Many entrepreneurs set their sights on the prosperous and promising Chicago area. Illinois is an active, thriving hub for entrepreneurs and startup founders ready to show the world what their innovations can do.
If you have your sights set on opening shop in the state of Illinois, there’s a long checklist that the state and local government will require you to complete before you can open up your doors. One of the first (and most important) steps is obtaining your Illinois business license. Here’s how to get the process started.
Why Do You Need an Illinois Business License?
All businesses require some type of license. Every state, county, and city has its own rules and regulations regarding business licenses. Licensing requirements may vary depending on the type of business you want to set up and how you’d like to structure your company. Simply put, you cannot do business in most parts of Illinois without some type of official license.
There is no general Illinois business license required by the state (besides a seller’s permit). Licensing requirements are enforced by each city. The city of Chicago requires a significant amount of licensing to open up most types of businesses. Some smaller cities in Illinois only require licenses for certain types of businesses, allowing others to operate without a formal license.
You only need an Illinois business license if the type of business you intend to open is required to have a license in the city where you intend to open it. Check local laws for licensing requirements to be sure you’re compliant with local regulations.
What Are the Different Types of Business Licenses in Illinois?
Your business may need several types of licenses to legally operate in the state of Illinois. There’s also a possibility that you won’t need a license at all, depending on the city you live in and the niche of your business.
These are the main types of business licenses available:
- Federally required licenses for certain businesses
- Statewide seller’s permit
- Local business licenses
- Specific licenses
The federal government requires licenses for businesses in niches that are federally regulated. This includes niches like alcohol, firearms, broadcasting, transportation, and agriculture. For example, if your business sells alcoholic beverages, you’ll need a liquor license.
Federal licenses can only be obtained from federal government agencies, and you will need them to start businesses of a controlled nature in any state. The Small Business Association offers more information about the federal license application processes.
The State of Illinois requires businesses that sell taxable goods or render taxable services to obtain a sales tax permit, also referred to as a seller’s permit, a Certificate of Registration, or an Illinois Business Authorization. Your seller’s permit allows you to collect sales tax from your customers and remit it to the state of Illinois. The type of seller’s permit you’ll need depends on the type of goods or services your business provides.
Local business licenses are the most important types of licenses in Illinois. The majority of licensing requirements are specific to a local area. The requirements in your city may be significantly different from the requirements in neighboring cities, which is why it’s important to double-check with your local authority for small businesses.
You may also need licenses specific to your type of business or the circumstances under which you’re doing business. Businesses in fields like healthcare will need professional licenses. Home-based businesses may need special permits that allow them to legally operate out of their residence, even if they’re remote sole proprietorships.
How Do You Apply for an Illinois Business License?
You’re required to register your business with the state of Illinois for tax purposes. Local requirements will differ depending on your locale, so it’s best to check with local business authorities for more information regarding specific requirements in your city.
You’re required to complete any local business license requirements as instructed by your local licensing authority. Licensing requirements, eligibility, required information, fees, and filing methods will vary by city.
The State of Illinois requires businesses to register electronically through MyTax Illinois Alternatively, you can file a form called Form REG-1 Illinois Business Registration Application or visit a regional Illinois Department of Revenue office to complete the process in person.
The state of Illinois prefers online applications, which receive priority processing and, ultimately, faster approval. It may be more advantageous to apply by completing the form online and electronically submitting it.
What Is Form REG-1?
Form REG-1 is required for every entity that conducts business in the state of Illinois, conducts businesses with customers that live in Illinois, sole proprietors, certain government agencies, and even exempt organizations. Depending on the type of business you operate, you may need to complete a specific schedule REG-1 form.
Electronically submitted forms can be processed in as little as two business days, whereas paper forms may take six to eight weeks to process. The Illinois Department of Revenue issues some types of certificates by mail and other types of certificates online through MyTax Illinois. You’re able to view, save, and print copies of your certificate through the online portal. You will simultaneously be issued a tax ID number if necessary.
What Are the Other Requirements for Getting an Illinois Business License?
Most licenses will come from your municipality. Local requirements can vary significantly. You may also have to comply with rules like zoning ordinances or building permits if you intend to renovate the property you’ve purchased for your business. Your county clerk will have more information about specific requirements.
Obtain an Employer Identification Number (EIN)
An EIN, sometimes called a FEIN (federal employer identification number) or a tax ID number, is necessary for tax purposes. Your EIN is a unique identifier for your business entity that allows you to legally hire people and pay taxes. It may also be necessary for providing certain services to your employees.
The IRS can issue you an EIN immediately and for free. There’s a simple questionnaire on their website. You’re required to input relevant information about your business. If you’re eligible for an EIN, you’ll get one upon completion of the questionnaire.
It’s important to keep this number safe because you’ll need it for many business documents. It can be a hassle to attempt to recover your EIN if you ever lose it.
If you lose your EIN before you have a chance to add it to your business bank accounts or other important business documents, the only way to locate it again is to call the IRS and wait for an agent to assist you. If you have a secure business inbox, emailing it to yourself can help you locate it when necessary.
Get a Certificate of Registration
You’ll receive your Certificate of Registration upon completing and submitting your REG-1 form. You’re able to print many official certificates yourself through the MyTax Illinois website. Some types of certificates may still have to be sent through physical mail.
What Are the Costs Associated With Getting an Illinois Business License?
License fee information can be obtained from your municipality. You may need one or more types of licenses issued by your city. Cities set their own rates for licenses, and some types of licenses may come at no cost.
Filing your business registration with the state of Illinois requires the payment of a fee. Registering your limited liability company (LLC) costs $150. You’ll also be responsible for a $75 annual report filing fee. This doesn’t include the cost of your registered agent or agent service, which you’ll need when you form an LLC. Registered agents set their own rates based on the services they offer.
Taking the Next Step for Your Business
After you’ve settled on a business name, a company structure, and a DBA, the only thing left to do is obtain your tax license and local licenses and register your business. Keep your business thriving by remaining in good standing with the federal government, the state of Illinois, and your local government.
Compliance with local laws, rules, and regulations is an ongoing process for small businesses. You’ll begin with compliance when you register your business and receive your licenses, but it’s a lifelong commitment as your business continues to grow and thrive.
Mosey is an automated compliance platform for businesses of all sizes. We can help you thrive by making it easier to manage the daily operations of your business while compliance reminders and checkups run in the background. Schedule a demo with Mosey to learn how we can make your business stronger.
