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Illinois Business License Basics

By: Startup 101
Last Updated: November 15, 2024

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Starting a business in Illinois marks the beginning of an exciting chapter, however, the path from idea to a legal business can be complex. From selecting the right business structure to ensuring compliance with federal, state, and local regulations, many aspiring owners are uncertain where to begin.

Our straightforward guide helps to cut through the confusion, offering a clear roadmap for registering your Illinois business. We’ll outline each step of the process so you’ll be well-equipped to navigate it confidently and bring your business idea to life.

Related: Starting A Business In Illinois Checklist

Step 1: Choose a Business Structure

Selecting the right business structure is an important first step when starting a business in Illinois, which makes it our first step. This choice shapes how your business will be taxed, your personal liability, and the way you’ll manage your company. Here are the four main types of business structures available in Illinois:

Related: Comparison of Business Structures

Sole Proprietorship

A sole proprietorship is the simplest form of business organization. As a sole proprietor:

  • You operate the business as an individual
  • You have complete control over business decisions
  • Profits and losses are reported on your personal tax return
  • You bear personal responsibility for all business debts and legal obligations

Learn How to Start a Sole Proprietorship in Illinois

General Partnership

A general partnership involves two or more individuals running a business together. In this structure:

  • Partners share profits, losses, and management responsibilities
  • Each partner is personally liable for the partnership’s debts and obligations
  • The partnership itself doesn’t pay income tax; instead, profits and losses are reported on each partner’s individual tax return.

Like sole proprietorships, general partnerships don’t require state registration but may need to register their name.

Corporation

A corporation is a more complex business structure that exists as a separate legal entity from its owners (shareholders). To form a corporation in Illinois:

  • You must file Articles of Incorporation with the state
  • Shareholders enjoy limited liability protection, shielding their personal assets from business debts and legal issues
  • The corporation pays its own taxes and can offer stock to raise capital
  • More extensive record-keeping and reporting requirements apply

Learn How to Form an Illinois Corporation

Limited Liability Company (LLC)

An LLC combines features of corporations and sole proprietorship/partnership. In an Illinois LLC:

  • Similar to the corporation, owners (called members) have limited liability protection
  • You can choose how the LLC is taxed: like a corporation or as a pass-through entity
  • There’s more flexibility in management structure compared to corporations
  • You must file Articles of Organization with the state to form an LLC

Illinois also offers a unique option called the Series LLC, allowing multiple businesses to operate under one LLC umbrella, each with its own liability protection.

Learn How to Form an Illinois LLC

Step 2: Select a Business Name

After choosing the business structure, the next step may involve selecting a business name. In Illinois, the process for registering your business name varies depending on your chosen business structure.

Sole Proprietorships and Partnerships: If you’re operating a sole proprietorship or partnership under a name that differs from the full legal name(s) of the owner(s), you’ll need to register an Illinois Assumed Name. This is also commonly referred to as a “Doing Business As” (DBA) name with the County Clerk’s Office in the county where your business is located..

For example, if Paul Smith starts a piano tuning service but doesn’t intend to operate under a specific business name, he doesn’t have to register one. However, if Paul decides to name his business Paul’s Piano Tuning, he will need to register.

Corporations and LLCs: Corporations and Limited Liability Companies (LLCs) in Illinois register their business names with the Illinois Secretary of State as part of their formation process. However, it’s important to note that these entities must have a unique name that isn’t already in use by another Illinois business.

Before filing your formation documents, an Illinois business name search should be completed through the Illinois Secretary of State’s website.

Step 3: Federal Employer Identification Number

A Federal Employer Identification Number (FEIN), also called a Federal Tax Identification Number, is a unique nine-digit identifier the Internal Revenue Service (IRS) assigns to businesses operating in the United States.

While not all businesses are required to have a FEIN, you’ll need one if your business:

  • Has employees
  • Operates as a corporation, partnership, or multi-member LLC

Sole proprietors and single-member LLCs without employees can use the owner’s social security number, though they can get one if they want

Learn How to Apply for a FEIN

Step 4: Occupational Licensing

A variety of professions in Illinois are regulated and need to be registered before offering certain services. 

There are two main categories:

The Illinois Department of Financial and Professional Regulation (IDFPR) oversees licensing for numerous professions. Some examples include:

  • Healthcare: Physicians, nurses, pharmacists, dentists, physical therapists
  • Personal Care: Cosmetologists, barbers, massage therapists, nail technicians
  • Financial Services: Real estate agents, insurance agents, mortgage brokers
  • Design and Construction: Architects, interior designers, structural engineers
  • Legal and Security: Attorneys, private detectives, security guards

In addition, some businesses require special licenses or permits not covered by IDFPR. These often involve public health, safety, or regulatory concerns. Examples include:

  • Food Service: Restaurants, food trucks, and catering businesses need permits from local health departments and the Illinois Department of Public Health.
  • Liquor Sales: Businesses selling alcohol require licenses from both state and local authorities. The Illinois Liquor Control Commission oversees state-level licensing.
  • Automotive: Car dealerships need licenses from the Illinois Secretary of State’s office. Auto repair shops may require environmental permits.
  • Construction and Trades: Plumbers, electricians, and contractors often need both professional licenses and local business permits.
  • Childcare: Daycare centers and in-home childcare providers need licenses from the Illinois Department of Children and Family Services.
  • Agriculture: Farms, animal feed producers, and pesticide applicators require permits from the Illinois Department of Agriculture.

Step 5: Illinois Business Tax Number

The Illinois Business Tax Number (IBT), also known as the Illinois Tax Account ID, is an identifier issued by the Illinois Department of Revenue (IDOR) and is needed for most businesses operating in the state. This

Businesses need to obtain an IBT if they hire employees in Illinois, sell goods or services subject to Illinois sales tax, manufacture goods, are required to withhold Illinois Income Tax, or are subject to other specific Illinois taxes.

The IBT is obtained by completing the Illinois Business Registration Application, often called the REG-1 Form. This application registers the business with IDOR, determines its tax liabilities, and establishes necessary tax accounts.

Step 6: Resale Certificate

An Illinois Resale Certificate, also known as a Certificate of Resale or Sales Tax Exemption Certificate, is a document for businesses that purchase goods for resale. This certificate allows businesses to buy products from suppliers without paying sales tax, provided these items are intended for resale to customers.

Businesses that sell tangible personal property or taxable services in Illinois can use a resale certificate. This includes retailers, wholesalers, and manufacturers who resell products.

Step 7: Local Business Licenses

While Illinois doesn’t require a general state-wide business license, many municipalities within the state have their own licensing requirements. These local licenses ensure businesses comply with city-specific regulations, which will vary significantly from one location to another. Here’s a more detailed look at licensing requirements in some of Illinois’ major cities:

Chicago: As the largest city in Illinois, Chicago has extensive licensing requirements administered by its Small Business Center. The city regulates a wide array of industries, including:

  • Retail stores
  • Food establishments
  • Daycare centers
  • Manufacturing facilities
  • Auto repair shops
  • Professional services
  • Entertainment venues

Chicago’s licensing fees can be substantial, often based on factors like the type of business, location, and square footage. Some businesses may need multiple licenses or permits, so thorough research is necessary.

Aurora: Aurora’s licensing requirements are more targeted, focusing on specific types of businesses such as:

  • Liquor establishments
  • Pawn shops
  • Second-hand stores
  • Home-based daycares
  • Certain service-based businesses

The city’s approach aims to regulate industries with higher risks or community impacts.

Rockford: Rockford requires licenses for a variety of businesses, including:

  • Junk yards
  • Towing services
  • Bowling alleys
  • Certain entertainment venues
  • Specific retail operations

Springfield: The state capital has its own set of licensing requirements, overseen by the City Clerk’s Office. Businesses that typically need licenses include:

  • Bowling alleys
  • Florists
  • Funeral homes
  • Certain service-based businesses
  • Specific retail operations

Springfield’s licensing often involves coordination with other city departments for inspections and approvals.

Given the wide variety of local licenses, be sure to check with the local city hall or economic development office about specific requirements. Even if operating from home, you may need a license or special permit.

Step 8: Local Building & Zoning Permits

A last step when discussing business licensing in Illinois, is local building and zoning permits. Here is a brief overview.

Zoning Regulations: Illinois empowers counties and municipalities to establish and enforce zoning laws. These regulations determine:

  • What types of businesses can operate in specific areas
  • Building height and size limitations
  • Parking requirements
  • Restrictions on noise, traffic, or other potential disruptions

Before leasing or purchasing a property, verifying that your intended use aligns with local zoning ordinances is a must. This may involve:

  • Reviewing zoning maps and codes
  • Consulting with local planning or zoning departments
  • Potentially requesting a zoning variance or special use permit if your business doesn’t fit current zoning designations

Building Permits: Most construction projects, renovations, or structural modifications in Illinois require a building permit. This typically includes:

  • New construction
  • Additions to existing structures
  • Major renovations or alterations
  • Changes to electrical, plumbing, or HVAC systems

Signage Regulations: Often overlooked, business signage is another area heavily regulated by local governments in Illinois. These regulations typically cover:

  • Sign size and dimensions
  • Placement and location
  • Illumination and animation
  • Content restrictions (particularly for off-premises advertising)

Before ordering any business signage, be sure to understand any local restrictions.

Additional Considerations:

  • Historical Districts: If your business is located in a designated historical area, you may face additional restrictions and review processes for any exterior modifications.
  • Environmental Regulations: Some projects may require environmental impact assessments or special permits, particularly if they involve wetlands, floodplains, or other sensitive areas.
  • Accessibility: Ensure all new construction or major renovations comply with state and federal accessibility standards.
Take the guesswork out of figuring out what licenses and permits are required to start your business with license research packages from Bizee and LegalZoom.

For only $99, you can save a lot of time and know your business complies with local, state, and federal requirements.


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