Starting a Business in Illinois – A Comprehensive Guide

How to Start a Business in Illinois

Greetings, ambitious entrepreneur! If you plan to establish a business in Illinois, this in-depth guide will provide all the information you need. With rich knowledge and invaluable resources, we endeavor to empower novice and seasoned entrepreneurs. Be it your first venture or a calculated expansion, let this guide be your steadfast companion on your quest to conquer the Illinois business landscape.

Once you have a business idea, you’ll surely be anxious to start your business without any missteps. We’ll cover everything from articles of organization, to choosing your type of business entity, information on how to register to pay state taxes in Illinois and more.

Top two advantages of starting a business in Illinois:

  1. Central location with excellent infrastructure, providing easy access to markets and resources.
  2. A diverse economy offers various opportunities for businesses across different industries.

Top two challenges of starting a business in Illinois:

  1. High taxes and stringent regulations may weigh heavily upon small businesses, potentially hindering growth.
  2. The fiercely competitive landscape demands businesses set themselves apart by offering a distinctive edge and exceptional value.

We will provide technical details and specific information tailored to the Illinois business environment as we dive into each section.

Regulatory Factors and Taxes in Illinois

Illinois has a reputation for being moderately regulated for business owners. While the state has regulations to ensure safety, environmental protection, and consumer rights, it has streamlined processes to make compliance easier for businesses.

Businesses must still consider Illinois’s corporate income tax rate of 9.50% when planning financial strategies and budgeting.

Illinois has a state sales tax rate of 6.25%, a maximum local sales tax rate of 4.75%, and an average combined state and local sales tax rate of 8.82% should be considered. The tax system ranks 36th overall on the 2023 State Business Tax Climate Index. In addition to these taxes, businesses may be subject to property and other industry-specific taxes or fees. Therefore, understanding the tax landscape in Illinois is essential for companies to budget accurately and ensure compliance with state and local regulations.

What are the Different Types of Business Structures I Can Use?

There are five primary business entity types. Each is described below.

Sole Proprietorship

A business owned and operated by one individual with no legal distinction between the business and the owner. The owner is personally responsible for all debts and liabilities of the business.

Limited Liability Company (LLC)

A flexible business organization that combines the liability protection of a corporation with the tax benefits and simplicity of a partnership. Owners of an LLC are called members, and their assets are typically protected from the debts and liabilities of the business. You have flexibility to define many aspects of how your business will work in your Articles of Organization.

Corporation

A type of corporation allows for pass-through taxation, meaning that profits and losses are passed through to the shareholders and reported on their tax returns. S-Corporations are limited to 100 shareholders and must meet certain eligibility requirements.

C-Corporation

A separate legal entity from its owners (shareholders) means that the corporation can enter into contracts, own assets, and sue or be sued. C-Corporations are subject to double taxation, meaning that the corporation and the shareholders are taxed on profits.

Limited Liability Partnership (LLP)

A partnership that limits the personal liability of its partners. LLPs are typically used by professional service providers such as lawyers, accountants, and architects. Each partner is protected from the other partners’ wrongful acts, omissions, and negligence, but they may still be personally liable for their own actions.

Distribution of Businesses

Business Type Percent of Businesses in Illinois
Sole Proprietorship 63.3%
Limited Liability Company (LLC) 19.7%
S-Corporation 8.7%
C-Corporation 7.9%
Limited Liability Partnership (LLP) 0.3%

These percentages will vary yearly and depend on the industry and the location it runs from. The date may also list info about businesses registered in other states but operate in Illinois.

What Is an EIN Number?

Definition of Employer Identification Number – EIN

The EIN or Employer Identification Number is a unique identification number comprising nine digits assigned to businesses operating within the United States by the Internal Revenue Service (IRS). It monitors companies ‘ tax accounts, also known as the Federal Tax Identification Number (TIN) or Federal Employer Identification Number (FEIN).

Do I Need One to Start a Business in Illinois?

Starting a business in Illinois requires an EIN, mainly if you’re working as a corporation or partnership, have employees, or are involved in certain activities, such as applying for business licenses or opening a business bank account.

How Do I Get One?

Obtaining an EIN is a straightforward process that can be done online via the IRS website or by submitting Form SS-4 to the IRS via mail or fax. The most efficient method is through the online application process, with the EIN usually issued immediately upon completion of the application.

For more information or assistance, you can contact the IRS directly at

Phone: 1-800-829-4933 (businesses)

Website: https://www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers

How to Start a Business in Illinois – Important Registrations

Registering My Business Name

You must contact the Illinois Secretary of State’s office to register your business name in Illinois. You can contact them by phone at (800) 252-8980 (toll-free in Illinois) or (217) 785-3000 (outside Illinois).

https://www.cyberdriveillinois.com/

Registering a DBA (Doing Business As) If Relevant

Contact your local county clerk’s office if you need to register a DBA or “assumed name” in Illinois. A list of county clerk offices can be found on the Illinois Association of County Clerks and Recorders website.

Website: https://www.ilcounty.org/

Registering for Payroll State Payroll Taxes, Unemployment Insurance

To register for state payroll taxes and unemployment insurance in Illinois, you must create an account with the Illinois Department of Employment Security (IDES).
Website: https://www2.illinois.gov/ides.
You can contact them by phone at (800) 244-5631

Registering for Worker’s Compensation Insurance

To register for workers’ compensation insurance in Illinois; you must contact an insurance provider offering workers’ compensation coverage. If you use a payroll service, they should be able to provide workers comp as well.

Registering for Collecting Sales Tax

To collect sales tax in Illinois, you must create an account with the Illinois Department of Revenue.

Website: https://www2.illinois.gov/rev/Pages/default.aspx

Contact them at (800) 732-8866 or (217) 782-3336.

Registering for Income Tax

Businesses operating in Illinois should register for income tax through the Illinois Department of Revenue.

Website: https://www2.illinois.gov/rev/Pages/default.aspx

Contact them at (800) 732-8866 or (217) 782-3336.

Registering to Pay Property Tax

You must contact your local county assessor’s office to pay property tax in Illinois. A list of county assessor offices can be found on the Illinois Department of Revenue website.

Permits for Starting a Business in Illinois

Do I Need a Business Permit to Operate a Business in Illinois?

At the State Level: Some businesses in Illinois may require state-level permits or licenses depending on the type of business and industry. To find out if your business requires a state-level permit or license, you can visit the Illinois Department of Commerce and Economic Opportunity website:

Website:https://www2.illinois.gov/dceo/SmallBizAssistance/BeginHere/Pages/default.aspx

Check With Your City: You need to contact your city’s business licensing office to determine if you require a special permit to run your business. You can get all the required information from the desk.

Check With Your County: Your country may have specific rules and licensing requirements for you to run the business in its jurisdiction. You can get this information from your county’s clerk office.

Check With Your County: Besides city and state requirements, your county may have specific regulations and permit requirements for businesses operating within its jurisdiction. Contact your county’s clerk office or visit their website to learn more about the permits and licenses needed for your business.

Remember, requirements can vary greatly depending on your business type and location, so verifying with all relevant authorities before starting your business is essential.

How do I learn about any special permits I need for my business?

For those embarking on a new business venture in Illinois, it’s imperative to determine the requisite special permits or licenses for your specific industry. The prerequisites for each type of enterprise may differ depending on various factors such as location and size. Conducting thorough research on the necessary permits within your area is essential to avoid legal difficulties and potential fines.

There are several channels to obtain this information, including reaching out to the Illinois Department of Commerce & Economic Opportunity (DCEO), which has a dedicated team for assisting businesses with licensing and permit requirements. In addition, you can browse their website to review the specific regulations or schedule an appointment with one of their knowledgeable staff members for further guidance.

Another valuable resource to tap into is your local chamber of commerce or small business development center, as these organizations are often available to help entrepreneurs navigate the nuances of regulatory compliance.

Financing Options for Entrepreneurs in Illinois

Securing adequate funding is critical to starting and growing a successful business in Illinois. Entrepreneurs have several financing options to consider, including federal and local resources.

Financing a New Business

Finding the right financing option for your business can be challenging, but ensuring your venture’s sustainability and growth is essential. Options include loans, grants, and investments from angel investors. Thorough research and planning will help you identify the most suitable funding sources for your business needs.

SBA Loans and Microloans

The Small Business Administration (SBA) of the United States provides many loan programs. Among them are microloans intended to assist budding entrepreneurs in establishing and expanding their enterprises. As the name implies, microloans are small-scale loans typically short and designed to facilitate speedy access to finances for small businesses.

https://smallbusinessplans.com/sba-microloans-for-small-businessess-and-startups/

In Illinois, microloan intermediaries such as Accion and the Women’s Business Development Center provide microloans to eligible businesses. These intermediaries also offer additional support services like business coaching and training.

SBA Microlenders in Illinois

Here is a list of SBA Microlenders in Illinois for those seeking small business financing opportunities.

Allies for Community Business
Marion Moore
135 N Kedzie
Chicago, IL 60612
312-275-3000
info@a4cb.org
https://a4cb.org/

Greenwood Archer Capital
David Doig
1000 E. 111th Street, 10th Floor
Chicago, IL 60628
773-341-2072
eking@greenwoodarchercapital.org
https://www.greenwoodarchercapital.org/

State and Local Grants and Incentives

The Department of Commerce and Economic Opportunity (DCEO) supports business activity within the state through many grants and incentives. A notable example of their support is the Advantage Illinois program, which boosts lending opportunities for small businesses. Additionally, the DCEO administers the Small Business Improvement Fund (SBIF) and the Neighborhood Opportunity Fund (NOF), both of which present avenues for growth and progress for those seeking to establish their enterprise in Illinois.

Angel Investor Groups

Angel investors are individuals or groups that provide capital to startups in exchange for ownership equity or convertible debt. Several angel investor groups in Illinois actively support local businesses, including Hyde Park Angels, Cornerstone Angels, and the Chicago Arch Angels. Connecting with these groups can offer valuable networking opportunities and potential funding for your business.

Remember, securing funding is just one aspect of starting a successful business. Researching and exploring all financing options is essential to find the best fit for your venture.

Benefits of a Well-Structured Business Plan

A well-structured business plan offers numerous benefits for entrepreneurs. A proper structure can help you define your objectives and overcome the business’s difficulties. Then, when you have a business plan, you can have a firm blueprint to show your vision to your stakeholders and partners and give strategies to your employees.

Meeting Lender and Investor Expectations

Lenders and investors typically require a comprehensive business plan before financing your venture. A well-prepared plan demonstrates your commitment and competence, showcasing your understanding of the market, financial projections, and strategies for achieving success. By meeting lender and investor expectations, a strong business plan can significantly improve your chances of securing the funding necessary to launch and grow your business in Illinois.

Where Can I Find a Mentor to Help Me Succeed?

Starting a business in Illinois can come with its challenges. Seek guidance from experienced professionals, such as attorneys, the Service Corps of Retired Executives (SCORE), or local business groups. In addition, engaging with mentors and networking with other entrepreneurs can provide invaluable insights and support as you build your business in the Windy City.

Several resources and organizations in Illinois offer mentorship and support specifically for local entrepreneurs. Some of these organizations include

  1. 1871 Chicago: This non-profit startup is a digital startup that can help a business by providing networking means, finding resources, and mentorship to run and grow a business in Illinois. You can contact 1871 Chicago through their website at https://1871.com/contact/ or
    (312) 239-0310.
  2. Women’s Business Development Center (WBDC): For women entrepreneurs, the WBDC is a one-stop resource providing business guidance, financial support, and networking resources to women starting or running a business in Illinois. Contact through Women’s Business Development Center (wbdc.org)
    Phone: 312.853.3477
  3. Chicago Urban League Entrepreneurship Center: Excluse to minority entrepreneurs, the facility offers different support programs, including technical assistance, financial programs, and access to training and development. Contact through https://chiul.org/contact/
    Phone:(773) 285-5800
  4. Bunker Labs Chicago: The military veterans looking to venture into a business will find most of the support from here. Whether the veterans seek mentorship, community support, or local business administration guidance, they can get this help from this center. Bunker Labs contact info: Phone number: (312) 218-9622 Website: www.bunkerlabs.org
  5. Small Business Development Centers (SBDCs): SBDCs’ main funding source is the U.S. Small Business Administration. They offer support services such as consulting, mentorship programs, and access to resources for a low fee. The services are available to entrepreneurs in Illinois and cover many locations in the Chicago area. To learn more about SBDCs, call the First Stop Business Information Center at 800.252. 2923

All the above resources offer new businesses and those seeking additional support an excellent hub to get information, grow their network, and grow their business.

The Economy of Illinois

Understanding the economy of Illinois is crucial when starting a business, as it provides insights into the financial landscape, consumer behavior, and growth opportunities. A strong economy offers a supportive environment for new businesses to thrive and expand.

Economic Overview

Average Household Income

Regarding income levels, Illinois boasts a median household income of $72,205, $2,488 higher than the median income across the US. This higher income indicates a stronger consumer base, which can benefit businesses targeting local markets.

Average Level of Education

40.7% of people aged 25 years and older hold advanced degrees. 47.6% are holders of high school diplomas, and 11.7% are of those people who lack primary high school education. This significant level of learning often correlates to a skilled and talented workforce, which can ultimately benefit companies searching for exceptional employees.

Consumer Spending per Capita

Illinois’s per capita personal consumption expenditures (PCE) amounted to $43,981. This is a significant increase from the state’s PCE of 2000, which was at $25,035. Higher consumer spending signals a robust market for businesses to tap into, offering a greater potential for revenue and growth.

Top Industries in Illinois

Illinois boasts diverse industries, spanning the manufacturing, agriculture, healthcare, life sciences, technology, transportation, and logistics sectors. The manufacturing sector includes machinery, food products, chemicals, plastics, and fabricated metals, while the agriculture domain is a leading producer of corn, soybeans, wheat, and livestock. The healthcare and life sciences arena looms large, with several distinguished institutions and biotechnology companies operating in the region.. The technology industry is increasing, focusing on software development, data centers, and information technology services. Finally, Illinois’s transportation and logistics are vital industries, largely thanks to the state’s central location and extensive infrastructure.

For entrepreneurs or small investors looking to start a new business in Illinois, it’s a good idea first to learn and get full information about the state’s top industries. This step will help them discover all the potential opportunities and risks associated with the businesses. Then, by starting your business in the thriving industry with the right information, you can increase your chances of success and take advantage of existing market opportunities. Boasting a robust and thriving economy, proficient workforce, and various sectors, Illinois presents a compelling option for entrepreneurs intending to establish or amplify their businesses.

  1. Identify complementary businesses: Explore ways your business can complement or support one of the top industries in Illinois. For example, if you offer marketing services, you could specialize in marketing for manufacturing companies or healthcare providers.
  2. Leverage workforce talent: Knowing which industries dominate the state can help you tap into a skilled workforce with experience and knowledge relevant to your business.
  3. Collaborate with industry leaders: Establishing partnerships or collaborations with businesses in the top industries can help you access resources, knowledge, and networks that can drive growth for your business.

Workforce and Talent

Understanding the workforce and talent in Illinois can provide valuable insights into the state’s labor market, helping you make informed decisions about your business’s staffing and recruitment strategies.

Unemployment Rate,

Illinois, a state with a diverse economic landscape, boasts a 4.50% unemployment rate. This number is a vital indicator of job opportunities and overall financial health.

Minimum Wage

The minimum wage in Illinois is $13 per hour, which can impact labor costs and your business’s budget and salary structure.

Average Age and Demographics

Illinois has a median age of 37.4 years, with a slight female majority of 50.9% and a male minority of 49.1%. Understanding the demographics can help you tailor your products or services to cater to the needs of different age groups and gender profiles in the state.

Breakdown of People with Various Levels of Education

The highest level of education among people aged 25 years and older in Illinois are as follows:

  1. 40.7% hold a higher degree.
  2. 47.6% have a high school diploma.
  3. 11.7% have no high school diploma.

This information can guide you in recruiting employees with the appropriate education and skill set for your business.

Top Areas of Skilled Workers for Residents of Illinois

Illinois has a diverse and skilled workforce that supports various industries. For example, manufacturing is a significant sector, employing professionals like production managers, engineers, and machinists, contributing 14% of the state’s GDP. Agriculture is another key industry, with skilled workers such as farm managers, crop specialists, and equipment operators.

Healthcare and Life Sciences in Illinois benefit from talented healthcare professionals, including doctors, nurses, and researchers. The technology sector is experiencing growth, driven by skilled roles like software developers and data analysts, and has contributed to creating 20,000 new tech jobs in recent years.

Illinois’s technology sector is thriving, with skilled roles such as software developers and data analysts experiencing significant growth. In recent years, this sector has created over 20,000 new tech jobs, signaling its importance to the state’s economy.

You Can Write a Great Business Plan - cover of 60 page booklet

Ready to complete your business plan in just 1 day?

Click GET STARTED to learn more about our fill-in-the-blank business plan template.  We'll step you through all the details you need to develop a professional business plan in just one day!

Successfully used by thousands of people starting a business and writing a business plan.  It will work for you too!