The Illinois Department of Commerce & Economic Opportunity bills the state as “a world class business environment with the most diverse economy in the nation.”
Just like in any state in the United States, you’ll need to obtain the necessary registration in order to do business in the Prairie State. Let’s look at which licenses you’ll need, which fees you need to be aware of, where to fill out a business license application, and why obtaining a business license is essential for both small business loans and business credit.
What Licenses Are Required to Start a Business in Illinois?
According to the Illinois Department of Revenue (IDOR), all companies that do business in Illinois or with Illinois customers must be registered. This requirement applies to most types of new businesses, including sole proprietorships, exempt organizations, and government agencies withholding for Illinois employees.
Your business may also be required to complete schedules like Schedule REG-1-A, Liquor Information, Schedule REG-1-L, Illinois Business Site Location Information, and Schedule REG-1-T, Telecommunications Tax Location Information.
The full instructions and contact information on how to apply can be found on the IDOR website. To complete your registration, you must submit an application online via MyTax Illinois (link available on the IDOR page), mail a physical Illinois Business Registration Application (Form REG-1), or make an in-person visit to an IDOR office. The online application is typically processed in one or two days, while Form REG-1 can take six to eight weeks.
Once approved, you’re required to display your Certificate of Registration at on-site locations where you conduct business.
Apart from IDOR regulations, certain businesses may be required to obtain a permit from the Illinois Department of Financial and Professional Regulation (IDFPR). A few examples include canine handlers, genetic counselors, title insurance companies, and state-chartered banks. In some cases, building permits may be required. For a full list of types of businesses and their required licenses, visit the IDFPR website.
Finally, local licenses may also be required depending on your municipality’s ordinances. Call your local gov’s office or county clerk for more information on specific licenses and licensing requirements.
What Are the Costs to Register a Small Business in Illinois?
For most small businesses, there are no business license fees.
However, according to the IDOR website, certain businesses may be subject to fees. Categories for these fees include excise taxes (for businesses involving cannabis, cigarettes, coin-operated amusement devices, and more), gaming (bingo, pull tab and jar games, and more), and motor fuel tax. Head here for more information regarding required business activities.
Certain cities and counties may also charge a fee. Contact your local government’s revenue department for more information.
What Are the Pros of Starting a Business in Illinois?
The Illinois Department of Commerce & Economic Opportunity markets Illinois as a business-friendly state that features “a central location with easy access to your operations, a well-educated and experienced workforce of millions, and an opportunity to be an integral part of the second most economically powerful region in America.”
Home to the city of Chicago, the third largest in the U.S., it may be easier to find the talent you need in your employee workforce in Illinois than it is in many other states. In 2021, the Small Business Administration (SBA) reported 1.2 million small businesses active, accounting for 99.6% of the state’s businesses. It also reported 2.5 million small business employees.
All in all, Illinois is home to a vibrant economy with no shortage of opportunities for businesses of all shapes and sizes.
Does Illinois Require LLCs to Pay Income Taxes?
Limited liability companies (LLCs) are not required to pay income taxes. Instead, the income is passed through to the owner, who then pays income tax on the applicable amount. For more details, visit the IDOR website.
Note that many LLCs will have to pay the personal property replacement tax (PPRT). The amount owed varies depending on how your business is incorporated, and ranges from 1.5 to 2.5%. Once again, head to the IDOR website for more details.
Why a Business License is Essential for Business Loans
In simple terms, it makes your business more appealing to lenders.
Some lenders only lend to small businesses that have a business license, which means getting a license can increase your loan opportunities. It can also make your business look more professional. Lenders that see you’re officially registered in the state of Illinois may feel more confident about offering a loan than they would if you were unregistered.
Bottom line: When it comes to business loans, there are no downsides to obtaining the proper permits and general business licenses.
Why A Business License is Essential For Business Credit
Your business needs to be registered in order for you to build business credit. This often requires obtaining a state license or a “doing business as” (DBA).
A strong business credit profile is valuable because it can open up more loan opportunities, both in the form of small business loans and business credit cards. If you’re wondering how to establish business credit, Nav can help. Create an account to get free business credit report summaries, one-on-one’s with specialists, and more.
While you’re here, we’ll also make it easy to compare your best options for small business loans and business credit cards. Just link your business data and we’ll instantly show you the options you’re most likely to get based on your qualifications.