In Illinois, 1.2 million small businesses represent 99.6 percent of Illinois businesses, providing jobs for over 2.5 million small business employees who represent 44.8% of all employed residents in the state. In other words, small business ventures employ close to half of the state’s labor force. Quite expectedly, Illinois reached a critical milestone in 2022 by surpassing $1 trillion in Gross Domestic Product (GDP) for the first time in the state’s history. Illinois is one of five US states to achieve this feat. The state’s low corporate taxes and tax-free personal property make it one of the most business-friendly places in the nation.
According to the Bureau of Economic Analysis, most businesses established in the United States are small. These companies are responsible for employing millions of citizens and are key drivers of economic growth. Small firms comprise 43.5% of the Gross Domestic Product in the United States.
Illinois Economy Trends
- According to data released in early 2022, Illinois set a new record in 2021, producing approximately 200,000 new businesses. Compared to pre-pandemic levels in 2019, Illinois added 69 percent more businesses in 2021.
- 21,836 identified companies exported goods worth $49.7 billion from Illinois in 2020, per a report by the U.S. Census Bureau, Department of Commerce. At the time, the state’s GDP was $889.5 billion.
- Small businesses made up 89.1% (or 19,445) of the exporters.
- In value to the state’s economy, exports by small business firms amounted to $12.2 billion (or 22.9% of the state’s total exports).
Summarily, starting a business in Illinois can be a rewarding and exciting endeavor. However, it will require careful planning and thorough attention to detail. The founder must make critical decisions and meet certain legal requirements, such as performing market research, drawing up a comprehensive business plan, securing funding, choosing a business location, and determining their business structure. Additionally, they must register the business with the state, acquire a business license or permit, get tax identification numbers, have a business bank account, get business insurance, hire employees, and comply with ongoing requirements once the business is up and running.
A business is typically set up in the following steps:
- Step 1: What Kind of Business Should I Start in Illinois?
- Step 2: How to Write a Business Plan
- Step 3: Do I Need a Business License in Illinois?
- Step 4: How Much Does it Cost to Start a Business in Illinois?
- Step 5: Choosing a Business Structure in Illinois
- Step 6: Choosing a Business Location
- Step 7: Legal Requirements for Starting a Business in Illinois
Step 1: What Kind of Business Should I Start in Illinois?
There exists a plethora of companies and startups that can be launched in the Prairie State. If an entrepreneur can manage the state’s business challenges and take advantage of its opportunities, Illinois’ current healthy economic environment, skilled workforce, and large customer base can make it a great place to launch and run a business.
Research in the public domain suggests that companies in technology, especially financial technology and advanced manufacturing, are growing quickly in Chicago and its environs. The Illinois Department of Commerce has also identified six industries for targeted growth in Illinois.
- Advanced Manufacturing
- Agriculture and food processing.
- Business and Professional Services
- Life sciences and Biotechnology.
- Transportation, Distribution, and Logistics
To best determine what business would be suitable for a certain location or what business niches are likely to thrive, intending business owners are advised to conduct market research.
How to Do Market Research in Illinois
The first and most important step in a market research in Illinois, is to ensure that the heart of the business idea-which should be a fitting product or service, fills a definite gap in the consumer market, and of course, the idea/concept must be really profitable. In conducting a market research in Illinois, an entrepreneur must be clear on certain details, such as:
- Why they want to begin the business
- What the market research says about the viability of idea (Including the opportunities and challenges related to the business idea in specific locations)
- The possible time they can spend developing the business.
- How the business will be financed.
- The business model to use (for example, an affiliate, subscription-based, or franchise model)
- The type of business enterprise/structure to establish (e.g. general, limited partnership or corporation)
- How the business will be financed
All these factors will impact a business idea’s success in the long run.
Illinois receives over 10,000 business applications monthly. As of March 2023, the state count had 13,982 new business applications (2,685 were from corporations).
Step 2: How To Write a Business Plan
A business plan is a document that reveals how a person intends to start and run their business. Developing a business plan is one of the crucial steps a new business must take, as it allows an entrepreneur to think through and expand on each aspect of their business before setting out.
A business plan will help clarify a business idea, set realistic goals, attract funding, provide a roadmap, and help a founder in making informed decisions. The plan is also valuable to partner(s), investors, lenders, and even the business’ management team because it simplifies a business’s direction, future growth, and future profitability—which may be difficult to assess or conceptualize from the outside.
Business owners can create either a traditional or lean business plan. The traditional plan is more common but more extensive than the lean business plan; the former consists of several pages, and the latter is typically a one-page document.
A detailed business plan should include the following parts:
- Executive Summary: This is a concise summary of what the company does and why it will succeed. It contains the business strategy and highlights the key components such as the target market, product or service, projected financials, and management team. Ideally, this should be written last.
- Business/Company description: This should clearly show the issues that the business’s product or service will address, its competitive advantages, the legal structure, and the customer base.
- Products or Services: This section outlines the goods or services that the company provides, outlining any distinctive characteristics, pricing policies, and registered trademarks. Additionally, it ought to explain how the product will help the consumer, where the raw materials will come from, how much it will cost to manufacture, etc.
- Market Analysis: The target market is thoroughly examined in this section, including consumer demographics, demands, and behaviors, market trends, competitive analysis, and marketing tactics.
- Marketing and Sales: This part emphasizes the SWOT analysis of a product or service and describes the marketing and sales tactics the company intends to employ to attract and convert clients.
- Organization and Management: This section describes how the company is organized and managed, as well as the management team, staffing strategy, and production procedures. Everything about the business structure and its functionalities will be documented here.
- Financial Plan: Financial projections are given for the company in this area, along with revenue, expenses, profit and loss, cash flow, and a balance sheet. Details on the necessary funding and the funding sources might also be included.
- Appendices: This section might contain extra details concerning the company’s plan, like the resumes of important team members, legal records, and other important resources.
Each of these sections plays an important role in the overall business plan, providing a comprehensive picture of the business’s goals, strategies, and financial projections
Step 3: Do I Need a Business License in Illinois?
Usually, yes. Most businesses established or operating in Illinois require at least one license to operate. This may be a local, state, or federal business license. (Note: Federal business licenses are necessary for businesses whose activities are regulated by a federal agency.)
Although a statewide business license isn’t required from all businesses, every business in the state is required to obtain a Certificate of Registration, sometimes referred to as a seller’s permit, which is free to obtain.
As regards local licenses, these are determined by each county or municipality in Illinois, as they have their own licensing requirements and processes for all businesses, including one-person, home-based businesses. The renewal periods of these licenses also differ by agency, but it is commonly biennially or annually. Therefore, all queries about a license should be directed to its issuing agency.
How Much Does a Business License Cost in Illinois
The cost of a business license in Illinois varies based on the location, type of business, and the license or permit one wishes to obtain. It is important to note that Illinois doesn’t operate a statewide business license.
Local licenses and the Certificate of Registration, sometimes called seller permits, are the usual licenses that every business is expected to have. The certificate or registration is free. However, local licenses are often within a few hundred dollars, although it may be higher depending on the jurisdiction.
How To Register for a Seller’s Permit in Illinois
Every business that operates in Illinois needs a seller’s permit. This registration with the Department of Revenue gets the business owner a tax I.D number, with can track what kinds of taxes they need to pay to the state. This application can be made as an Online Application or as a Paper Application that is filled and submitted by mail to the appropriate address
Information that may be required to obtain a seller’s permit includes:
- Business owner information
- Knowledge of the business entity structure
- Federal tax ID, usually called the EIN, which is issued by the IRS
- North American Industry Classification System (NAICS) number
- The estimated yearly tax liability with Illinois.
For business owners selling through Amazon FBA warehouses, such persons will need to have the warehouse location addresses handy, as it will be needed to get the permit. These requirements shared above apply to all business entities in the state.
Typically, it takes about two business days for sellers who registered online to receive their Illinois sales tax or seller’s permit, but if the application for the permit was made by mail, the processing period would take about six to eight weeks for the permit to be ready. There is no cost to acquire a seller’s permit in Illinois, although other business registration fees may apply.
The Illinois Department of Revenue can be contacted through their address and contact information below:
Illinois Department of Revenue,
Springfield IL 62794-9447
Phone: 1 800 732-8866 or 217 782-3336.
The Department’s representatives are usually available Monday through Friday, 8 am – 5 pm
Step 4: How Much Does It Cost To Start a Business in Illinois?
According to the Small Business Administration (SBA), it is estimated that setting up most small businesses will cost between $3,000 to $5,000. However, the precise amount will vary by the type of business, its location, its structure, and size. Per Illinois statutes, all business are expected to pay the following:
- Articles of Registration Filing Fees: This is typically paid after determining the business name and type of business entity being established. The type of entity or business structure chosen will determine the registration filing fee as well as the annual tax of the business.
- Illinois LLC Cost: To file an LLC in Illinois, the business owner will be required to pay $150 to the Illinois Secretary of State. The filing of articles can be done online or by mail. Online filings are handled on an expedited basis within 24 hours. Application to Reserve a Name (Form LLC-1.15) costs $25, while filing fees for registering a “DBA” with the Illinois Secretary of State, (short for Doing Business As) ranges from $30 to $150 per year.
- Cost To Set Up a Partnership: In Illinois, general partnership may not need to file for registration with the Secretary of State, however, business partners in a limited partnership structure are expected to file the business with the Secretary of State at $150
- To Form a Corporation in Illinois: Business owners will be required to pay a $150 filing fee to process Articles of Incorporation
- Annual Fees and Taxes
Illinois businesses are legally required to pay annual fees for local permits in addition to standard income taxes determined by profit margins and state statutes.
Aside from the above fees, business owners must estimate start-up costs depending on the needs and specific niche of the business. These include the cost of:
- Market research
- Advertising and marketing
- Licenses and permits
- Equipment and supplies
After itemizing the cost of each expense outlined, and determining whether it will be a one-time payment or otherwise, consider the options for obtaining business funding.
How To Get Business Funding in Illinois
A business owner in Illinois can explore different funding sources for their business, such as:
How To Self Fund a Business in Illinois
An entrepreneur may choose to self-fund the business if sufficient savings or resources are available. Self-funding a business, also known as bootstrapping, is typically possible for small enterprises requiring minimal initial capital. To self-fund a business, proprietors must:
- consider the option of leveraging personal credit.
- Evaluate their personal resources to determine if they have sufficient funds to launch the business.
- Leverage personal credit.
- Explore alternative ways to reduce startup expenses. This will necessitate utilizing free resources, such as those provided by the SMA and the Illinois Chamber of Commerce, which seek to strengthen the business climate and economy of Illinois for aspiring entrepreneurs.
How To Find Investors in Illinois
In Illinois, investors are a popular source of business funding, particularly venture capitalists seeking for avenues to multiply their resources. In addition to providing capital, an investor can facilitate networking opportunities, and contribute their expertise to crucial business decisions. Before searching for a business investor, it is essential to create a concise pitch that summarises the business plan, and also conduct research on investors interested in the industry, alongside possible local investors in the community, and those with documented experience investing in the sector.
To find an Illinois-based investor, business owners may:
- Join local startup and entrepreneur-focused groups in the city and on social media.
- Search online platforms such as AngelList and Crunchbase, to seek out valuable information on investors actively investing in or incubating startups and new businesses.
- Participate in startup events and conferences that are hosted within the state.
There are various kinds of investors, each better suited to specific types of business partnerships, and the current phase of a business. The most popular investor types are personal investors, angel investors, incubators and venture capitalists.
How To Get a Loan To Start a Business in Illinois
Aside from having a detailed figure for business operations that is based on a well-written business plan, an entrepreneur needs to duly research lenders that offer loans to their business types. Some possible options include banks, credit unions, and credible online lenders.
Other funding options outside self-funding include grants, investors, and crowdfunding. Alternatively, funds could be obtained through loans given by family and friends, which typically have lower interest rates or longer repayment periods.
On the other hand, a business owner can obtain financing through the SBA or state-sponsored loan programs. Additionally, people can look into the federal SBIR & STTR programs, which offer small businesses grants for R&D to promote private sector innovation in emerging technologies.
- Getting a Loan from a Bank or Credit Union:
Bank customers can obtain small business loan packages from their banks or credit unions. To get these loans, an individual can make detailed enquiries about available loans and the necessary application procedures from their desired bank. People with a better chance of getting available loans are usually those who can provide a business plan, expense sheet, and the company’s financial projections for the next five to ten years.
- Getting a loan from the Illinois Small Business Emergency Loan Fund:
DCEO and the Illinois Department of Financial and Professional Regulation (IDFPR) offers small businesses low-interest loans to the tune of $50,000. Only businesses located outside of the City of Chicago having less than 50 workers and not more than $3 million in revenue are eligible to apply. Interested persons can learn more about eligibility and other state loan programs for small businesses in Illinois.
- Getting a Loan from the U.S. Small Business Administration (SBA):
Individuals unable to acquire small business loans through banks, state, or any other legal way can apply for an SBA-guaranteed loan through an approved lending institution. Compared to traditional loans, SBA-backed loans have unique features such as lower down payments, and in some cases, they require no collateral to secure them.
Also, SBA offers different loan packages to startups, one of which is the microloan program that provides up to $50,000 to help businesses start and grow. The eligibility requirements for obtaining SBA loans are determined by characteristics, such as:
- How the business operates
- Where the business operates
- How the business earns
- The character of its ownership.
- Ability to satisfy SBA’s size standards
- Ability to repay the loan.
- Reasonable business purpose
In any case, getting funding from external sources will require thorough research, gathering necessary documents, and an eventual application for the loan. Afterwards, following up on the application while yet considering alternative funding sources is very important, as getting a loan to start a business can be quite challenging, but with proper planning and preparation, getting the needed funds is very possible.
How To Find Illinois Business Grants
In Illinois, there are small business grants provided by the state government, which are managed by various agencies in the state. There are grants for specific business requirements, such as
Start-up capital, expansion, or research and development, as well as grants for specific industries, such as manufacturing, retail, and technology.
Some of these grants are:
- Illinois Small Business Emergency Loan Fund.
- Downstate Small Business Stabilization Program.
- Hospitality Emergency Grant Program – Grant Recipients.
To find small business grants in Illinois, prospective business owners can:
- Search the internet for websites that list grant opportunities peculiar to Illinois.
- Contact Small Business Development Center (SBDC) or the closest local Chamber of Commerce for information about grant opportunities in the business area.
- Contact Illinois Department of Commerce and Economic Opportunity (DCEO) concerning the program called the Business Development Program (BDP)-which provides grants to businesses in Illinois, is also a credible option.
After discovering any grant of interest, it will be necessary to gather the needed personal documents for prompt application. This may include things like financial statements, business plans, and tax returns. Proceed to fill out the application, which can be done online or in person.
Can I Start a Business With No Money in Illinois?
Technically, no. It costs money to register, plan and start any business in Illinois. From registering with a government authority to obtaining a local license/permit to purchasing business insurance and marking off other items that may be on the start-up checklist, one eventually spends some money to establish the business.
However, some businesses require little capital to start. These are usually service-based businesses where only a laptop or a phone is sufficient to begin operations. An example is a personal blog, where the entrepreneur will still require a subscription to an internet service, a computer, and some time to begin.
Step 5: Choosing a Business Structure in Illinois
In Illinois, there are several types of business registration categories to choose from, and the best one for a business depends on several factors, including the founders’ personal liability, tax obligations, and business structure. Here are some of the most common business registration categories in Illinois and the types of businesses that are suited for them:
- Sole Proprietorship: They are well-suited for small businesses, such as freelancers, consultants, and small retail shops.
- Partnership: Partnerships are best suited for businesses that require multiple owners and operators, such as law firms, accounting firms, and medical practices. In Illinois, the recognized partnership structures are:
- General Partnerships: A General Partnership is a formal agreement between two or more individuals to run a business together. Partners share the company’s assets, profits, and debts.
- Limited Partnerships: A Limited Partnership is an organization made up of a General Partner, who manages a project, and limited partners, who invest money but have limited liability and are not involved in day-to-day management. Typically, limited partnerships are found in the oil and gas, real estate, family partnerships, and equipment leasing businesses.
- Limited Liability Partnerships (LLP): In a Limited Liability Partnership under a specific section of the General Partnership Act, partners in a Limited Liability Partnership are not liable for the partnership’s debts, obligations, and liabilities arising from negligence, wrongful acts, omissions, misconduct, or malpractice committed while the partnership was a Limited Liability Partnership.
- Limited Liability Company (LLC): LLCs are suitable for small to medium-sized startups in any industry because they combines the tax advantages of a partnership with the liability protection of a corporation.
- C Corporation: A C corporation is a legal entity that is separate from its owners, and it can issue stocks to raise capital.
- S Corporation: S Corporations are well-suited for small to medium-sized businesses that want the liability protection of a corporation without the tax burden.
Of all the structures above, the business structure a founder eventually chooses will affect the following:
- How the business and its participants will be taxed
- How assets and ownership interests will be transferred
- How the business will be operated
- An owner’s ability to obtain funding
- An owner or shareholder’s liability
- Whether it will be necessary to register the business with the Secretary of State’s office
Therefore, in view of meeting specific business needs, entrepreneurs are advised to consult a tax accountant, attorney, or business advisor, in order to make informed decisions, after knowing peculiar legal obligations and possible structure which fits their business goals and aspirations.
How To Start a Sole Proprietorship in Illinois
One of the most common business entities to launch in Illinois is a sole proprietorship. In a sole proprietorship structure, the founder (the sole proprietor/owner) has total control over the company and is personally liable for its assets and liabilities. A sole proprietorship is not a separate business entity but an individual taxpayer for tax purposes. Generally, obtaining long-term financing for sole proprietorships is often challenging due to the inability to sell stocks. Sole proprietorships remain operational until their dissolution or the owner’s demise. Sole proprietorships are often excellent choices for low-risk businesses or persons who want to test a business idea.
To start a sole proprietorship in Illinois, an individual must:
- Choose a Business Name:
Normally, a Sole Proprietorship’s name is the owner’s legal name. However, in Illinois, if a founder chooses to do business under a different name, Per the Assumed Names Act, the business owner is required to file a DBA name (Doing Business As name) with the recorder’s office in the county where the business is located. In Illinois, a DBA is also called an Assumed Name.
- Register with IRS and Get an Employer Identification Number (EIN).
Normally, a Sole Proprietor can use their Social Security Number (SSN) for financial and tax reporting purposes. However, a Sole Proprietor in Illinois can also get an EIN Number (Employer Identification Number) from the IRS. This can be very useful for safety reasons and also when the business begins to hire employees.
- Obtain the Relevant Licenses and Permits:
Illinois doesn’t require a “general” business license at the state level for Sole Proprietors. However, depending on the industry, and business location, a business owner may need an industry-specific license or a license issued by their municipality (ex: county or city). It is important to note that business owners who conduct business in Illinois or with Illinois customers must register with the Illinois Department of Revenue. This includes sole proprietors
Further details can be sourced from the Starting Your Business in Illinois Handbook, a helpful resource created by the Illinois Department of Commerce and Economic Opportunity.
How To Start a Corporation in Illinois
A corporation in Illinois is a legal entity that is separate from its owners (shareholders) and is granted certain rights and privileges under the law. The business recognized as being separate from its owners means that it can be sued and taxed separately from its owners. Corporations generally protect owners/shareholders from personal liability but do not nullify the owners’ tax liability.
In the matter of taxation, there are two ways that corporations can be taxed: C-Corporation (C-Corp) or S-Corporation (S-Corp). C-Corps are taxed separately from their owners, whereas S-Corps are not. To start a corporation in Illinois, an owner or their attorney or registered agent must choose a name for the business and file Articles of Incorporation with the Department of Business Services at the Secretary of State’s Office. The document can be filed online or submitted in person or by mail.
After downloading and filling out the required forms, the original articles must be submitted with signatures in black ink and with one copy to the filing address.
Department of Business Services
501 South, Second Street, Room 350
Springfield, IL 627564
The Articles of Incorporation cost a minimum of $150.00 to file, plus an optional $100.00 to expedite the service. The document will cover the basics of the corporation, such as:
- The name of the corporation and its statement of purpose
- Name of the corporation’s registered agent
- Street Address of the corporation’s registered agent
- The number of authorized shares which the corporation is allowed to issue
- The estimated value of property owned
- The estimated gross amount of business
- Director(s) name(s) and address(es)
- Incorporator(s) name(s) and address(es)
If the document was filed online, an individual may return to the Secretary of State’s Website after 24 hours and retrieve a copy of the document at no extra charge for a period of 30 days. Once the SOS endorses the Articles of Incorporation, the corporation is established and will remain active until its dissolution.
Entrepreneurs can get additional information about corporations and nonprofits on the SBA’s Office of Advocacy website.
How To Start an LLC in Illinois
An LLC (Limited Liability Company) is a fusion of the corporation and partnership business types. Hence, owners enjoy the benefits of both types of business structures. One or more persons can own an LLC, and the owners are called members.
A Limited Liability Company limits the personal liability of the members regarding business lawsuits or bankruptcy (debts)—just as a corporation does for its owners. This means the owners have limited liability. However, LLCs are not taxed separately from the members. Conventionally, LLCs must register with the State and pay LLC formation fees. The Secretary of State regulates the naming convention and implements any other rule that needs to be followed. To form an LLC, after determining the business name, one should file Articles of Organization online for faster processing or submit an application by mail using Form LLC-5.5. The filing fee is $150.00.
According to the Office of Advocacy, LLCs can be perfect for medium or higher-risk businesses, owners who want to pay a tax rate lower than that imposed on a corporation, and owners who wish to protect many personal assets. LLCs in Illinois have varying tax requirements depending on their decision on how the IRS should process their tax. By default, the IRS taxes single-member LLCs as sole proprietorships, and it taxes multi-member LLCs as partnerships. LLCs can choose to be taxed as either C-corporations or as S-corporations.
How To Start a Business Partnership in Illinois
The business partnership (or simply partnership) structure comprises two or more owners who run a business together. General, limited, and limited liability partnerships are the prevalent partnership types
How to Start a Limited Partnership in Illinois
A limited partnership (LP) has limited partners and at least one general partner. The general partners own and manage the business, and the limited partners are investors having limited liability. A limited partner’s role in the company is constrained to certain responsibilities outlined in the partnership agreement.
A limited liability partnership (LLP) shares similarities with a limited partnership, only that all owners have limited liability. As a result, partners are secured from debts arising from the partnership and are not liable for another partner’s actions. An LLP is usually suitable for attorneys, land surveyors, medical professionals, accountants, and other professional offices.
A limited liability limited partnership (LLLP) offers a unique blend of LLP and LP advantages. Like an LLP, the LLLP is common with high-risk professions that usually seek outside investments.
In Illinois, to start an LP or LLLP, it must be registered with the Secretary of State by filing a Certificate of Limited Partnership and paying the appropriate fees. Although registering a general partnership with the state is optional, in establishing an LLP, one must file an Application to Register a Limited Liability Partnership. Filing can occur online, in person, or by mail, as outlined in a step-by-step guide on the Illinois Department of Commerce and Economic Opportunity website.
How To Form a General Partnership in Illinois
The business partnership (or simply partnership) structure comprises two or more owners who run a business together. General, limited, and limited liability partnerships are the prevalent partnership types.
A general partnership (GP) features two or more individuals who own and manage a business. They are liable for the company’s obligations and debts. In Illinois, registering a general partnership with the state is optional. Although partnership agreements in a general partnership can be recorded at the county recorder’s office where the GP is situated.
How To Start a Nonprofit in Illinois
Most nonprofits are formed for educational, charitable and religious purposes, other are formed for scientific and literary purposes. This makes these nonprofits eligible for federal and state tax exemptions, since they are classified as 501(c)(3) tax-exempt organization. To start a NonProfit in Illinios, the organization needs to be formed as an Illinois not-for-profit corporation, followed by an application for tax-exempt status from the IRS and the state.
To start a nonprofit in Illinois:
- Choose a Name for The Organization:
One can check for its availability by using the Secretary of State’s website
- Appoint a Registered Agent:
As with any Illinois entity, there must an appointed registered agent for the organization. The registered agent is the person or organization who agrees to accept legal notices on behalf of the not-for-profit
- Assemble a Board of Directors
Per Illinois statutes, the board must have at least 3 people, who are to be listed directly on the articles of incorporation.
- Develop the mission, goals and bylaws of the organization
This should contain an outline of the organization’s purpose and objectives. It should also outline the rules and procedures of the organization and the operations of its board. These must satisfy Illinois’s nonprofit requirements.
- Develop a fundraising plan and Establish financial systems
Identify and pursue various funding sources including grants, donations, sponsorships and programs or activities. In addition, set up bank accounts, accounting systems and internal controls to aid the transparent and effective management of the organization’s finances. The organization will need to obtain an EIN from the IRS in order to open bank accounts and apply for tax-exempt status
- File Articles of Incorporation
Create the organization by filing the articles of incorporation with the Illinois Secretary of State (Form NFP 102.10)
- Secure an EIN (Employer Identification Number)
An EIN can be used to open a business bank account, submit tax returns to the IRS, and apply for 501(c)(3) compliance. The application can be done online, through phone, fax, or mail.
- Apply for Federal and State Tax Exempt Status
Apply for 501(c)(3) status with the IRS by filing Form. If the IRS tax exempt application is successful, the nonprofit is then automatically exempt from the Illinois state income tax. However, to get an Illinois sales tax exemption, the organization will need to file Form STAX-1 (the Application for Sales Tax Exemption) to the Illinois Department of Revenue.
Other important processes includes:
- Registering for required state licenses
- Opening a bank account for your IL nonprofit.
- Filing the Illinois nonprofit annual report once the organization begins operations
Step 6: Choosing a Business Location
Generally, independent reports suggest that Chicago, Oak Brook and Lincolnshire among others, are quite favorable for start-ups in Illinois. However, across the state, businesses typically operate from:
- A Brick and Mortar Location
- A Website and/or Social Media Page
- A Residential Address (Home Business)
Therefore, in order to choose a location for the business, it will be necessary to take some time to measure the cost of running the company in the desired area, while also looking at the opportunities the location provides, before committing to any location. At this point, the business plan can really help to simplify the decision making process, by comparing the dynamics of an environment with the projected plan.
It’s also a good idea to double-check that the location is zoned for the form of company to be set-up. This can be done by contacting the local business license office for the location in-view
What Kind of Business Can I Run From Home in Illinois?
No specific statute governs the kind of business an Illinois resident can run from home. Each county and city in Illinois establishes its own zoning ordinances or code that affect these matters. The laws regulating home-based businesses are typically codified as the Home Occupation Regulations.
For example, in Chicago, a Regulated Business License for Home Occupation is given to individuals who are self-employed or operate their own business in their primary place of residence. The term “home occupation” in this case does not apply to individuals who, as an employee or owner, perform administrative, research, or clerical work in their home, on either a full-time or part-time basis, for a licensed entity located elsewhere. Also, it does not include any childcare institution that is properly licensed by the City of Chicago or by a state agency.
The following are examples of business activities or services not allowed as home occupations in some cities in Illinois:
- Any animal services
- Astrology, Fortune-Telling, or Card & Palm reading
- Dancing, tutoring or children-related activities
- Massage Establishments
- Catering or any Food related business
- Funeral Chapels or Homes
- Producing or assembling of any product when the home is not the retail point of sale for such products
- Sale of any firearm or ammunition.
- Firearm Training or Instruction
- Any dispatch service
- Personal services such as body piercing, nail, hair, or tattoo.
- Welding or Machine Shops.
Altogether, the best way to know what type of business can be run from a home in Illinois is to determine the kind that cannot be run. To find out, one should review zoning laws or contact their region’s zoning or planning division.
How Do I Start a Small Business From Home in Illinois
There is no statewide business license in Illinois. However, many municipalities require local licenses for businesses to operate. Rules for getting a local license differ by location and type of enterprise. So generally, residents in Illinois who want to start a home-based business (referred to as a Home Occupation) generally need to submit the following to the city/county in the business location:
- Certificate of Registration (or Sellers Permit)
- Local license
- Zoning Permit
- Building Permit
- Signage Permit
- Professional License (if the profession requires licensing in Illinois, e.g., barbers and cosmeticians.)
Aside from the licenses listed already, in some cities, like Chicago, there are home-based business licenses, which home-based businesses will need to get. However, additional requirements may still apply depending on the business location. Also, one may need to file an assumed business name with the county recorder’s office.
An individual can contact the governing body in charge of their residential city or county to ensure compliance when starting a home business.
Starting a Business Online in Illinois
An “online business” refers to any business conducted over the Internet. Individuals who want to start this type of business in Illinois must comply with the applicable regulations. This includes filing the business with the Department of Revenue (if eligible), obtaining the relevant business licenses and permits from a local authority, and others outlined in the Office of Entrepreneurship, Innovation, and Technology Starting Your Business in Illinois Handbook.
Besides the legal requirements to establish an online business in Illinois, owners of online businesses must also comply with the applicable federal and state consumer laws. For example, several laws restrict certain goods from being sold online, particularly recalled and defective products and certain tobacco products.
Step 7: Legal Requirements for Starting a Business in Illinois
In Illinois, a prospective business owner needs to submit documentation for business registration with the Illinois Department of Revenue and the Internal Revenue Service. The type of business and its structure of operation will determine the specific registration requirements.
As regards the business name, an entrepreneur must check for the availability of the name with the Illinois Secretary of State office. It is necessary to also file the appropriate state and federal taxes, set up worker’s compensation insurance, and ensure to abide by labor laws once the business begins operations.
The eligibility requirement for starting a business in Illinois is simply to have a business idea, be willing to run it, and be above 18 years to register it. Minors can’t legally own businesses in Illinois. A workaround by a parent or guardian might be to form a business for the child.
Overall, the business formation process in Illinois requires a founder to contact or visit several government departments to satisfy existing federal, state, county, and municipal government requirements. As a result, one may speak to a business advisor based locally or their attorney to discover the procedures, some of which are included in this guide.
Additional resources may also be obtained from a government agency’s website. For instance, the Secretary of State’s website. Further, the Illinois Department of Commerce and Economic Opportunity provides a helpful Step by Step by Step Guide for individuals interested in setting up a business
How To Get an EIN Number in Illinois
An EIN is a unique nine-digit number assigned by the IRS for tax purposes. It is also known as a Federal Tax Identification Number. To apply for an EIN, the business must be located in the US and the person applying must have a valid Tax Identification number (TIN) such as a Social Security Number or an Individual Taxpayer Identification Number.
(For US applications)
Internal Revenue Service
ATTN: FIN Operation
Cincinnati, OH 45999
(For applicants with no legal residence or place of business in the US)
Internal Revenue Service
Attn: EIN International Operation
Cincinnati, OH 45999
Fax: 855-215-1627 (within the U.S.)
Fax: 304-707-9471 (outside the U.S.)
How To Get an Illinois Registered Agent
An Illinois registered agent is an individual or business entity tasked with receiving legal documents and notices on behalf of a company. Per state statute, every corporation, limited liability company (LLC) and limited partnership (LP) is required to have a registered agent.
The provisions for the operations of a registered agent are outlined in the Illinois Business Corporations Act. Businesses are required to appoint an individual as their registered agent or hire a professional service considering factors like availability, reliability and cost. In Illinois, the typical registered agent service will cost between $49 and $200 per year. Self-representation is allowed in Illinois.
Patents, Trademarks and Copyrights in Illinois
Patents, Trademarks and Copyrights are different in operation, but somewhat similar in purpose, as all are needed for the protection of intellectual property of businesses and individuals in Illinois’s booming economy. In Illinois, the U.S. Patent and Trademark office is responsible for issuing and managing patents under the Patent Act which is Title 35 of the US Code, It is important to note that while Patents, trademarks and copyrights are protected and covered by Federal Law, trade secrets and unfair competition are handled by State law
Generally, the government grants an inventor a patent for their invention, granting them the limited right to prevent others from producing, using, or selling the invention without their permission. Typically, the invention will be a product or process that demonstrates a new method of doing something, or provides a new technical solution to a problem.
On the other hand, a copyright is a legal right granting an author, inventor or creator exclusive rights to perform, display, reproduce and distribute the work, as well as create derivative works of the work throughout the life of the creator. Similarly, trademarks are symbols, designs, words and phrases that identify and distinguish the source of a product or service. They protect logos, brand names, slogans and can be renewed unto perpetuity. The operative statutes in Illinois are the Consumer Fraud and Deceptive Practices Act (815 ILCS 505/1, et. seq.), the Counterfeit Trademark Act (765 ILCS 1040/0.01, et. seq.), and the Trademark Registration and Protection Act (765 ILCS 1036/1, et. seq.). These statutes governs trademarks and service marks in Illinois. Operating alongside the federal Lanham Act (Title 15 of the United States Code), which governs trademarks and service marks at the national level, the state statutes also provide protection for registered and unregistered marks used in business and in the creative industry within the state.
Requests for patents and trademarks are processed by the United States Patent and Trademark Office. Authors or applicants interested in getting a patent or trademark can determine the patent type, by conducting a patent/trademark search on the USPTO database to ensure the invention hasn’t been patented already and fill out the required application on the USPTO’s Electronic Filing System. The cost of obtaining a patent varies significantly, depending on the type of patent and the status of the applicant (micro entity, small entity or large entity). However, fees are typically between a few hundreds and several thousand dollars. A trademark, on the other hand, can cost between $250 and $350 per class.
Illinois Business Tax
The Illinois Department of Revenue is the primary agency responsible for administering state taxes in Illinois. Illinois has a corporation franchise tax which is currently being phased out, a corporate income tax, and a personal property replacement tax. Most businesses will be subject to at least one of these three business-related taxes. If income from the business passes through to the business owner personally, that income will be subject to taxation on their personal Illinois tax return.
The specific tax a business owner can expect to pay will vary with the type of business entity as well as the nature and location of the business. However, in most cases, Illinois business owners will pay:
- Business Income Tax
- Corporations – 7 percent of net income
- Trusts and estates – 4.95 percent of net income
- Individual Income Tax – 4.95 percent of net income
- Personal Property Replacement Tax
- Corporations – (other than S corporations) – 2.5 percent of net income
- Partnerships, trusts, and S corporations – 1.5 percent of net income
- Optional Pass-Through Entity (PTE) tax for 2022 through 2025, for S corporations, partnerships, and LLCs taxed as partnerships.
Are Business Records Public in Illinois?
Yes, business records are releasable to the public under the Illinois Freedom of Information Act.
It is presumed that all records held by a public body are available for view or copying. This makes business records received and maintained by government agencies, employees, or officials while executing their official duties available for public viewing or copying unless a specific statute restricts disclosure.
In Illinois, business information that falls under the category of ”Private Information,” which qualifies for redaction or removal under the state’s public records law, includes
- Credit card information
- Banking information
- Driver’s license numbers
- Social security numbers
- Shareholders, owners, and employees’ contact information (email addresses and phone numbers).