How To Start a Business in Illinois in 2022: 8 Simple Steps

how to start a business in Illinois

This content doesn’t contain and isn’t meant to provide legal, tax, or business advice.*

Illinois is the sixth most populous state in the nation and home to the country’s third-largest city, Chicago. It boasts both urban and rural regions, and industrial and agricultural sectors. In short, this can be a dynamic market for starting a business. In this guide, you’ll gain an understanding of what it takes to set up shop in the state of Illinois.

1. Choose a business idea

Choosing a viable business idea involves thorough planning. Part of that is figuring out what you’re trying to sell: A product? A service? Both? But that’s only the beginning. There are a number of considerations that come into play when devising an idea for your Illinois business. A couple of key questions to ask yourself are:

  • Who are my customers? A workable business idea means knowing and understanding your target customer. You can learn who your customer is by conducting a competitive analysis of other businesses in your market, by looking at marketplaces where similar products or services are sold (like Amazon or Wayfair), by going out and speaking to potential customers, or by researching industry trends.
  • What is my projected profitability? Try to determine the potential profitability of your business by looking at pricing, packaging and distribution options, business models, and consumer demand. With this information in hand, work through how many products or services must be sold to at least cover the business’s overhead.

2. Name your business

Picking a name for your business is one of the most important decisions you’ll make on the journey to incorporation. Especially in a packed market like Illinois—with some 1.2 million small businesses—a name has to effectively communicate the venture’s purpose and mission in a catchy, memorable way. A name can make or break a business, so it’s important to keep in mind some considerations when at this stage.

  • Is this a formal business structure? In Illinois, there are specific business-naming rules you will have to follow, depending on whether your company is a formal or informal business structure. Formal business structures include corporations and limited liability companies (LLCs). If you form an LLC, the company name must include the phrase “limited liability company” or one of its abbreviations, LLC or L.L.C. Similarly, Illinois corporation names must contain the word “corporation,” “company,” “incorporated,” “limited,” or a proper abbreviation of those terms.
  • Is this an informal business structure?Under informal business structures, an Illinois sole proprietorship must operate under the surname of the sole proprietor, and the sole proprietor must file for a DBA (doing business as) to operate under any other name. An Illinois partnership must include the surnames of the partners. The same DBA rules that apply to sole proprietorships apply to Illinois partnerships.
  • Is the domain name available? Having a unique business extends beyond the products or services provided to the name as well, since that will likely be incorporated into the website. Before finalizing the company’s name, check whether a domain name is available that adequately aligns with your business name. If nothing is available that conveys your business’s identity, you may want to reconsider your choice.

Using a DBA in Illinois 

To set up a DBA in Illinois, you must file a Certificate of Assumed Name form with the county clerk in the county where your business is located. These forms will vary county to county, but instructions for filing a DBA in Chicago (in Cook County) are available here. A requirement is to ensure your DBA is unique from any other business name in the state—this applies to the original business name, too. You can run a search of existing Illinois company names at the Illinois Secretary of State’s website.

3. Create a business plan

A solid business plan is a vital part of successfully starting a business in Illinois. A comprehensive plan will include the following sections:

  • Executive summary
  • Detailed company description
  • Thorough market analysis
  • Outline of the business entity’s organizational and managerial structure
  • List of products and services
  • Customer segmentation report 
  • Marketing plan
  • Logistics and operations plan
  • Financial plan

A free business plan template is a solid starting point, one that provides a foundation to build on. It can be customized to fit the needs of your new organization.

4. Choose a business structure and get started

Before formally filing for incorporation in Illinois, you’ll want to choose between four business structures categorized as either “formal” or “informal.”

Informal business structures

  • Sole proprietorships. Under the umbrella of informal business structures in Illinois are sole proprietorships and general partnerships. Sole proprietorships are owned and run by a single individual and are taxed at the owner’s personal income one time—but there is no legal separation between the owner and business. So the owner of the sole proprietorship is fully liable for any, and all, of the business’s debts and potential legal damages.
  • Partnerships. General partnerships are formed by two or more owners. Partnerships, too, are taxed one time at the owner’s personal income tax level. Like sole proprietorships, there is generally no legal distinction between the owners and the company itself.

Formal business structures

  • Corporations.Corporations are entities that are separate, at least legally speaking, from the individuals who own them. This protects an owner’s personal assets in the event the company fails or is subject to a lawsuit. They can be taxed twice: once on corporate income, and again on an owner’s personal income from the business, as a result of dividends.
  • LLCs. LLCs marry some of the benefits of partnerships with those of corporations. While they are similar to partnerships in structure (being made up of one or more owners, or “members”), they enjoy the liability shield typically applied to corporations. They can either be taxed like a partnership or corporation, depending on which the LLC elects.

Obtaining a federal employer identification number (EIN)

After deciding what type of business you’d like to start, next is applying for a federal employer identification number (EIN). This can be done on the IRS website. A nine-digit number assigned to businesses by the IRS for tax purposes, an EIN functions similarly to a person's Social Security number. Illinois state tax authorities will identify your business by its EIN. Having one not only makes it easier to file federal and state taxes, but it also helps with securing business lines of credit and getting business credit cards.

Incorporating in Illinois

Obtaining an EIN is only one part of the incorporation process in Illinois. To form your business, there are additional steps to follow:

  • Choose a business name, abiding by any rules specific to the chosen structure.
  • File articles of organization, which can be done online or by mail. At minimum, these articles must include basic information like the business name, plus the name and street address of a registered agent. Depending on the type of business being formed, there may be a registration fee of up to $150.
  • Open a business bank account.
  • Address tax obligations, which vary based on business structure. LLCs don’t need to file a corporate tax return in Illinois; you’ll handle taxes on any profits at your personal income level. Corporations, however, are required to file a corporate income tax return with the state. Sole proprietorships and partnerships will need to pay self-employment taxes—15.3% in Illinois.

5. Obtain business licenses and permits

To operate lawfully in the state of Illinois, a business will need to acquire the necessary business licenses and permits. This will depend on the industry or location in which the business operates:

  • Certificate of Registration. This is necessary for businesses in Illinois classified as a retailer, reseller, or provider of goods or services to which sales tax is applied. You can apply online or mail a Form REG-1 to the Illinois Department of Revenue.
  • Professional or occupational license. Some businesses, such as those selling liquor, tobacco, or firearms, will require licenses through certain state boards. You can find more information through the state’s Department of Financial and Professional Regulation.
  • Local licenses. Specific cities, counties, or towns may also require their own local licenses. Check out your county and town’s government websites to find out if these might apply to your business. Information on applying for business licenses in Cook County can be found on the county government’s website.

6. Examine insurance options in Illinois

Unforeseen catastrophes can take a toll on a new business. If the event is severe enough, it could wipe a fledgling venture out entirely. While some business structures like corporations and LLCs offer a degree of personal asset protection, you may still want to consider purchasing insurance for your business’s products, vehicles, or other assets not shielded from legal action. Also, if intending to hire employees in Illinois, it’s necessary to purchase workers’ compensation insurance. The federal Small Business Administration maintains a list of forms of insurance your new Illinois business may need.

7. Understand financial considerations

Additionally, you will likely have to make other financial investments to get your business up and running. These could include rent toward a brick-and-mortar retail space, as well as expenditures for a professionally designed website, ad placements, equipment, and software. You might consider hiring lawyers, accountants, and other business professionals. These costs can quickly add up. Luckily, there are accessible, fast options to obtain startup funding.

8. Market your business

A solid marketing plan for your Illinois small business will include several key elements:

  • Market research. Market research helps to better understand your company’s target customer.
  • Advertising and promotion. Get the word out about your product through paid advertising. You can do this yourself, or hire an agency. Chicago is an advertising hub, so there are many local companies from which to choose.
  • Social media. Most successful businesses have a robust social media presence across multiple platforms. Businesses based in Illinois are no exception. By publishing content consistently that aligns with your brand, your company builds stronger brand awareness.
  • Public relations. Identify and cultivate relationships with media outlets—both in Illinois and nationally—that can increase your visibility organically.
  • New business and customer retention. Build genuine relationships to gain repeat customers, who will hopefully spread the word to friends, family, and colleagues.

Final thoughts

Following these steps can lay the groundwork for building your business in Illinois. But before setting up shop in the Prairie State, consider giving careful thought to whether your business goals align with what Illinois has to offer new business owners. Research the state’s demographics, business laws, and infrastructure—which can vary greatly from the city of Chicago to the rural areas and pastures of downstate. Considering all these factors can help ensure your business venture fits seamlessly into the Illinois economic ecosystem—and is poised for growth.

*This post is for information only. You are responsible for reviewing and using this information appropriately. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax, and business advisors, as needed. Businesses outside of Illinois will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy, and any other applicable policies.

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