How to Start a Business in Illinois
Everything you need to form your Illinois LLC, corporation, or sole proprietorship, with exact fees, timelines, and step-by-step instructions.
Illinois has the fifth-largest state economy in the United States with a population of 12.7 million, providing a substantial market for new businesses. Forming an LLC costs $150, and Illinois imposes no state franchise tax on LLCs, so the only recurring state maintenance is a $75 annual report fee due each year. An LLC taxed as a partnership pays only the 1.5 percent personal property replacement tax, making this structure efficient for business owners.
This guide covers every step from choosing a business structure to obtaining licenses and registrations.
Choosing Your Illinois Business Structure
This is the first decision and it affects everything: taxes, liability, paperwork. If you are unsure, an LLC is the right default for most Illinois small businesses.
| Entity Type | Liability Protection | Taxation | Illinois Filing Fee | Annual Cost | Best For |
|---|---|---|---|---|---|
| LLC | Yes | Pass-through | $150 | $75 Limited Liability Company Annual Report... | Most small businesses |
| Corporation | Yes | Double (C-Corp) or pass-through (S-Corp) | $150 | $75 Domestic Corporation Annual Report... | Raising investment, stock options |
| Sole Proprietorship | No | Pass-through | $0 | $0 | Freelancers, side hustles |
| Partnership | No | Pass-through | $0 | $0 | 2+ owners (consider an LLC instead) |
8 Steps to Start Your Illinois Business
- 1
Choose your business structure
LLC, corporation, or sole proprietorship. Each has different costs, tax treatment, and liability protection.
- 2
Pick and reserve your business name
Search the Illinois Secretary of State, Department of Business Services database. Reserve for $25 (90 days).
- 3
Appoint a registered agent
Must have a physical Illinois street address. Can be yourself (free) or a service ($100 to $300 per year).
- 4
File your formation documents
Articles of Organization (Form LLC-5.5) ($150) or Articles of Incorporation (Form BCA 2.10) ($150) with the Illinois Secretary of State, Department of Business Services.
- 5
Get your EIN from the IRS
Free, online, takes about 5 minutes. Do not pay anyone for this.
- 6
Register for a sales tax permit if you sell goods
Through the Illinois Department of Revenue (IDOR). State sales tax rate: 6.25%.
- 7
Get required licenses and permits
Illinois issues no single general statewide business license.
- 8
Register for Illinois taxes
Personal income tax: 4.95% flat rate on net income for individuals, trusts and estates, effective July 1, 2017.
How Much Does It Cost to Start a Business in Illinois?
| Item | Cost | Notes |
|---|---|---|
| LLC filing fee (Illinois Secretary of State, Department of Business Services) Required | $150 | 10 business days for standard online filing. |
| Corporation filing fee Required | $150 | If forming a corporation instead |
| Limited Liability Company Annual Report... Required | $75 | Before the first day of the LLC anniversary month each year, the anniversary month being the month the Articles of... |
| Name reservation | $25 | 90 days |
| Registered agent service | $0 to $300/yr | Free if you serve as your own |
| EIN (IRS) Required | $0 | Always free |
| Business license | Varies | Illinois issues no single general statewide business license. |
| Operating agreement | $0 to $500+ | Free template or attorney-drafted |
| Realistic LLC total (year 1) | $150 to $525 |
Start a Specific Business in Illinois
Illinois Business Guides
- How to Start an LLC in Illinois
- How to Start a Corporation in Illinois
- Sole Proprietorship in Illinois: How to Start One
- Illinois Business License: What You Need and How to Get It
- Illinois Home-Based Business Laws: Zoning, Permits and Rules
- How to Get an EIN in Illinois
- Illinois Business Name Search: How to Check and Reserve a Name
- How to Get a Resale Certificate in Illinois
- Illinois Registered Agent: Requirements and How to Choose One
- Best LLC Services in Illinois
- Illinois Business Taxes Explained for New Owners
- How Much Does It Cost to Start a Business in Illinois
Why Start a Business in Illinois?
- Illinois produced $1.202 trillion in current-dollar GDP in 2025, the 5th largest state economy in the United States (BEA table SAGDP1).
- The state population was 12,710,158 as of July 1, 2024, with 2,721,308 people in Chicago alone (Census Bureau).
- Forming an LLC costs $150 for Articles of Organization, examined within 10 business days, or $250 for 24 hour service.
- Ongoing state maintenance is a flat $75 annual report for both LLCs and corporations, due before the first day of the anniversary month.
- The corporate franchise tax carries a $10,000 liability exemption for filing periods beginning 1/1/2025 and after, so most small corporations owe $0 franchise tax on top of the $75 report fee.
- Individual income tax is a flat 4.95 percent, S corporations and partnerships owe only the 1.5 percent replacement tax at the entity level, and state sales tax is 6.25 percent on general merchandise.
Illinois Business Resources
Frequently Asked Questions
- How long does it take to form an LLC in Illinois?
- The Articles of Organization can be filed online with the Secretary of State, and standard processing takes 10 business days. If you need faster approval, expedited 24-hour service is available for $250 total.
- What does it cost to start an LLC in Illinois in the first year?
- Formation costs $150 for filing the Articles of Organization. You must register with the Illinois Department of Revenue for free, which processes in one to two business days. Your annual report fee is $75, due before your anniversary month, for a total first-year state cost of $225 before income taxes.
- Can a non-resident form an LLC in Illinois?
- Yes. An LLC can be formed through online filing of the Articles of Organization with the Illinois Secretary of State. You will also need to register with the Illinois Department of Revenue.
- What is the cheapest way to start a business in Illinois?
- An LLC is the cheapest way to start a business, costing $150 for the Articles of Organization and $75 for the annual report fee. If taxed as a partnership, an LLC pays only the 1.5 percent replacement tax, compared to 9.5 percent for a corporation. Registration with the Illinois Department of Revenue is free.
- Is an operating agreement required for an Illinois LLC?
- No. The Illinois Secretary of State requires only the Articles of Organization to form an LLC. Many LLC owners create an operating agreement to establish member responsibilities and governance procedures.