Complete Guide to Forming a Business in Chicago
Navigate Illinois state requirements, federal registration, and Chicago city licensing for successful business formation
Executive Summary
Bottom Line Up Front: Chicago entrepreneurs must complete three distinct registration layers to legally operate: (1) Illinois state entity formation, (2) federal tax registration, and (3) Chicago city business licensing.
Total startup costs range from $225 minimum (DIY LLC) to $1,000+ (full-service S Corp with professional assistance).
1 Choose Your Business Structure
Limited Liability Company (LLC)
Illinois LLC provides liability protection with tax flexibility. LLCs separate personal assets from business debts while offering multiple tax election options.
- ✓ Must include "Limited Liability Company," "LLC," or "L.L.C." in name
- ✓ Requires registered agent with Illinois address
- ✓ No residency requirement for owners
- ✓ Unlimited members allowed
S Corporation Election
S Corporation status eliminates double taxation while maintaining corporate structure. Businesses can elect S Corp tax treatment for both LLCs and traditional corporations.
- • Maximum 100 shareholders
- • Shareholders must be U.S. citizens or permanent residents
- • Only one class of stock allowed
- • Cannot be owned by other corporations or partnerships
Problem → Solution → Result
Problem: Personal liability risk → Solution: Illinois LLC formation → Result: Personal assets protected from business claims
2 Illinois State Formation Process
Step 1: Business Name Search and Reservation
Illinois Secretary of State Business Entity Search → Verify name availability before filing.
Name Search Process:
- Visit Illinois Business Entity Search
- Search proposed business name
- Call Illinois Department of Business Services at (217) 524-8008 for confirmation
- Reserve name for 90 days using Form LLC 1.15 ($25 fee) if needed
Critical Name Requirements:
- • LLC names must end with "Limited Liability Company," "LLC," or "L.L.C."
- • Corporation names must include "Corporation," "Corp," "Incorporated," or "Inc."
- • Name must be distinguishable from existing Illinois entities
Name Reservation:
- • Cost: $25 fee
- • Duration: 90 days
- • Form: LLC 1.15
Step 2: Appoint Registered Agent
Illinois law requires registered agent with Illinois street address. The registered agent receives legal documents and official state correspondence.
Self-Appointment
- • Cost: Free
- • Requires Illinois address
- • Business-hour availability required
- • No privacy protection
Professional Service
- • Cost: $49-$300 annually
- • Privacy and reliability
- • Professional document handling
- • Compliance notifications
Step 3: File Formation Documents
LLC Formation (Articles of Organization)
File Articles of Organization with Illinois Secretary of State:
Required Information:
- • LLC name and duration
- • Registered agent name and address
- • Names and addresses of managers/members
- • Principal office address
Corporation Formation (Articles of Incorporation)
File Articles of Incorporation with Illinois Secretary of State:
Note: First $100,000 of paid-in capital is exempt from franchise tax.
Filing Methods:
Illinois Department of Business Services
Limited Liability Division
501 S 2nd Street, Room 351
Springfield, IL 62756
3 Federal Tax Registration
Employer Identification Number (EIN)
All Illinois business entities must obtain EIN from IRS for tax purposes, banking, and hiring.
⚠ Important: Apply Direct with IRS
Cost: FREE when filed directly with IRS. Beware of fee-charging websites.
EIN Application Process:
- Visit IRS EIN Application Portal
- Complete Form SS-4 online
- Receive EIN immediately upon completion
Critical Timing:
Apply for EIN after state approval but before opening business bank accounts.
S Corporation Election (Form 2553)
Illinois LLCs and Corporations can elect S Corp tax treatment to reduce self-employment taxes and avoid double taxation.
Form 2553 Requirements:
- • Filing deadline: Within 2 months and 15 days of beginning tax year
- • Shareholder consent: All owners must sign consent
- • Processing time: Approximately 60 days
- • Filing method: Mail or fax only
S Corp Tax Benefits:
- • Pass-through taxation (no corporate-level tax)
- • Potential self-employment tax savings
- • Single-level taxation on distributions
Form 2553 Filing Address (for Illinois businesses):
Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999
4 Chicago Business License Requirements
Chicago Business License Overview
Every business operating in Chicago requires City of Chicago business license from Department of Business Affairs and Consumer Protection (BACP).
Problem: Operating without license → Solution: BACP business license application → Result: Legal compliance and $250-$500 daily penalty avoidance
License Application Process
Step 1: Business Consultation
- • Contact Chicago Small Business Center
- • Phone: (312) 744-6249
- • Schedule BACP business consultant appointment
- • Location: City Hall, 121 North LaSalle Street, Room 800
- • Hours: 8:30 AM - 4:30 PM, Monday-Friday
Step 2: Zoning Verification
- • Check zoning compliance using Chicago Zoning Map
- • Verify business type permitted at proposed location
- • Critical: Do not sign lease until zoning approval confirmed
Step 3: License Application
Apply online via Chicago Business Direct: www.chicago.gov/BusinessDirect
- • Business entity formation documents
- • EIN confirmation letter
- • Registered agent information
- • Lease agreement or property documentation
Chicago Business License Fees
License fees vary by business type and size:
General Business
$660-$1,600
Retail/service businesses
Liquor Establishments
Up to $4,400
Varies by license type
Manufacturing
Industry-specific
Contact BACP for pricing
Fingerprint Processing
$40
Per person (25%+ owners)
Special Permits and Requirements
Public Way Use Permits
Required for:
- • Business signs extending beyond property line
- • Awnings, canopies, or lighting
- • Sidewalk cafes
Application: Requires aldermanic sign-off before BACP submission
Zoning-Regulated Businesses
Additional scrutiny required:
- • Salons and personal services
- • Manufacturing operations
- • Animal services
- • Auto services and repairs
- • Health clubs and recreation
- • Liquor establishments
Estimated Costs Summary
DIY LLC Formation
Minimum Cost
Professional LLC Formation
Full Service
S Corporation Setup
Complete Formation
Annual Ongoing Costs
Timeline and Next Steps
Formation Timeline
Week 1
Name search, registered agent appointment, document preparation
Week 2
State filing submission, EIN application
Week 3
State approval, business license preparation
Week 4
Chicago license submission, banking setup
Ongoing
Compliance monitoring and annual filings
Critical Deadlines
Form 2553
Within 75 days of start of tax year
Chicago business license
Before commencing operations
Illinois annual reports
By formation anniversary month
Workers' compensation
Within 15 days of hiring first employee
Need Professional Help?
Navigating Illinois state requirements, federal registration, and Chicago city licensing can be complex. Professional formation services can ensure accuracy, provide ongoing support, and help you avoid costly mistakes.
Key Takeaways
Three-Layer Compliance
Illinois state registration → Federal tax registration → Chicago city licensing
Total Investment
Plan for $810-$2,735 in first-year costs depending on structure and service level
Professional Value
Business consultants can navigate zoning requirements and accelerate approvals
Timing Critical
File Form 2553 within 75 days for S Corp benefits
Chicago Advantage
Access to tech startup incentives and Angel Investment Tax Credit Program
Success Formula
Proper entity selection + timely compliance + professional guidance = Protected assets and optimized tax position
Professional Resources
Illinois State Resources
- • Illinois Secretary of State Business Services: (217) 524-8008
- • Illinois Department of Revenue: (217) 785-3707
- • Illinois Secretary of State Website
- • MyTax Illinois Registration
Chicago City Resources
- • Chicago Small Business Center: (312) 744-6249
- • IRS Business Help Line: 1-800-829-4933
- • Chicago Business Direct Portal
- • Chicago Zoning Information
Disclaimer: This guide provides general information only. Consult qualified legal and tax professionals for specific advice regarding your business formation. Laws and procedures may change.