liability Partnership (LLP)
A formal company operated by two or more people (often professionals) to give themselves equal share in managing the business but limit their individual liability
✔Each partner is only liable for their own actions—if a partner gets sued for a mistake or negligence, other partners can’t be found financially responsible.
✘ This is one of the more complex business structures to set up in Illinois.
Corporation
A formal company owned by shareholders and managed by an elected board of directors
✔Owners are provided liability protection because the corporation bears tax and legal responsibilities.
✔Offers different options for tax elections (like an S corp) so you can reduce your individual tax burden.
✘ Corporations can be “double taxed” under certain tax elections at the income and dividend levels.
4. Register your business in Illinois
If you choose an informal business structure, like a sole proprietorship or general partnership, you don’t need to register your business with the state. But a formal business structure needs to be registered, which requires paperwork and a filing fee. In the table below, find the details and costs for registering each common type of business in Illinois.
Business type
How to register
Costs
Limited Liability Company (LLC)
To register an Illinois LLC, you need to submit your Articles of Organization (Form LLC 5.5) to the Secretary of State. You can submit it in person or by mail, or complete the process using the Secretary of State’s online portal. You also need to draft an operating agreement, but it does not need to be submitted to the state.
$150
Limited Liability Partnership (LLP)
To form a limited liability partnership, you need to file a Statement of Qualification (Form UPA 1001) with the Secretary of State.
$100 per partner
Corporation
To register an Illinois corporation, you need to submit Articles of Incorporation (Form BCA 2.10 for for-profit corporations or Form NFP 102.10 for nonprofits). You can submit it in person or by mail, or complete the process using the Secretary of State’s online portal. You also need to create bylaws for the corporation, though these are not filed with the state.
$150 for for-profit corporations
$50 for nonprofits
5. Decide on a registered agent
All businesses in Illinois need a registered agent—an individual listed on the business’s statement of information who can accept tax and legal documents on its behalf.
Business owners in Illinois can act as their own registered agent, as long as they reside in the state. Otherwise, you can hire a professional registered agent service. There are many options, and prices depend on the length of engagement and the types of services you need (for example, 24/7 service will cost more than service only during business hours). In general, services range from $50 to $200 per year.
6. Apply for an Employer Identification Number
No matter which state your business is in, you can’t hire employees without a federal Employer Identification Number (EIN). Your EIN is assigned to your business by the Internal Revenue Service (IRS).
You’ll use your EIN to hire and pay employees, open a business bank account, or apply for loans. Think of it as a social security number for your business. It’s fast, easy, and free to get an EIN—just fill out Form SS-4 and submit it to the IRS.
7. Get up to speed with Business Tax Credits
Whether you’re building a tech startup or a nonprofit, tax credits can help you grow your business by reducing your tax liability—something that can really help in Illinois, a state known for its high taxes. Here are a few tax credits to explore:
- Economic Development for a Growing Economy Tax Credit Program (EDGE): EDGE provides annual corporate tax credits to qualifying Illinois businesses that help create jobs and training programs in the state.
- Illinois Opportunity Zones: Illinois Opportunity Zones offers tax credits and incentives for businesses that invest and create jobs in areas that are economically challenged.
- Blue Collar Jobs Act Tax Credit Program: This program provides corporate income tax credits to companies that make capital investments in Illinois through economic development activities.
- Illinois Apprenticeship Education Tax Credit Program: This program offers employers a tax credit for qualified education expenses for apprentices.
8. Stay on top of filing requirements and taxes
In Illinois, LLCs and corporations must submit an annual report to the Secretary of State’s office each year in order to stay in good standing. Annual reports are due by the end of the month prior to the anniversary of the month your business was registered. Filing fees for annual reports are:
- $75 for LLCs and for-profit corporations
- $10 for nonprofits
Businesses are also responsible for filing their state and federal tax returns. State taxes will vary depending on the type of business—you may need to pay sales tax, payroll tax, or other taxes in addition to income tax, depending on your business activities. Learn more at the Illinois Department of Revenue website.
9. Find a payroll solution
Hiring employees or contractors in Illinois means a whole pile of new considerations. First, you have to make sure you’re classifying them correctly to avoid fines or potential legal action. You also need to be sure you’re complying with Illinois’s complex minimum wage rules, which vary by county and city, the worker’s age, and whether they receive tips—and don’t forget that minimum wage is increasing annually through 2025.
It’s a lot to keep track of—which is why you need a payroll solution that will make sure your employees and contractors are paid accurately and on time. Rippling takes the tedious, manual work out of running payroll, all while helping you stay compliant with overtime laws and changing minimum wage laws, no matter where your workers live.
With Rippling Time & Attendance, you can track employees’ hours automatically and receive notifications when they’re approaching overtime. Once hours are approved and synced to payroll, click “Submit,” and Rippling calculates net pay and taxes instantly.
If you’re hiring globally, Rippling has you covered:
- Pay your entire team—across different tax regions and even different currencies—in a single pay run.
- Include hourly employees, salaried employees, and contractors.
- Manage your entire workforce, systems, and data worldwide in one place.
10. Support and scale your growing business with Rippling
As your business grows, a solution like Rippling becomes even more valuable. Rippling’s HRIS (Human Resource Information System) streamlines administrative tasks like recruiting, onboarding, running payroll, administering benefits, and more—so you can focus on running and growing your business.
When you use an HRIS, it’s much easier to scale, especially if you have dreams of growing your business globally. If you use Rippling, you’ll be able to:
- Hire, manage, and pay people all over the world in a single system.
- Keep all your recruiting data up to date and automate every step of the hiring process.
- Bring all your benefits together in one place—and automate the busy work like enrolling new hires, updating deductions, and administering COBRA.
- Have a single, global source of truth for all your HR policies, data, analytics, and more.
FAQs about setting up a business in Illinois
Do I need a business license in Illinois?
Whether you need a business license depends on the type of business you’re starting and where you’re located. For example, the city of Chicago requires most LLCs to have a city business license, even if they conduct business entirely online.
Certain types of businesses will also need professional licenses, permits, or tax certificates, depending on state and local regulations. These cover areas like health and safety, environmental protection, building and construction, and professional services. To see if you need a business license, check the Registration, Licenses, and Permits section of the state’s website.
Do I need a business bank account when launching a business in Illinois?
It depends. If you have an informal business structure, you aren’t technically required to have a business bank account. But for other types of businesses, having a separate bank account helps protect your personal assets. It’s always a good idea to have a dedicated business credit card and bank account, so you can avoid commingling your finances.
Do I need to get business insurance?
It depends. If you offer professional services, for example, you may want to consider professional liability insurance to protect yourself and your business. In other cases, you may be required to get certain types of business insurance—in Illinois, if you have at least one employee, you’re required to provide workers’ compensation insurance.
What are Illinois’s state payroll taxes?
Employers in Illinois are required to pay and withhold a few different payroll taxes:
- State Income Taxes: withheld from employees’ pay
- Unemployment Insurance: paid for by the employer
Illinois has reciprocity agreements with several states, including Iowa, Kentucky, Michigan, and Wisconsin. This means that if an employee works in Illinois and lives in one of those states, their employer should withhold income taxes for the employee's home state.
Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.
