Starting a Business in Illinois: The Complete Guide


If you want to learn how to start a business in Illinois, congratulations! Small businesses are gaining traction in the Prairie State and it’s a good time to hop onboard. A small business profile analysis by the U.S. Small Business Administration shows that small businesses have grown over 2% since 2016 and have employed 45.1% of the private workforce.[1]

Illinois has its own unique business regulations and we’ve included Illinois-specific business resources for you at the end of this guide. But don’t scroll to the end just yet—we are breaking down all the steps you need to take when starting a business in Illinois.

9 Steps to Starting a Business in IL

Step 1: Confirm You Have a Winning Business Idea

You’re already imagining it: Opening your storefront (or launching your online store) and selling your product or service, but that’s putting the cart before the horse.

If you’re starting a business in Illinois, you need an idea that sells. Double-check the merit behind your business idea by asking yourself these four questions:

  1. Does my idea solve a problem?: The top profitable small businesses do more than make money—they solve problems. What problems does your target customer experience? Does your business idea solve that problem?
  2. Is my idea profitable?: After you hire staff, create your product, and pay your overhead costs, are you selling your product or service at a price point that will earn you profit? 
  3. Is there a market for my idea?: Your business idea won’t be profitable if you’re only selling it to a handful of people. Do market research to check if there are enough customers who will pay for your product or service. 
  4. How will technology influence my industry?: What technological advancements are affecting your target industry? Ensure that your business idea won’t be rendered obsolete by technology anytime soon.

Step 2: Pick a Business Name

Choosing a distinct name for your business can be a challenge but shouldn’t be neglected. A unique business name distinguishes you from other businesses and protects against customer confusion, strengthening your brand. 

Search for Your Business Name Online

When starting a business in Illinois, you should know that the Illinois Limited Liability Company Act requires that your name must be distinguishable “from any domestic or foreign limited liability company name or assumed LLC name.” This is a great rule for your business, regardless of its business entity (more on that in a few). To make sure your desired business name is free: 

  1. Search for it on Google.
  2. Search the United State Patent and Trademark database.
  3. Complete an Illinois Corporation/LLC Search.
  4. Check if your domain name is available on or

What Your Business Name Must Include and Exclude

If you are forming an LLC, the words “Limited Liability Company” or “LLC” must be included but separate from the other words in your business name. Your name should also avoid certain words and phrases like “corporation,” “Corp.,” “incorporated,” “Co.,” “Inc.,” “Ltd.,” and “LP.”

If you are forming a corporation, the words “corporation,” “incorporated,” “company,” or “limited” must be included but separate from the other words in your business name.

Reserve Your Business Name

If your desired business name is available, you can reserve the name for a period of 90 days for a fee of $25. Just complete either the Application to Reserve a Name for LLC or the Application to Reserve a Name for Corporation and mail it in to the Secretary of State’s office with a check for the fee.

Step 3: Create Your Business Plan

Your business plan will help you create, run, and scale your business. Don’t skimp on the work during this stage—it will be your roadmap to building a profitable small business. Here are a few things to consider when creating your business plan:

1. Product Development

So you’ve checked all the boxes that prove you have a winning business idea. Now it’s time to turn that business idea into a plan. In this stage, consider cost, testing, and analysis when discussing product development. Would the manufacture process be too costly? Can you make a profit or will you be digging yourself into a hole? You might even create a prototype of your product and test it out on a focus group.

2. Financial Planning

A key part of planning your finances is to record your expenses. Will you have enough capital to pay for rent, subscription fees for business tools, payroll, marketing, and other expenditures? Be thorough. You’ll want to consult with a business attorney or an accountant. They will help you understand your business finances and tax requirements (sales, employee withholding, state and federal). Expert financial advice will be well worth your time and money.

3. Marketing

When the logistics of starting a business in Illinois, start nourishing a marketing mindset. How can you position yourself in a way that is different from the competition? In your business plan think about how you can define your target audience, develop your branding, and establish your web presence. This will probably include building your small business website and promoting yourself on social media—another reason it’s important to confirm the availability of your desired business name.

You may also want to consult our business plan template or a business plan software to help you get started.

Step 4: Choose Your Business Entity

When starting a business in Illinois, you need to decide which business entity is right for you. With so many available, it can get confusing. Here is a breakdown of the three most common business structures available to you:

Sole Proprietorship

This business structure is common for businesses operating under an individual. Many freelancers opt for this business structure when selling their services.

However, sole proprietorships are not separate business entities. That means your personal and business assets go into the same pool when filing taxes. Moreover, the individual assumes total liability for any unpaid debts or legal issues.

Limited Liability Company (LLC)

Unlike a sole proprietorship, an LLC separates the owner from their business. This offers the individual certain liability protections: during a legal dispute, the company will be sued and not the individual. For that reason, it’s often a popular choice for small business owners. You can form an LLC by yourself, or with one or more business partners.

LLC’s allow for pass-through taxation, but LLC’s aren’t exempt from property taxes the way corporations are, and LLC members must pay full self-employment taxes—a cost corporations can cut by distributing dividends. Illinois prohibits banks and insurance companies from registering as LLCs.


Like an LLC, a corporation is an independent legal entity. There are two main types: C-corporations and S-corporations, each with slightly different benefits and costs. In general, though, corporations cost more to open than LLCs in Illinois, and there are more formalities you’ll be required to follow, such as creating bylaws and holding shareholder meetings. Corporations do offer protection from personal liability and are great options for businesses that expect to grow and scale quickly. 

Step 5: Register Your Business in Illinois

By this time, you’ve already verified that your business name is available and you’ve chosen a business structure (sole proprietorship, LLC, or corporation being the most common). If not, return to Step 2 and Step 4. There are a couple of steps you’ll need to take to register your business.

Obtain Your Federal Employer Identification Number (EIN)

You must apply for your EIN for federal tax administration purposes through the IRS website. You can use this number to file for taxes and register your business with the state. Your EIN will be assigned immediately upon completion. Note that if you’re a sole proprietorship with no other employees, you don’t need to file for an EIN. 

Register Under the Illinois Assumed Name Act

If you’re in a sole proprietorship or general partnership and you’re operating your business under a name different from your legal name, known as a DBA or “doing business as” name, you must visit the county clerk’s office for the county in which your business operates in. A clerk will assist you with registering your business name under the Illinois Assumed Name Act. Some counties allow you to file online.

If you’re an LLC or corporation hoping to adopt a DBA, you must do so at the state level, instead of the county level. There are separate forms to register your adopted name as either an LLC or corporation online. 

Choose a Registered Agent 

The state of Illinois requires that every business retain a registered agent with a registered office. The registered agent provides a reliable communication point between your business and the state, and receives tax and legal documents pertaining to the business.

Your registered agent can be you or a member of your LLC or corporation that is 18 or older with an address in IL, or a professional registered agent service that can accept communications on your behalf. There are pros and cons to choosing either registered agent option, so be sure to read up on them and see what makes sense for you.

Register With the Illinois Department of Revenue 

This step is a must for all business entities if you are starting a business in Illinois.

You can register your business with the Department of Revenue online at MyTax Illinois, or you can fill out form REG-1 and mail it to the Central Registration Division (the address is located on the form). You can also visit a regional office to fill out this form.
Please note that it may take up to eight weeks to receive a Certificate of Registration and state taxpayer ID number in the mail.

File Articles of Organization or Articles of Incorporation 

The articles of organization (for LLC) or the articles of incorporation (for corporations) will be your legal application when starting a business in Illinois. You can file the articles of organization or the articles of incorporation directly with the Office of the Illinois Secretary of State. Fortunately, the entire application process can be completed electronically.

Please note that the application process will require you to provide (but not limited to):

  • Your business name
  • Principal place of business address
  • The name of your registered agent and business’s address
  • Names and business addresses of managers 

Please note that there will be a filing fee when submitting your application ($150 for LLCs and $175 for corporations).

It may take up to 10 days before you receive an email response from the Office of the Illinois Secretary of State.

Step 6: Separate Your Personal and Business Assets

When starting a business in Illinois, you’ll want to open a business bank account. Separating your personal and business assets is essential for tax and personal liability purposes. 

  • Taxes: Having your business expenses already separated simplifies your life when it’s time to do your taxes. This saves you time (and stress) when you’re reviewing your business expenditures for tax write-offs.
  • Personal liability: Remember, when you form an LLC or corporation, you and your business are separate legal entities. That means that if you go out of business, your personal assets are mostly protected when the lenders come to collect on loans. 

Step 7: Obtain Your Business Licenses and Permits

Just as in any other state, Illinois business regulations require for businesses to obtain certain registrations, licenses, and permits.[2]

Licenses and Permits

There is no single business license you need to obtain when starting a business in Illinois. Depending on what type of business you operate, you may need to obtain one or several regulatory licenses and permits. The Illinois Department of Financial and Professional Regulation has a list you can search to see what kinds apply to your business. They may include:

  • Liquor license
  • Manufacturing license
  • Contractor license
  • Waste management permit
  • Air permit 
  • Water pollution control permit 
  • Land pollution control permit

For example, if you’re opening a bar, you may need several licenses that you’ll need to send in to the Illinois Liquor Control Commission. Your city and county may also have their own regulations, so make sure to check their websites before proceeding. 

Step 8: Secure Funding

You’ve completed all the logistics of starting a business in Illinois, but it will be difficult to get your business off the ground if you don’t secure startup funding. Fortunately, there are many ways for new businesses to secure funding. 

Business Loans

If you want to apply for a business loan, the first place you might look is your bank. Bank term loans are attractive because they are among the most affordable on the market, with interest rates between 4% and 10%.

Bank loans may be difficult to get if you’re starting a business in Illinois for the first time, though, so a popular option is an SBA loan. SBA loans are partially-guaranteed bank loans backed by the Small Business Administration, and interest rates have a set ceiling of 7% to 9.5%.

Aside from these two options, there are many non-traditional bank loans that small business owners can seek out.

Equipment Loans

Also, if your business requires specialty equipment, you may want to look into equipment financing. The amount and interest rate of your loan would depend on the equipment itself, your financial history, and your credit score. 

Other Funding

Here are some other methods of funding you can use to get your business started:

  • Business credit cards: If you are committed to paying your balance every month, opening a business credit line can be a quick option to cover large expenses.
  • Crowdfunding: Sharing your business idea with the public and receiving funding (usually small donations) from a large group of people can be a good way to finance your business.
  • Bootstrapping: Stretch your dollar as far as it can to make it work, which can sometimes lead to self-financing your business.
  • Angel investors: Bring your business idea to a highly affluent individual and convince that person to fund your business plan.
  • Personal loans: Make an appeal to friends and family who can pool the capital you need to launch your business.

Step 9: Review an Employer’s Responsibilities

By now, you’ve learned about how to start a business in Illinois. But you still need to prepare for the grind of running a business. If you’re a small business owner, expect to be involved in the day-to-day operations.

Before your business scales to hire more employees, your responsibilities as an employer might include:

  • Hiring employees
  • Creating a healthy and safe work environment
  • Posting required Illinois posters in plain view
  • Providing essential types of small business insurance
  • Accounting and payroll
  • Customer service
  • Marketing strategy

As a business owner, you’ll be expected to wear many hats. Make sure you know what’s expected of you and that you have a plan in place for all aspects of your operation

How to Start a Business in IL: Final Thoughts

We threw a lot at you, we know. But completing these steps to starting a business in Illinois sets you up for exciting milestones like making your first sale, growing your team, and scaling your business.

Hopefully this guide helped to streamline the process and replaced any confusion with excitement. Now that you know how to start a business in Illinois, it’s up to you to use this knowledge to nourish that entrepreneurial spirit and build a profitable small business that creates value for people.

Illinois Business Resources

Article Sources:

  1. “Illinois Small Business Profile
  2. “Registration, Licenses, & Permits

Dan Marticio

Dan Marticio is a small business owner and contributing writer at JustBusiness, specializing in business finance and entrepreneurship. He’s written on a broad range of topics from stocks and net worth to productivity hacks. He helps SMBs scale and profit through compelling content.

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