How to Start a Business in Illinois

Illinois Business Facts and Environment

IL Business Facts

Illinois is nicknamed the Land of Lincoln, after Abraham Lincoln, the 16th President of the United States. It is also known as The Prairie State, owed to its vast tracts of farmland.

Chicago is the largest city in Illinois, with a population of 8.865 million as of 2020. It is the third most-populous city in the United States, and the surrounding Chicago Metropolitan area has nearly 10 million people. The city has been called a global architectural capital, and is considered one of the most important business centers in the world. It was the site of the world’s first skyscraper, built in 1885.

The Illinois College of Business is nationally recognized as one of the country’s leading business schools.

Aside from the service industry, which contributes the largest dollar amount to the state’s economy, manufacturing and mining are the two top industries in Illinois. It has the 4th largest manufacturing industry in the country, and has exported more than 8 billion tons of coal and 4 billion barrels of petroleum.

Nearly 80% of the land in Illinois is farmland.  It is a leading farm income state, and corn is its most important crop, followed closely by Soybeans, hay, wheat, rye, oats, and grain.

Major Companies In Illinois

Walgreen Co. tops the list of Illinois’ largest companies, employing more workers than any other business in the state. They are followed by McDonald’s, Boeing, Caterpillar and a handful of holdings companies, like United Continental, Sears and Mondelez International.

Startup Environment

The Chicago startup scene has struggled somewhat in recent years, with entrepreneurs saying there isn’t enough money and Midwest investors claiming there aren’t enough proven entrepreneurs or good ideas. The upside is that there is a lot of wealth and a lot of worth in the city – and a lot of big money for the right startup. Chicago has in fact proven its worth as a solid home for entrepreneurs, especially female founders.

Step 1: Decide on a Business Structure

There are 3 basic options: a DBA, a Corporation or an LLC. Click here to learn more about business entities.

• A DBA or “Doing Business As” (also known as a “Fictitious Business Name” or FBN) is not really a separate structure, but just a different name that an individual or partners use as their business name.
• A Corporation is a separate entity (provides liability protection to the owners) that has a structure that includes shareholders, directors and officers. More complex than a DBA but the entity of choice for large companies and startups that intend to raise funding. Some professions are required to choose what is known as a “Professional Corporation” or PC (doctors, lawyers, architects, etc.).
• An LLC or “Limited Liability Company” is a newer type of business that is both a separate entity but provides very easy management (doesn’t require directors or officers) and taxation. Has largely replaced the DBA and Corporation in popularity recently as it provides liability protection but with much less complexity (and taxation) than a Corporation.

Step 2: Pick a Business Name

Picking a business name is easier said than done – many legal and business problems can arise from picking the wrong name (you can always change it later but the less times you have to do that, the better). In Step 3 we’ll show you how to search for the name in Illinois, but we highly recommend you do the following before searching Illinois state databases:

• Make sure you’ve covered the basics in your chosen name: unique, easy to understand/pronounce (practice saying it out loud: “Thanks for calling XYZ”) and can survive over time (“DVD World” is not timely). Here are some of our tips on business identity including logo and trademarks.
• Do a search on Google, Bing and DuckDuckGo of your proposed name. This is a “first sweep” of any potential conflicts, especially in your state or local jurisdiction. NOTE: If you intend to operate nationally or even internationally it will be even more important that your name be unique. This should cover many cases where a company name is being used but not officially trademarked (see next tip).
• Do a trademark search with the US Patent and Trademark Office (USPTO). This will be a very good indicator if you’re name will have any conflicts. There’s an art to trademark searches (trademark specialists will charge you handsomely to do a thorough search) but in our experience if you can use google at a fairly advanced level you can reasonably clear a name yourself.
  
  TIP: search misspellings, plurals, variations of spelling, sound-alikes and other versions of your chosen name to be sure it’s not already registered.

Ready to start a business in Illinois?

Our Illinois filing services will help you get started as quickly as possible.

Step 3: Register the Business

Now that you’ve picked your business name, you’re ready to search the name on Illinois databases and register with the appropriate government office.

How to File a DBA in Illinois

NOTE: All businesses in Illinois are required to register alternative trade names by filing for a DBA if the business seeks to operate under a different name than what it used when it was formed.

• Check your business name by calling the County Recorder or visiting their website (search for “YOURCOUNTY county recorder” should find it).
• Obtain the forms from the county to register your DBA. Each county has its own specific filing requirements, but most accept the online filing options found here.
• File the forms with the County. Some counties require the form to be notarized and published.

NOTE: We can prepare and file your DBA in any county in Illinois

How to Form an LLC in Illinois

• Make sure your company name choice is available by searching the Illinois Business Entity Database and doing a name search on the State of Illinois website. Note: This can be harder than it looks, make sure you search all variations of spelling, plurals and even misspellings as the state may reject a name that is too similar (then you have to start all over again, wasting valuable time).
• Hire a professional Registered Agent. This is a requirement for every Illinois LLC. The chosen registered agent must have a physical street address in Illinois. A professional Registered Agent will provide their address and forward any important documents to you, this is also convenient if you have to move (you don’t have to file forms or pay fees, just update your address with your agent).
• File the correct paperwork with the Illinois Division of Corporations called “Articles of Organization”. The Division of Corporations could take anywhere from 2-3 business days for e-filing to 3 to 5 days for mail filings to process the paperwork.  This may increase during peak periods.
  
  TIP: Check our LLC order form to see how long Illinois is currently taking to process regular and expedited orders.
  
• Optional: Elect S-Corporation status with the IRS by filing IRS Form 2553. Yes, even an LLC can choose to be taxed as an S-Corporation (or even a C-Corporation). Speak to your tax advisor about this important issue because it adds complexity to your LLC most people would rather avoid.
• Do the proper post-formation tasks. Once the articles are filed and approved you will then need to properly organize the LLC (yes, even “1 person LLC’s”) by holding an “Organizational Meeting” which takes contributions from the members, issues Member Certificates, adopts the company Operating Agreement and more. Many people simply do steps 1 and 2 above but this leaves your company unorganized and possibly exposed to legal, tax and compliance issues. Save time and money now by properly organizing the company.

NOTE: Our LLC formation package includes not only filing the Articles of Organization (we’ll prepare and submit them to the state) but all the necessary post-formation documents completed and personalized to you “ready for signature” as well as our exclusive Startup Wizard which guides you through the complete startup process from formation to bank accounts, logos and more.

How to Incorporate in Illinois (Form a Corporation)

• Make sure your company name choice is available by searching the Illinois Business Entity Database and doing a name search on the State of Illinois website. Note: this can be harder than it looks, make sure you search all variations of spelling, plurals and even misspellings as the state may reject a name that is too similar (then you have to start all over again, wasting valuable time).
• Hire a professional Registered Agent. This is a requirement for every Illinois LLC. The chosen registered agent must have a physical street address in Illinois A professional Registered Agent will provide their address and forward any important documents to you, this is also convenient if you have to move (you don’t have to file forms or pay fees, just update your address with your agent).
• File the correct paperwork with the Illinois Division of Corporations called “Articles of Incorporation.”. The Division of Corporations could take anywhere from 2-3 business days for e-filing to 3 to 5 days for mail filings to process the paperwork.  This may increase during peak periods.
• Optional: Elect S-Corporation status with the IRS by filing IRS Form 2553. Click here to learn more about S-Corporations.
• Do the proper post-incorporation tasks. Once the articles are filed and approved you will then need to properly organize the corporation (yes, even “1 person Corporations”) by holding an “Organizational Meeting” which takes contributions from the shareholders, elects directors and officers, issues stock, adopts the Corporate Bylaws and more. Many people simply do steps 1 and 2 above but this leaves your company unorganized and possibly exposed to legal, tax and compliance issues. Save time and money now by properly organizing the company.

NOTE: Our Corporation formation package includes not only filing the Articles of Organization (we’ll prepare and submit them to the state) but all the necessary post-formation documents completed and personalized to you “ready for signature” as well as our exclusive Startup Wizard which guides you through the complete startup process from formation to bank accounts, logos and more.

Step 4: Obtain Your Federal Employer Identification Number

Your EIN is like your Social Security Number for your company. It’s required for Corporations and LLC’s and optional for DBA’s (if you don’t have any employees, then it’s required). However, if you are a DBA and don’t obtain an EIN you will be forced to use your Social Security Number on many documents so it’s typically recommended you obtain the EIN to prevent identity theft.

To obtain an EIN you can apply online with the IRS or via IRS Form SS-4.

TIP: We will obtain your EIN for you if you we form your company.

Step 5: Open Company Bank and Credit Accounts

To keep business and personal expenses separate, you should open a separate account for your business. In addition, getting business credit cards is how you begin to build a company credit profile (corporation or LLC required) and can later qualify for larger loans and lines of credit. To open the account simply call your chosen bank and inquire on the steps to open a business bank account. Typically you’ll need a) your filed paperwork b) your EIN c) a company resolution authorizing your company to open the account (signed by the owners, members, officers or directors, etc.).

Top Business Banks in Illinois:

• Bank of America
• BMO Harris Bank
• First Midwest Bank
• Associated Bank
• Woodforest National Bank

TIP: Our business formation service includes a free banking resolution for your use.

Step 6: Set-up An Accounting System

Setup your Accounting and Record-keeping system and learn about the taxes your new company is responsible for paying.

Company documents generally are required to be kept for 3 years, including: a list of all owners and addresses, copies of all formation documents, financial statements, annual reports, amendments or changes to the company. All Tax and Corporate Filings should be kept for at least 3 years. View our “Accounting & Financial Management” section for help with setting up an accounting system and purchasing accounting software.

Step 7: Obtain Licenses and Permits

Now that you’ve registered your business name you need to obtain a business license for your company – this authorizes your company to do business in your city or county. Typically this also involves registering for state taxes and permits (the city may require them as part of the business licensing process).

TIP: We work with a company that can obtain and prepare business licenses and permits for you. Click here to learn more.

Step 8: Hire Employees (if applicable)

If you intend to hire yourself or others as a full or part-time employee of your company, then you may have to register with the appropriate State Agencies or obtain Workers Compensation Insurance or Unemployment Insurance (or both). View our “Employees & Payroll” section for help with hiring employees and processing payroll.

Step 9: Obtain Business Insurance

There are many types of insurance for businesses but they are usually packaged as “General Business Insurance” or a “Business Owner’s Policy”. This can cover everything from product liability to company vehicles. A decent policy can run as little as $300/year and offers a great extra level of protection. Click here to view our preferred provider of business insurance online.

Step 10: Systemize and Organize

Prepare the business as if someone needed to take it over and run it for you. This means have a method to process orders, pay bills, pay employees, pay taxes, maintain your permits, etc. Basically, try to make the operational aspect of the business as automated and efficient as possible so you can concentrate on growing your business. View our “Manage Your Company” section for help with systemizing and automating your business.

Step 11: Branding and Marketing

Now that you’ve set-up the company for success, you need to get the word out. Create a marketing plan for your products and services that targets your ideal customer. View our “Marketing & Sales” section for help for more information.

Step 12: Annual and Ongoing Requirements

DBA: In Illinois, your Fictitious Business Name should be valid for 5 years (unless you change company name or other information listed on the FBN) at which point you’ll need to renew it with the county.

LLC: Illinois requires both annual reports and an annual franchise tax. These are due within a 60-day period immediately preceding the first day of the month of incorporation. The fee is $77.

Corporation:  Your business must keep corporate records at its principal place of business. Every year, an officer of your corporation must file an annual report due before the first day of the anniversary month of incorporation. Generally, this report can be filed electronically unless:

• Your business owns property or transacts business outside of the state
• There have been recent changes in authorized shares, issued shares, or paid-in capital
• You need to enter more than six officers or directors on your report.

Franchise Taxes: Illinois businesses are required to file a $75 annual report with a $25 minimum franchise tax, based on your company’s paid-in capital.  The franchise tax form in Illinois is widely decried as being one of the most complicated in the country – it’s therefore advisable to work through your corporate taxes with an accountant.

Ready to start a business in Illinois?

Our Illinois filing services will help you get started as quickly as possible.

Important Illinois Contacts

Illinois Secretary of State
213 State Capitol
Springfield, IL 62756
217-785-3000 (outside Illinois)
800-252-8980 (toll free in Illinois)

Illinois State Taxation Departments

• Illinois Department of Revenue

Illinois State Labor and Employment Departments

• Illinois Department of Labor

Illinois State Startup Resources

1. Small Business Administration (SBA) Illinois State District Offices

• Small Business Administration Illinois District Office
• US Small Business Administration

2. SCORE Volunteer Mentors

SCORE Illinois

SCORE resources are very helpful for startups and available from a number of branches throughout Illinois. Connecting with a SCORE mentor can help you avoid common pitfalls as you start your business.

• Illinois Business Portal
• Illinois Business Information Center
• Illinois Small Business Development Center Directory
• Illinois Job Link Employer Portal
• The Illinois Innovation Network
• Tax Information For Illinois Businesses

3. Illinois State Legal Statutes:

• Illinois Business Corporation Act
• Illinois State Limited Liability Companies – the specific act that applies to Illinois State LLCs.
• Illinois State Businesses and Professions – includes regulations on topics such as business and professions codes.

4. Illinois State Chambers of Commerce

• Illinois State Chamber of Commerce
• Illinois Office of Business Development

5. Angel.co Illinois State Startups

• A list of Illinois angel investors registered with Angel.co.

6. Illinois State Business News

• Illinois Business Journal
• Central Illinois Business Magazine
• Chicago Tribune Business

7. Illinois State Small Business Development Center

• The Illinois Small Business Development Center is a network of business advisors, trainers, and support staff who operate from Southern Illinois University.

8. Illinois Green Business Association

• Find out how to register your Green business and enjoy their many resources.