Illinois has always been an incredibly popular state to live and work in. If you want to start your own company, registering a business in the state is a pretty straightforward process due to the state’s efficient and consistent support for new businesses and the business community as a whole.
There are many different support systems in place in Illinois to help entrepreneurs and those with existing businesses grow and flourish in their community, throughout the state, nationally, and even internationally. The support comes in the form of many local and national grant programs for Illinois businesses.
Illinois’ support for small businesses is evident in its approach to encouraging new businesses to register in the state. With access to a multitude of different business grants, recently lowered business licensing fees, a low income tax rate, newly affordable Illinois Secretary of State registration fees, and very efficient filling times, it is no wonder why so many people register a business in Illinois and start their entrepreneurial journey.
The state is business-friendly, to say the least, meaning that for a small capital outlay you can get your new business started and registered in Illinois quickly, conveniently, and cost-efficiently. Not only is Illinois extremely pro-business, but it also boasts some great attractions, beautiful landscapes, and the iconic city of Chicago.
How to Register a Business Name in Illinois – 7 Easy Steps
The Illinois Secretary of State and the Illinois Department of Revenue makes it reasonably easy to register your business name. There are three ways you can do this:
- 1. Do it yourself directly on their website.
- 2. Pay a document filing company that can register everything online for you – there is a modest fee for this.
- 3. Hire an attorney or accountant to file and register your new company – there are higher fees associated with this.
Step 1 – Determine your registered name
Firstly, you must determine that your business name is unique and not being used by someone else. A business registration company can do this research on your behalf or alternatively, you can search directly on the Illinois Secretary of State website.
Once you have established your name is available you can register a business name in Illinois directly on their website if you are comfortable with the process. Or, if you want a company to do this for you that specializes in this, you can use an online registration service to do it.
These companies usually offer a free registered agent service for one year with most of their packages which is often a necessity for new businesses and those being registered by foreigners with no U.S. address.
Before doing any of this, you must decide on the right structure.
Step 2 – Choose the right entity
You need to choose the right type of business to register and the most common options are a limited liability company (LLC) or an incorporated company (Inc.). If you are keeping things really small and simple (one or two people), then you may consider a sole proprietorship or a general partnership.
Even if you plan to be a solopreneur, it is usually more beneficial for you to register an Illinois LLC to make sure, as the owner, you have limited liability under this structure, and so you can benefit from the pass-through tax advantages.
Here is a quick rundown of the various options and what they might mean to you:
- Limited Liability Company: An Illinois LLC is often the best route for most entrepreneurs because the structure comes with personal asset protection, no double taxation, is fairly easy to maintain, and does not have high registration or annual renewal costs. Through LLC formation you have better tax flexibility and income can be taxed as a pass-through entity like a sole proprietor or partnership, or as a corporation.
- Incorporated Company: An Illinois Corporation offers personal asset protection and your company can own property, vehicles, incur liabilities, and is responsible for its own debts and can conduct business without the owners risking their personal assets such as their homes, cars, personal savings, retirement, etc. On the flip side, owners of sole proprietorships or partnerships face unlimited liability for both business and personal assets.
Step 3 – Make sure your name is not being used by another company
This may seem obvious, but if you check the Illinois Secretary of State website and see that your chosen business name is available, that is all well and good, but that doesn’t mean someone else is not using that same or similar name, particularly in another state.
Many people register an “official business entity name” and trade under a different name. This is called an Illinois dba, or “doing business as” name or assumed trading name, and needs a separate DBA certificate.
You will want to do a Google search for your official name and your desired trading name (if different) to make sure no one else is using this name. Most importantly, you will want to make sure you can get an easy-to-remember website domain name that is not being used by someone else.
Having an awesome name or trading name for your business can be crucial to your success, so making sure the domain name is available too, and registering it right away, is equally as important.
Finally, if you go to the Illinois Secretary of State website and discover that someone else has registered the name you would like, you can search for variations of that name by adding a word before it or after it, or using some other variations until you find a name that is available and acceptable for you.
Step 4 – Request an Employer Identification Number (EIN)
Once you have registered your new business in Illinois you will need to get an EIN for a number of reasons. These include paying taxes for your business, opening a bank account, obtaining credit cards or lines of credit, establishing terms with vendors and suppliers, hiring employees, and more.
There are only a few instances where you likely won’t need an EIN. More often than not, many business activities are just not possible without having an EIN.
An EIN is the business equivalent of a social security number and is used to track your business dealings. Even if you do not intend to hire employees, you will almost certainly still need an EIN for your Illinois company and it protects you from having to use your social security number.
For more information on how to get an EIN number in Illinois use our guide where you will find downloadable forms and links to the online process.
An EIN (also known as a federal tax id) is free to obtain from the IRS and you can apply online but if you are not comfortable filling in forms you can use a third-party document filing service to do this for you for a small fee. This ensures you are 100% compliant with the law and they handle everything with the IRS.
Step 5 – Obtain the Required Business Licenses and Permits
To operate your business in Illinois you must comply with federal, state, and local government regulations. Illinois law does not require a small business owner to have a “general” license to operate.
You will, however, need specific permits for specific businesses. For example, if you open a restaurant or similar food-related business you will most likely need a health permit, sales tax permit, facilities permit, and others. If you plan to sell alcohol, you will need a liquor license, essentially it all depends on the type of products and services your business is going to offer.
The business licenses you will need to acquire in order to register a business in Illinois will also differ depending on the location of the business too.
You must find out how to obtain the necessary Illinois business licenses and permits for your business and fill out the appropriate forms. Alternatively, you could hire a professional document filing company to do this for you. It eliminates a lot of time and hassle and ensures you are correctly complying with Illinois law. After all, Illinois has no single generic business license that will ensure compliance with all requirements.
Step 6 – Determine Your Business Employer Requirements
There are several things you need to check regarding your responsibilities as an employer in Illinois because there are requirements you must meet at the federal and state level. These could include various workforce commissions, safety, and state tax obligations, as well as labor law requirements including the minimum wage in Illinois and employee rights and remedies under the Illinois minimum wage act.
To learn more about Illinois employer resources take a look at the Illinois Department of Labor website.
Step 7 – Open a Business Bank Account for your Illinois Company
As a new business owner, you should seriously consider separating your personal and business bank accounts to make it easier to track and account for your income and expenses. For certain business types, such as an LLC or a Corporation, it is essential that you open a separate business bank account to maintain your liability protection.
Once you have your EIN and your company registration documents, coupled with your driver’s license, you are ready to go to the bank and open your checking account.
Don’t worry, this won’t be expensive or leave you burdened with hefty monthly fees to pay – there are many free business bank accounts out there for you to choose from. Each has its different features and benefits, so you can decide what bank and checking account best suits your needs.
Summarizing Registering a Business in Illinois
Illinois offers one of the top business ecosystems in the nation for businesses small and large. The barriers to entry for those looking to start a business in Illinois have been lowered in recent years and are more comparable with other states, and with the resources at your disposal being extremely high, this is a win-win for entrepreneurs.
Small Businesses thrive in Illinois because of its low state tax burden (4.95% is the maximum corporate income tax), fairly low cost of living when compared with the national average (just below average), a regulatory environment that won’t slow down your progression making things as efficient as possible, and a highly-skilled workforce (42% college-educated).
The state fee for registering a business in Illinois is $150 for an LLC and $150 for a corporation. The annual filing fee to maintain your company in Illinois is $150 for a corporation and an LLC.
The Prairie State is committed to your success and has many resources at your disposal that you can take advantage of.
Resources for Small Businesses in Illinois
Whether you decided to register as an LLC, Corporation, or simply as a Sole Proprietor in Illinois you are going to need to tap into the resources available to you to drive your small business forward.
Illinois has 17 small business development centers that are dedicated to supporting the development and retention of small businesses. The support they provide to entrepreneurs covers everything from crafting business plans to navigating the state’s tax codes. Visit the Illinois Small Business Development Center website to find out more.
Not only are there small business development centers tailored around working with small businesses and startups for growth and development, but SCORE volunteer business professionals and expert mentors are readily available and are free to use for those looking to begin their entrepreneurial journey.
These services are very useful and cost-efficient, and it makes perfect sense to arm yourself with all the help and information you can get.
Here are some additional small business resources in Illinois:
- Illinois SCORE: Not only are there small business development centers tailored around working with small businesses and startups for growth and development, but SCORE volunteer business professionals and expert mentors are readily available and are free to use for those looking to begin their entrepreneurial journey.
- Illinois Department of Commerce and Economic Opportunity: The main focus of the Illinois DCEO is to endorse the retention and creation of jobs to promote economic growth. The department has access to many resources and information that will help entrepreneurs massively.