How To Start A Business In Illinois (2024 Guide)

You must choose a business name that the state can identify you by and that you can operate with. Your name must be unique and can’t be previously registered in the state of Illinois. Before registering your business, you can use the online search function to see if any business has currently registered the name that you prefer. This will speed up the process later when your paperwork is finalized.

It’s recommended that you name your business something related to what you do, or a name that makes it easy for potential customers to identify you. Don’t pick something very close to another business name so that you can avoid any potential confusion. Once your name has been approved, you should grab the domain name for your business and get it registered as well.

Once you have chosen a name, the first thing to do when you’re ready to start your business is to make sure it is legally registered. You must register certain business entity types before you can conduct business.

Choosing the Right Business Entity

You can choose from several different business entities when starting your business, but each has its own unique pros and cons that might make it the right choice for you. Some of your options include:

• Limited liability company (LLC): Many small businesses choose to register as an LLC because of the tax flexibility combined with the liability protection. LLCs allow you to be taxed as a sole proprietorship or an S-corporation, where the tax loss or gain can be reported on your personal tax return. Read more about how an LLC works.
• Corporation: When choosing a corporation, you can choose either an S-corp or a C-corp. A corporation is typically chosen as an entity type by businesses that expect to scale quickly, or those that are planning on raising capital (because you can divide shares among owners).
• Sole proprietorship: This is a business entity that doesn’t elect to separate business finances and liabilities from the business owner’s personal matters. If you choose a name that is not your own legal name, you will need to register a DBA (doing business as) registration with the state. There are no formation documents to register for this type of business. Learn more about why a sole proprietorship might be the best option for you.
• Partnership: A partnership works the same as a sole proprietorship, except that there are multiple owners of the business that partner together. If you go this route, you’ll want to make sure that you have a partnership agreement.
• Limited partnership (LP): In this type of partnership, there are general partners who are personally liable for the company’s debts and limited partners who are liable only up to their investment in the company.
• Limited liability partnership (LLP): All partners have limited liability, similar to an LLC in this type of business.

You can find business formation papers on the Secretary of State’s website and can submit them by mail with payment of the required fee for your entity type.

To register your business entity in Illinois with the Department of Revenue (required for all business types), you have three options. First, you can complete the registration process online. Second, you can mail in your Form REG-1. And your last option is to visit one of the regional Illinois Revenue offices in Chicago, Marion, Des Plaines, Rockford, Fairview Heights or Springfield. You may have to fill out additional schedules to go with your REG-1 if your business sells liquor or involves a utility.

The online Department of Revenue registration process in Illinois can take one to two days to finalize. However, if you mail in the form, then the state asks for six to eight weeks for your application to be finalized.

An Employer Identification Number (EIN) is your business’s tax identification number that the federal government will use to identify your business and it’s required to hire employees. You will also need an EIN if you’re going to file taxes as a separate entity and not allow those tax liabilities to fall to your personal tax returns.

The business liability protection you may have hoped to create with your business entity choice won’t exist if you commingle business and personal funds.

You can apply for an EIN online through IRS.gov. The process is simple and only takes a few minutes. You’ll receive your new EIN immediately, but make sure you keep it in a safe place as it will take a week or so to receive the paperwork in the mail.

The state of Illinois does require certain business licenses, or permits, depending on the nature of your business and where you’re located. You may need to check into these types of licenses:

• Local business licenses: This is a general operating license that your local county or municipality may require.
• Sales tax and revenue permits: All business entity types must register with the state Department of Revenue.
• Additional local or state permits: You might need a permit depending on your industry type or how your business uses real estate in the local community.
• Federal licenses: Many businesses will be required to get a federal license to participate or sell things in their industry. For example, you have to get a federal license to sell alcohol.

You should check with your local municipality or county for any required permits or licenses, even if your business is conducted entirely online.

Now it’s time to open a business bank account. This is important to make sure that the liability protection from your business registration is valid. Mixing finances between your business and your personal accounts can cancel any liability protection. Find the best business checking account for you.

There are many different types of business insurance that cover things such as your business vehicles, your real property, and protecting you from any liability your business may have. If you’re obtaining any financing or buying real estate, then you’ll be required to get certain insurance to protect the interests of the parties injecting capital into your business. Insurance is a great way to make sure that a single accident or mistake won’t cost you your whole business down the road.

Now that you’ve completed all of the administrative tasks related to starting your own business, it’s time to start marketing and finding clients. Most businesses cannot set up shop, open their doors and immediately have customers flood in to make purchases. You must get the word out about your business.

Depending on whether you’re offering products or services, your marketing plan might look a bit different. The important part is making sure you have a plan and the capital to execute it so that your business can turn into a success.

Bottom Line

Overall, starting a business in Illinois is straightforward. Once you have an idea, you can get your business registered and ready to start accepting customers within a week or less. The proper planning can help you figure out the right steps in the process that will be unique to your business and your specific needs.