How to Start a Business in Illinois: A Practical Guide

Chicago, the third-largest city in the country, is located in Illinois and has the sixth-highest population. Both urban and also rural areas, as well as industrial and agricultural sectors, are present.

In conclusion, this market has the potential to be active for new businesses. You’ll learn what it takes to open a business in Illinois through this guide.

1. Select a business venture.

Selecting a profitable company idea requires careful consideration. Finding out what you’re trying to sell is a part of it. A thing? Support? Both? But that’s just the start. Several factors must be considered when creating an idea for your Illinois business.

It would help if you would consider the following essential questions:

Just who are my clients? An effective business plan involves recognizing and comprehending your target market.

You can find out who your customers are by performing a comparative analysis of other companies in your market, looking at online stores that sell comparable goods or services (like Amazon or Wayfair), visiting potential customers in person, or reading up on market trends.

What is my anticipated profit margin? Examine pricing, packaging and distribution alternatives, business concepts, and consumer demand to see if your venture can be profitable.

Work out how many goods or services must be sold using this information to at least pay the company’s overhead.

2. Identify your company

Choosing a name for your current company is one of the current crucial choices you’ll make on the road to incorporation.

A name must effectively and succinctly convey the venture’s purpose and aim for it to be remembered, especially in a competitive market like Illinois, which has about 1.2 million small enterprises.

A company’s name has the power to create or ruin it, so it’s critical to keep a few things in mind at this early stage.

Is this an official corporate structure? Illinois has unique business naming regulations that you must adhere to depending on whether your firm is a formal or informal business structure. Corporations and limited liability firms are examples of official business formations (L.L.C.s).

In the case of an L.L.C., the term “limited liability company” or one of its abbreviations, such as L.L.C. or L.L.C., must appear in the company name.

Similarly, the word “corporation,” “company,” “incorporated,” or “limited,” or an appropriate abbreviation of those terms must appear in the name of an Illinois corporation.

Is this a casual business arrangement?

In informal business structures, a sole proprietorship in Illinois must use the owner’s last name. The owner must apply for a D.B.A. (doing business as) license to use any other name.

The last names of the partners must be listed in an Illinois partnership. Illinois partnerships must abide by the same D.B.A. regulations as sole proprietorships.

Does the domain name still exist? A distinctive business goes beyond the goods or services offered because the name will probably be included on the website.

Verify whether a domain name that closely matches the name of your business is available before deciding on the name for the organization. If nothing out there expresses your company’s identity, you should change your mind.

D.B.A. usage in Illinois

You must submit a Certificate of Assumed Name form to the county clerk where your business is situated in Illinois to establish a D.B.A. Although the forms will differ from county to county, you can find directions for submitting a D.B.A. in Chicago (in Cook County) here.

Ensuring your D.B.A. is distinct from every other business name in the state—including the original business name—is a must.

On the Illinois Secretary of State website, you can search for already-existing Illinois company names.

3. Write a company strategy.

Starting a profitable business in Illinois requires a strong business plan. The following sections will be found in a comprehensive plan:

  • A summary
  • Complete company profile
  • comprehensive market research
  • An overview of the organizational and management structure of the corporate entity
  • Products and services list
  • Report on customer segmentation
  • marketing strategy
  • Plan for logistics and operations
  • fiscal strategy
  • A free business plan template offers a development base and an excellent place to start. It can be altered to meet the requirements of your new company.

4. Select a business structure and launch your venture.

Four business structures can be classified as “formal” or “informal” before you formally file for incorporation in Illinois.

Structures of informal businesses

single-person businesses. Sole proprietorships and general partnerships fall under the category of informal business formations in Illinois. A sole proprietorship is run and owned by a single person, taxed as that person’s income once.

However, there is no formal separation of the owner’s interests from those of the business. Therefore, the sole proprietorship’s owner is entirely responsible for the company’s debts and potential legal penalties.

Partnerships. Two or more proprietors can form a general partnership. Likewise, partnerships are subject to a single tax at the owner’s income tax rate. Like sole proprietorships, the owners and the business are typically treated equally under the law.

Formal organizational frameworks.


Legally speaking, corporations are distinct entities from the people who own them. If the business fails or is sued, this safeguards an owner’s assets.

They may be subject to double taxation: once on corporate income and once more on a business owner’s income due to dividends.

L.L.C.s. L.L.C.s combines some of the advantages of corporations with those of partnerships. They share a structure with partnerships in that they are composed of one or more owners, or “members,” but corporations often have a liability shield. Depending on the option the L.L.C. chooses, they may be taxed as either a corporation or a partnership.

The process of obtaining a federal employer identification number (E.I.N.)

Choosing the kind of business you want to launch comes first, then comes the application for a federal employer identification number (E.I.N.). On the I.R.S. website, this is possible.

An E.I.N. is a nine-digit number that the I.R.S. issues to businesses for tax purposes; it works similarly to a person’s Social Security number. The E.I.N. of your company will be used by Illinois state tax authorities to identify it.

Not only does having one simplify filing federal and state taxes, but it also facilitates obtaining company credit cards and lines of credit.

Forming an Illinois corporation

Getting an E.I.N. is just one step in Illinois’ incorporation procedure. To form your firm, you must also take the following steps:

Pick a company name while adhering to any regulations unique to your chosen structure.

Post or electronically file the articles of the organization. These articles must, at the very least, contain the business name and the name and address of a registered agent. A registration cost of up to $150 may apply, depending on the type of business being founded.

Create a bank account for your company.

Deal with tax requirements, which change depending on the type of firm. Illinois does not require L.L.C.s to submit a corporate tax return; any gains are taxed at the personal income level. However, businesses must submit a corporate income tax return to the state.

Partnerships and sole proprietorships must pay self-employment taxes, which are 15.3% in Illinois.

5. Obtain business permits and licenses

A company must obtain the required business licenses and permits to operate legally in Illinois. This will depend on the sector or place where the company operates:

Registration Certificate. Businesses in Illinois that are classed as retailers, resellers, or suppliers of products or services to which sales tax is applied must do this. To apply, submit Form REG-1 by mail or online to the Illinois Department of Revenue.

Occupational or professional license. Some companies, including those that sell alcohol, tobacco, or firearms, will need licenses from specific state bodies. You may get further details from the state’s Department of Financial and Professional Regulation.

Local permits. Local licenses may also be necessary for specific counties, towns, or cities. To see if they apply to your business, visit the websites of the county and town governments. On the website of the county administration, you may find details on how to apply for a business license in Cook County.

6. Research Illinois insurance options

Unexpected tragedies might harm a young company. A severe enough incident could destroy a startup business.

You may still want to get insurance for your company’s goods, automobiles, or other assets even if some business formations, such as corporations and L.L.C.s, provide personal asset protection.

Additionally, workers’ compensation insurance must be purchased if hiring staff in Illinois. A list of the insurance policies your new Illinois business might require is kept up to date by the federal Small Business Administration.

7. Be aware of financial factors

You’ll need to make more financial commitments to launch your firm. These could include expenses for a professionally designed website, ad spots, equipment, software, and rent for a physical storefront.

Consider working with attorneys, accountants, and other business experts. These expenses might soon accumulate. Fortunately, there are simple, quick ways to get startup finance.

8. Promote your company

A strong marketing strategy for your small business in Illinois should contain the following elements:

Market analysis. Understanding your company’s target market is made more accessible through market research.

Promotion and advertising. Make your goods known by using paid advertising. Either do it yourself or hire a company. Since Chicago is a center for advertising, there are numerous local businesses from which to select.

The internet. Most successful companies have a significant social media presence on numerous channels. Businesses with Illinois addresses are not an exception. Consistently releasing brand-consistent content helps your business increase brand recognition.

Public affairs. Find and build connections with media organizations in Illinois and beyond that can naturally help you gain more attention.

Retention of customers and new business. Create sincere connections with your consumers to win their loyalty and perhaps their referrals to friends, family, and coworkers.

Last thoughts. Laying the foundation for your business in Illinois by doing these things is possible. However, consider carefully if your business goals connect with what Illinois offers new business owners before opening a shop in the Prairie State.

Pros and cons of doing business in Illinois   

Pros of doing business in Illinois:

Strategic location: Illinois is in the heart of the United States, making it ideal for businesses that want to serve customers nationwide.

Skilled workforce: Illinois has a highly skilled workforce, with many people employed in industries such as manufacturing, healthcare, and technology.

Robust transportation infrastructure: Illinois has a vital transportation infrastructure, including major airports, highways, and railroads, which makes it easy to transport goods and people throughout the state and beyond.

Business-friendly environment: Illinois has a relatively low corporate tax rate and offers various business incentives, such as tax credits, grants, and loans.

Diverse economy: Illinois has a diverse economy, with a mix of industries, including agriculture, manufacturing, technology, and finance, which provides opportunities for businesses in various sectors.

Cons of doing business in Illinois:

High taxes: Illinois has some of the highest taxes in the country, including corporate income tax, property tax, and sales tax, which can burden businesses.

Government regulations: Illinois has a complex regulatory environment, making it challenging for businesses to navigate and comply.

Budget and fiscal issues: Illinois has been struggling with budget and fiscal issues for many years, leading to uncertainty and instability for businesses operating in the state.

Infrastructure challenges: Although Illinois has a robust transportation infrastructure, it also faces challenges, such as congestion and aging infrastructure, which can increase business transportation costs.

Crime rates: Certain areas in Illinois have high crime rates, which can be a concern for businesses that want to ensure the safety of their employees and customers.

Examples of Startups Illinois    

Illinois has a rich history, cultural diversity, and a thriving startup ecosystem. The state has a large pool of talent, investment opportunities, and business support systems, making it an ideal location for entrepreneurs and startups.

This article will highlight some of the most successful startups that have emerged from Illinois.

Groupon: founded in 2008 and based in Chicago, Illinois, is a prominent global e-commerce platform connecting consumers with local merchants. Operating in over 500 markets across 48 countries, it offers daily deals on various products and services.

GrubHub: GrubHub is a food ordering and delivery platform that connects diners with local restaurants. The company was founded in the year 2004 and is headquartered in Chicago, Illinois.

Sittercity: Sittercity is a platform that connects families with babysitters, nannies, and pet sitters. The company was also founded in 2001 and is headquartered in Chicago, Illinois.

Avant: Avant is an online lender that provides personal loans to consumers. The company was also founded in 2012 and is headquartered in Chicago, Illinois.

Trunk Club: Trunk Club is a personalized styling and clothing subscription service. The company was also founded in 2009 and is headquartered in Chicago, Illinois.

Sprout Social: Sprout Social is a current social media management platform that mainly helps businesses manage their social media presence.

Uptake Technologies: Uptake Technologies is an industrial predictive analytics platform that helps companies optimize their operations.

These are just a very few examples of successful startups from Illinois. The state has a thriving startup ecosystem and is home to many successful businesses and entrepreneurs. If you’re looking to mainly start your own business, Illinois is your chosen location.


In Illinois, launching a business needs extensive planning, investigation, and preparation. Select the business type and organizational structure that will best work for you. Ensure you know all applicable legal requirements for business registration and licensing in your area.

You’ll also need to decide how to market your company, find an appropriate location, and get finance.

Last but not least, make sure to draft a thorough business strategy including all of your company’s objectives and tactics. You may successfully launch a business in Illinois with the correct planning and investigation.


What are the legal prerequisites for opening a business in Illinois?

Owners of businesses must register with the Secretary of State’s office, obtain all necessary licenses and permits, file the necessary paperwork, and pay taxes in Illinois.

A Federal Employer Identification Number (E.I.N.) must also be obtained from the I.R.S. You must register for any additional Illinois taxes that apply.

What legal structure should I pick to launch a business in Illinois?

The size and also structure of your business, the amount of liability you wish to assume, and the amount of taxes you would like to pay will all impact the type of business entity you should select.

Corporations, partnerships, limited liability companies (L.L.C.s), and sole proprietorships are the most popular types of business entities in Illinois.

What procedures must I follow to register my company in Illinois?

You must first select a business name and get the Secretary of State’s office to approve it before registering your company in Illinois.

The next step is to apply for an Illinois identification number and register your business with the Secretary of State.

Any licenses, permits, or unique registrations necessary for your business must also be obtained.

What taxes do I pay in Illinois when I open a business?

The kind of business you are operating will determine the taxes you must pay when opening a business in Illinois.

You typically need to register to pay corporate income tax, franchise tax, sales tax, property tax, and any other applicable taxes.

What other tools are available to me in Illinois to assist in launching a business?

Resources are available from the Illinois Department of Commerce and Economic Opportunity to assist business owners in Illinois with the launch and expansion of their enterprises.

Additionally, to assist small business owners in Illinois, the Small Business Administration offers financial, counseling, and other support services.

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