How to start a business in Illinois in 14 steps (2025 guide)

Ready to bring your business vision to life in Illinois? Launching a business here is an exciting journey. The state has a bit of everything—thriving cities like Chicago, accessibility thanks to a major international airport and logistics hubs, and natural beauty. Let us help guide you on your path to entrepreneurship. From securing funding and registering your business to navigating insurance and understanding tax incentives, we have information and resources tailored for aspiring Illinois business owners like yourself.

Why start a business in Illinois in 2025?

Illinois attracts major companies looking to expand or set up new operations, offering a prime environment for business growth. Whether you're launching a startup or growing an established company, the Prairie State is full of potential. Site Selection Magazine ranked Illinois #2 in the nation for business expansions and relocations for the second consecutive year. The state’s success is attributed to a mix of strategic incentives, a thriving market, a diverse workforce, and a strong infrastructure. Chicago, in particular, has been recognized as the top metro for business expansion for 11 years running, excelling in industries like life sciences, data centers, and technology.

Wondering how to start a business in Illinois? Our step-by-step small business guide provides a clear road map. 

Here are the topics we’ll cover in this step-by-step guide: 

• 14 steps to starting a business in Illinois
• Step 1: Decide what type of industry is best for your business
• Step 2: Conduct industry research
• Step 3: Create a business plan
• Step 4: Choose your business entity: Types of business entities in Illinois
• Step 5: Secure funds: Illinois small business funding, loans, and grants
• Step 6: Choose your Illinois business name and Illinois DBA
• Step 7: Pick a business location in Illinois
• Step 8: Find an Illinois registered agent 
• Step 9: Get an Illinois EIN and file your tax and employer identification documents 
• Step 10: Register as a small business in Illinois 
• Step 11: Register for your business license and permits in Illinois
• Step 12: Secure insurance for your Illinois small business 
• Step 13: Prepare to pay taxes on your business in Illinois
• Step 14: Set up your business bank account
• Additional resources to get your business started
• Frequently asked questions

14 steps to starting a business in Illinois

Launching a business in Illinois is filled with opportunities to grow, innovate, and thrive in one of the nation’s most diverse economic landscapes. From Chicago's metropolitan market to the agricultural hubs downstate, Illinois offers unique opportunities in every industry. Below, we break down the essential steps, from refining your business idea to building a strong foundation for success. With small business resources and insights tailored to Prairie State entrepreneurs, you’ll be equipped to turn your vision into reality.

Step 1: Decide what type of industry is best for your business 

Choose your business and industry by aligning your skills and passions with the state's economic strengths and local market needs. For example, Chicago is a great market for tech startups and professional services, while the southern and central regions are ideal for agribusiness or manufacturing ventures. Taking the time to assess market demand and your expertise will help set you up for long-term success.

Not sure where to start? Begin by exploring a variety of small business ideas to spark inspiration.

Step 2: Conduct research in your business industry

Once you have a target industry, you’ll want to conduct a competitive analysis, identify customer needs, and research industry trends. Gathering this information will help you understand your market, position your business effectively, and create strategies that meet customer demands while standing out from competitors. 

The Illinois Small Business Development Center network offers valuable resources and guidance specific for your industry.

Step 3: Create a business plan

Start your business by creating a business plan. This document is a strategic roadmap that outlines your business goals, market analysis, and financial projections, serving as a critical blueprint for launching and growing your venture. It also can help you secure funding from investors and lenders by demonstrating your business's potential for profitability.

A comprehensive business plan typically includes the following key sections:

• Executive Summary: Summarize your business concept, goals, and vision.
• Company Description: Outline your company's mission, background, and primary objectives.
• Market Research and Potential: Evaluate your target market and highlight relevant industry trends.
• Competitive Analysis: Identify your competitors and showcase how you stand out.
• Products and Services: Explain your offerings and the value they provide to customers.
• Marketing and Sales: Detail your plans for attracting and retaining customers effectively.
• Business Financials: Present financial forecasts, including projected income and cash flow statements.
• Management and Leadership: Highlight your team’s expertise, skills, and leadership capabilities.
• Funding Request: Specify the funding you need and how it will be allocated.
• Appendix: Include supplementary materials like market analysis, financial documents, or visual aids.

Creating a thorough business plan can take time, but it’s an essential step to clarify your goals, attract investors, and position your business for success. Get started by using a free business plan template. For one-on-one support and business plan creation assistance, visit an Illinois Small Business Development Center in your area.

Step 4: Choose your business entity: Illinois business entity types

Determine your business entity structure. Your structure type will determine how your business is taxed, your legal liability, and the administrative requirements you'll need to fulfill. Here are the main types of structures available to Illinois small businesses: 

Sole Proprietorship

A business owned and operated by one person, with no legal distinction between the owner and the business.  

General Partnership

A business owned by two or more people who share profits, losses, and management responsibilities.

Corporation 

A legal entity separate from its owners, with shareholders who have limited liability for the company's debts and obligations.

Limited Liability Company (LLC)

A hybrid business structure combining the limited liability of a corporation with the tax flexibility of a partnership. Learn more about LLCs.

Step 5: Secure funds: Illinois small business funding, loans, and grants 

Starting a business requires careful financial planning, as you'll need to secure funding to cover a range of costs. These expenses depend on factors such as your industry, location, and business structure. You'll also need to budget for permits and licenses, which vary by industry and municipality.

Consider inventory for selling goods, equipment for daily operations, insurance to safeguard your business, and real estate costs if you're renting or purchasing commercial space. Determining how to fund these needs will depend on your business goals and financial situation. Here are common ways new entrepreneurs secure the money they need.

Illinois also has numerous state resources to help fund startups and small businesses. Here’s a sampling:

Advantage Illinois 

This State Small Business Credit Initiative assists historically underrepresented populations with access to capital via loan programs. 

Illinois Federal Grant Support Program

This initiative offers a comprehensive list of federal grants based on industry and amount of funding. Apply for funding and access a wealth of resources and training to support your Illinois business. 

Chicago Small Business Improvement Fund (SBIF) 

If you’re located in key areas of the city, plan to make improvements or repairs on commercial properties, you’ve been in business for several years, and your commercial business meets a certain sales threshold, you may be eligible for an SBIF grant. 

Step 6: Choose your Illinois business name and Illinois DBA registration

Select a business name that’s memorable and that reflects your product or service offerings. Your name is an important part of your brand identity. Once you’ve brainstormed your name, you’ll need to ensure it’s available for use. You can do that by searching the Illinois Secretary of State's Business Entity Search tool. 

Also known as an Assumed Name in Illinois, a DBA (short for Doing Business As) allows you to operate your business under a name different from your legal business entity name. Let’s say you’re a single-employee LLC operating under your legal name, John Doe. If you decide to sell products as a branch of your business entity, you’ll want to have a catchier name to represent your new business, like John’s Jams. 

Sole proprietorships and general partnerships must register their Assumed Name with their local county clerk's office to comply with the Illinois Assumed Name Act. Corporations, LLCs, LLPs, and limited partnerships typically register an assumed name as part of their initial business filing with the Secretary of State.

Step 7: Pick a business location in Illinois 

Location, location, location! It's the age-old mantra of real estate, and it applies to businesses too. Whether you're dreaming of a bustling restaurant in downtown Chicago or a tech startup in the heart of Champaign's innovation hub, your business location plays a crucial role in your success. It impacts everything from your operating costs and taxes to customer traffic and logistics.

Before you lease or purchase a space, check with your local municipality to understand the permits, licenses, zoning laws, and tax considerations that apply to your industry. You might even choose to operate from home to keep overhead costs down. But if you're drawn to the energy of a metropolitan area, here's an overview of some of the major business hubs in Illinois:

Chicago

As a major economic hub, Chicago offers endless opportunities for businesses, from retail and dining in downtown neighborhoods like the Loop to office space in suburban areas such as Schaumburg. The city provides a diverse customer base but also has specific zoning and permit requirements. Be sure to consult the Chicago Department of Business Affairs and Consumer Protection (BACP) to navigate licensing and compliance with the city’s rules and regulations.

Springfield

Springfield, the state capital, combines affordable commercial space with a steady influx of government employees and visitors. Whether you’re setting up near downtown or closer to the outskirts, verify land use codes and zoning laws with the Springfield Office of Planning and Economic Development to ensure your business location aligns with regulations.

Rockford

Known for its manufacturing and industrial roots, Rockford is ideal for businesses in these sectors. The city also has a growing small business scene, particularly in the downtown area. Be sure to connect with the Rockford Economic Development Council for guidance on available spaces, local incentives, and required permits.

Naperville

This vibrant suburb offers a mix of residential charm and commercial opportunity. Naperville is particularly appealing for small retail and service-based businesses thanks to its affluent population and walkable downtown. Check zoning maps and consult the Naperville Development Partnership to understand regulations and take advantage of any incentives for new businesses.

Step 8: Find an Illinois registered agent

Any business you operate in Illinois requires a registered agent. This professional service or individual must have a street address—not a P.O. box—in the state and be available during normal business hours. They’ll act as your point of contact for everything from legal documents to government notices. You are legally allowed to be your own registered agent if you choose, so long as you have a physical street address and you’re over the age of 18.

Step 9: Get an EIN in Illinois and file your tax and employer identification documents

An EIN (Employer Identification Number) is a nine-digit number the IRS uses to identify your business for tax purposes. Although Illinois doesn't require a state EIN, you'll need one to file payroll taxes and federal tax returns, open a business bank account, and apply for loans. You can apply for a free EIN through the IRS website.

Step 10: Register as a small business in Illinois

All businesses in Illinois must register with the appropriate state authorities, depending on their business entity type. Here are the requirements for registering various business entity structures:  

For the most accurate and up-to-date information, it's advisable to contact the Illinois Secretary of State.

Step 11: Register for your Illinois business license and business permits

While Illinois doesn't have a one-size-fits-all state-level business license, most localities require some form of business registration or licensing. Specific requirements vary depending on your business location, industry, and activities.

Do you need a business license in Illinois?

Most cities and counties in Illinois have their own business licensing requirements. Contact your local clerk’s office to inquire about specific licenses needed for your business type and location, or contact the Illinois Department of Commerce & Economic Opportunity with questions. 

Common Illinois business permits and business licenses

Before you start your business, ensure you’ve secured all the necessary permits and licenses for your industry. The following are just a few to consider based on your business: 

• Selling or serving alcohol requires a license from the Illinois Liquor Control Commission.
• Operating a business from your home may necessitate a home occupation permit from your local municipality.
• If you’re in a profession ranging from cosmetology or mortuary services to accounting or optometry, you’ll need to secure a professional license from the Illinois Department of Financial and Professional Regulation.
• Sales tax and revenue permits through the Department of Revenue are required for specific industries to collect sales tax. 

If your business falls within industries such as agriculture, alcohol, aviation, firearms, and other similar activities, you’ll need to uphold federal licensing and permitting standards. If you’re a farmer, for instance, and plan to buy or sell cattle across state lines, you’ll need to follow USDA regulations and secure any permits.

Step 12: Secure insurance for your Illinois small business

That slow drip in your office sink turns into a flood. A client brings a lawsuit against your business. Or an unexpected weather event ruins your equipment. Business insurance gives you a financial safety net, safeguarding your Illinois business from lawsuits, property damage, and other liabilities. 

Types of small business insurance in Illinois

Step 13: Prepare to pay taxes on your business in Illinois 

In Illinois, all business types must register with the Illinois Department of Revenue (IDOR) to collect and remit state taxes, even if you have no employees or haven’t started generating income yet. There are three ways to register your business with the IDOR:

• Online: Register electronically through MyTax Illinois. Processing typically takes one to two business days.
• Mail: Download and complete Form REG-1, the Illinois Business Registration Application, from the IDOR website and mail it to the address provided.
• In Person: Visit one of the regional Illinois Revenue offices located in Chicago, Marion, Des Plaines, Rockford, Fairview Heights, or Springfield.

Understanding your business tax obligations in Illinois is essential for compliance, as you must navigate state, federal, and local tax requirements tailored to your structure and operations.

Corporate income tax 

Illinois' corporate income tax rate for 2024 is 9.5%, which includes two components: a 7% corporate income tax and a 2.5% Personal Property Replacement Tax.

Sales and use tax

Businesses in Illinois are also responsible for sales and use tax, which is collected on the sale of tangible goods and some services. The base state sales tax rate is 6.25%, though local taxes can push this rate higher depending on where the business operates.

Employer withholding tax

If you have employees, Illinois requires businesses to withhold state income taxes from employee wages and remit these to the Illinois Department of Revenue. The withholding rate for 2024 is a flat rate of 4.95%. It is required to be paid regularly, based on schedules assigned by the Department of Revenue.

Property tax

Although Illinois does not impose a direct state property tax, local property taxes are a significant revenue source for municipalities. Businesses owning real estate are subject to property taxes based on the assessed value of the property, which varies by county.

Federal taxes

In addition to state and local taxes, all businesses must pay applicable federal taxes, including:

• Federal income tax
• Self-employment tax (for sole proprietors and partners)
• Employment taxes (if you have employees), including the Federal Unemployment Tax Act (FUTA tax)
• Excise taxes (for certain industries)

To ensure you understand your federal tax obligations, check out these IRS resources: Publication 334, Tax Guide for Small Business and Publication 583, Taxpayers Starting a Business and Keeping Records.

Tax credits and incentives for Illinois employers

Tax credits and incentives can help reduce your tax liability and free up funds to invest in your business growth and development. Look into the following to see if you qualify. 

• Economic Development for a Growing Economy Tax Credit Program (EDGE): The EDGE Program offers annual corporate income tax credits to qualifying businesses that help create jobs, investment, and training programs in Illinois.
• Investment Tax Credit: The Investment Tax Credit alleviates the tax burden on qualified companies that repair or improve properties within an Illinois enterprise zone. 
• Workforce tax credit programs: Employers hiring economically disadvantaged workers can earn federal tax credits under the Work Opportunity Tax Credit (WOTC) program, including up to $2,400 for short-term welfare recipients, $9,000 over two years for long-term public assistance recipients, and up to $9,600 for veterans ($6,240 for tax-exempt organizations).

Step 14: Set up your business bank account

Setting up a business bank account is essential for business owners to separate personal and business finances, simplify tax preparation, and maintain accurate financial records. Here’s how to get started: 

1. Collect all your business paperwork, including your EIN, business formation documents, registrations, permits, and licenses to open your small business bank account. 
2. Choose a bank or credit union that offers products and services you need, whether loan offerings or high-yield savings accounts. 
3. Establish business credit using a bank credit card for business-related purchases and expenses. 
4. Set up your financial records by selecting the right accounting software for your organization. 
5. Hire a professional accountant well-versed in local tax codes and your industry to help with financial and other bookkeeping services.

Additional resources to get your business started 

There are several state and federal resources that can support your business with guidance, training, potential funding, and more. 

State resources

Illinois Department of Commerce and Economic Opportunity (DCEO): The DCEO aims to create equitable economic opportunities statewide by attracting major employers, investing in communities, supporting workforce development, fostering innovation, and advancing clean energy. It provides resources for starting a business, expanding, and relocating to Illinois. 

First Stop Business Information Center: First Stop is a statewide resource for entrepreneurs and businesses to obtain regulatory and permitting information. Business specialists help entrepreneurs identify and navigate regulatory requirements for their businesses and link them to state and local resources.

Office of the Illinois Secretary of State: The Business Services department provides information and resources for incorporating a business, filing annual reports, receiving a Certificate of Good Standing, and more. 

The Chicago Department of Business Affairs and Consumer Protection (BACP): The BACP provides programs and resources to support businesses through all steps of the entrepreneurial journey. Services and programs include business licensing applications and renewals, permit applications, business support tools, labor standard information, and more. 

Federal resources 

Small Business Administration (SBA): The SBA supports small businesses through various loan programs, including the 7(a) loan, provides resources for government contracting, and offers counseling and training programs to help entrepreneurs start and grow their businesses.

Grants.gov: This centralized platform simplifies the process of searching for and applying for federal grants across various sectors. It also provides grant writing tips and has a Grants Learning Center featuring the basics of grants, eligibility, and more. 

Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR): SBIR and STTR programs provide research and development funding to innovative tech companies. 

SCORE: SCORE is a national nonprofit organization that partners with the U.S. Small Business Administration (SBA) to provide free mentoring and educational resources to entrepreneurs and small business owners. While not a direct federal agency, SCORE is an independent organization with a network of volunteer business mentors across the United States.   

U.S. Department of Agriculture (USDA): The USDA website lists grants, loans, and other programs and resources for farmers and other businesses serving rural America.

Frequently asked questions

How long does it take to start a small business in Illinois?

Starting any business in Illinois can take as little as a few weeks to several months, depending on everything from location and permits to hiring employees. 

How do you start a small business with no money?

Consider starting a service-based business in your area of expertise. If, for instance, you’re an accountant or consultant, you can provide services with little overhead. Choose a home-based office, use social media or word of mouth for marketing, and seek out grants, loans, and government programs that help small businesses. 

Do I need a local business license if I only operate online in Illinois?

Operating an online business in Illinois requires adhering to licensing and registration rules, which vary by municipality since the state does not issue a statewide business license. Local governments may require a general business license, while some cities and counties impose industry-specific licensing requirements. To ensure compliance, it’s essential to contact your local government and confirm the specific licenses needed for your business location.

Disclaimer: 

This content is for information purposes only and information provided should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does it have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.