Starting a Business in Illinois: Licenses, Permits & Requirements (2026)

Last updated: October 3, 2026

Starting an Illinois business involves choosing a structure, checking local and industry approvals, and registering the right tax and employee accounts. Use the checklist to see which steps apply and where optional services can help.

Illinois Business Requirements at a Glance

An LLC is one option, not the entire business setup. County name filings, city permits, tax registration and employee obligations follow their own rules. Check each applicable step before opening or hiring.

Affiliate links may earn us a commission. Paid providers are optional; official filing routes are included.

Setup step	When it applies & what to budget	Your next step
Choose your business structureChoose first	An LLC can help separate business liabilities from personal assets, but not every business needs one. Standard Illinois LLC Articles of Organization cost $150; expedited processing, payment processing and provider packages can add charges. Series LLCs use a different fee schedule.	Understand Illinois LLC costs and filing, or use the official state filing route. Optional filing help: ZenBusiness can prepare and submit the LLC formation filing. Review the package and any recurring add-ons. Form an LLC with ZenBusinessAffiliate · Optional provider
Check licenses & your locationDepends on your work	Check the municipality or county for business licensing, zoning and home-occupation rules. Food, childcare, construction and regulated professional services can need additional approvals. Chicago and other local governments have their own requirements; entity registration does not replace them.	Find your Illinois industry guide. Check the city or county for the location where you plan to operate.
Register a trading nameIf using an assumed name	Sole proprietors and general partnerships using a name other than their owners’ legal names generally register with the county clerk and follow the applicable publication process. An LLC uses the Secretary of State’s assumed-name route. Name registration is separate from forming a liability-protecting entity.	Check the name-registration route for your structure.
Get your federal tax IDIf an EIN is needed	An employer identification number (EIN) identifies your business for federal tax purposes. Whether you need one depends on your structure and activities. It is free from the IRS. If forming an LLC or corporation, form it before applying.	Check eligibility and get an EIN free. You do not need to buy an EIN service.
Register for sales taxIf making taxable sales	Register applicable Illinois tax accounts through MyTax Illinois using Form REG-1. Check the treatment of the products, services and materials you sell instead of assuming every service invoice is tax-free. Sales/use obligations and wage withholding are separate account responsibilities.	Check tax registration and filing requirements.
Arrange business insuranceRequired coverage varies	Illinois generally requires workers’ compensation when you have one employee, including a part-time employee, with limited statutory exceptions. Coverage should be in place when work begins. Review liability, professional, property and vehicle coverage for the work you perform and any customer or lease requirements.	Check Illinois workers’ compensation rules. Optional quote service: Simply Business can help you explore business insurance. Coverage and availability depend on your trade and underwriting. Get business insurance quotesAffiliate · Optional provider
Separate money & keep recordsPractical setup	Choose how you will separate business receipts and expenses, reconcile transactions and save tax records. Compare account fees, cash-deposit access and bookkeeping needs. Account-opening documents depend on the provider and business structure.	Prepare your formation or trading-name documents and tax ID, then compare business accounts. Set up a recordkeeping routine before your first payment.
Put customer agreements in writingDepends on your service	Agree on the work, price, payment dates, exclusions and cancellation terms before starting. A general service-agreement template may help with routine work; regulated or complex jobs can need specific contract terms or legal review.	Optional document service: use LawDepot to customize a service agreement, then check that it fits your work. Create a service agreementAffiliate · Optional provider
Set up invoices & paymentsChoose your payment method	Decide how customers will pay and when invoices are due. Compare transaction fees, hardware costs and payout timing. Buying a particular payment service is not a state requirement.	Optional payment service: explore Square for accepting customer payments and compare its fees with your expected sales. Explore Square paymentsAffiliate · Optional provider
Plan startup costs & cash reservesBorrowing is optional	Add filing costs, equipment, insurance and operating expenses before deciding whether to borrow. Financing options depend on revenue, time in business, credit and lender criteria. A new, pre-revenue business may not qualify.	Optional comparison service: SuperMoney Business Financing lets you explore funding options, subject to eligibility. Compare total repayment cost and payment frequency. Compare business financingAffiliate · Optional provider
Prepare for employeesIf hiring	Arrange applicable Illinois withholding and unemployment insurance registration, federal payroll withholding and new-hire reporting. MyTax Illinois can connect tax and unemployment registration, but confirm each required account. Check state and local wage, leave and workplace-notice requirements for where employees work.	Register applicable tax and unemployment accounts Review Illinois employer setup guidance
Calendar reports & renewalsFor your entity and licenses	A standard Illinois LLC files a $75 annual report. Use the due date shown on your state record and keep registered-agent information current. Series filings can add fees. Tax returns, assumed-name registrations, local licenses and occupational approvals have separate schedules.	Check the official reporting and renewal guidance. Paid filing help is optional and may cost extra.

Need the detailed instructions? Continue below for state filings, employer obligations and links to the licensing agencies.

How to Start a Business in Illinois (Step by Step)

Step 1: Choose Your Structure and Register It

An LLC is one option, not a requirement for every business. Compare ownership, liability and ongoing obligations before choosing. If an LLC fits your plans, the filing instructions below apply; our Illinois LLC guide explains the costs and options.

File Articles of Organization (Form LLC-5.5) with the Illinois Secretary of State, Department of Business Services. Cost: $150. Online filings through the ilsos.gov filing portal process in 5-10 business days; mail filings take 10-15 business days plus mail time. If you need faster turnaround, pay an additional $100 for 24-hour expedited processing.

Your LLC name must contain “LLC,” “L.L.C.,” or “Limited Liability Company” and must be distinguishable from existing entity names on file. Run a name search using the Illinois Business Entity Search before filing. Optional 90-day name reservation: $25.

Registered agent: Every Illinois LLC must have a registered agent with a physical Illinois street address – P.O. boxes are not accepted. You can serve as your own registered agent if you have an Illinois address, or hire a commercial registered agent.

Annual Report: Illinois LLCs must file an annual report with the Secretary of State every year. The report is due by the first day of your LLC’s anniversary month – the same month you originally filed. The filing fee is $75. You can file up to 60 days early. Missing the deadline triggers a $100 penalty and, eventually, administrative dissolution. File through ilsos.gov.

Assumed Business Name / DBA: If you operate under a name different from your LLC’s legal name, Illinois LLCs and corporations file an Assumed Name adoption with the Secretary of State. Sole proprietors and general partnerships file DBAs at the county clerk level instead. Fees vary.

After formation, apply for your federal EIN for free at IRS.gov – you need it before you can register for state tax accounts, open a business bank account, or hire employees.

Step 2: Register for Illinois Taxes Through MyTax Illinois

Illinois consolidates most state tax registrations through MyTax Illinois (mytax.illinois.gov) – the Illinois Department of Revenue (IDOR) portal. Register there for sales tax, withholding, and unemployment insurance in a single session.

Illinois Sales Tax (Retailers’ Occupation Tax)

Illinois’s state sales tax rate is 6.25% on general merchandise. Local jurisdictions layer on municipal, county, and Regional Transportation Authority (RTA) taxes that push the combined rate higher. Chicago’s combined rate is 10.25%; combined rates across the state range from 6.25% to roughly 11.50% depending on location.

• Services are generally NOT taxed in Illinois – a meaningful difference from states like Texas or Connecticut. Cleaning services, landscape maintenance, and most professional services are exempt from state sales tax. But specific service categories (parking, telecommunications, hotel accommodations, some repair labor) are taxable. Always verify your specific service before assuming exempt status.
• Grocery sales tax was permanently eliminated on January 1, 2026, but municipalities may adopt their own local 1% grocery tax. If you sell groceries, check your local ordinance.
• Registration is free at MyTax Illinois. Filing frequency is assigned based on expected liability (monthly, quarterly, or annual).

Illinois Income Tax and Personal Property Replacement Tax

Illinois uses a flat individual income tax rate of 4.95% and a flat corporate income tax rate of 7.0%. LLCs, partnerships, and S-corps are pass-through entities – their income flows to owners’ personal returns at 4.95%. No brackets.

Illinois also imposes a Personal Property Replacement Tax (PPRT) that most states don’t have. PPRT is a separate tax on business income paid to the state and distributed to local governments. Rates:

• Corporations: 2.5% of net income, for a combined effective corporate rate of 9.5%
• LLCs, partnerships, S-corporations, trusts: 1.5% of net income
• Sole proprietorships: Not subject to PPRT

PPRT is why forming a single-owner LLC in Illinois still costs real money – the owner pays 4.95% personal income tax on pass-through earnings, and the LLC itself pays 1.5% PPRT. A sole proprietorship avoids the PPRT layer, so for very small businesses with minimal liability exposure, the sole-prop vs. LLC math sometimes comes out different in Illinois than in states without a PPRT.

File through IDOR. Estimated quarterly payments are required if you expect to owe $500 or more in Illinois tax.

Step 3: Register for Unemployment Insurance and Withholding Before First Payroll

If you hire employees in Illinois, you must register with the Illinois Department of Employment Security (IDES) for unemployment insurance. Register through MyTax Illinois within 30 days of your first payroll.

• 2026 new employer rate: 3.35% (standard), or 3.45% for employers in NAICS sector 56 (administrative support and waste management – this includes cleaning services and many landscape maintenance operations). Both rates include the 0.55% fund-building surtax.
• 2026 taxable wage base: First $14,250 per employee per year
• Experienced employer rate range (2026): 0.75% to 7.05% (including the 0.55% fund-building surtax)
• Filing: Quarterly UI-3/40 through MyTax Illinois

New Hire Reporting: Report every new employee to the Illinois New Hire Directory within 20 days of hire. Required under Illinois Income Tax Act and federal law.

Withholding: Withhold Illinois income tax from employee paychecks at the 4.95% flat rate. Register for a withholding account on MyTax Illinois and remit per the assigned schedule (semi-weekly, monthly, or annual based on prior liability).

Step 4: Get Workers’ Compensation Insurance

Illinois requires workers’ compensation insurance from any employer with one or more employees. No threshold. Part-time employees count. Family members count. The only workers exempt are true independent contractors and, optionally, sole proprietors, business partners, corporate officers, and LLC members who file to exempt themselves.

Situation	Illinois Requirement
1+ part-time or full-time employees	Workers’ comp required
Family members on payroll	Workers’ comp required
Sole proprietor or LLC member with no employees	Optional (may elect coverage)
Construction / extra-hazardous occupations	Exemption generally not available for owners
True independent contractors	Not required (but misclassification is audited)

Penalties for operating uninsured (administered by the Illinois Workers’ Compensation Commission):

• Fines of up to $500 per day of non-compliance, with a minimum of $10,000
• Class A misdemeanor for negligent failure to carry coverage
• Class 4 felony for knowing failure to carry coverage
• Personal liability for corporate officers if the business fails to pay the penalty
• Work-stop order: IWCC can halt all business operations until you produce proof of insurance
• Loss of exclusive remedy: Uninsured employers can be sued in civil court with unlimited damages – the workers’ comp shield is gone

Illinois has no state fund equivalent to Colorado’s Pinnacol or Texas’s TXCOMP – you buy coverage from a private insurer or a licensed self-insurance program. The National Council on Compensation Insurance (NCCI) sets advisory loss costs used by most Illinois carriers.

Step 5: Comply With Illinois Paid Leave – and Chicago/Cook County If Applicable

This is one of the most Illinois-specific pieces of running a business here, and the rules change depending on where your employees physically work.

Statewide: Illinois Paid Leave for All Workers Act (PLAWA)

Effective January 1, 2024, the Paid Leave for All Workers Act requires Illinois employers of all sizes to provide 40 hours of paid leave per 12-month period. Employees accrue 1 hour of paid leave for every 40 hours worked. There is no minimum employee threshold – PLAWA applies to employers of 1.

• Workers can use the leave for any reason – PLAWA is not limited to illness; employers cannot require workers to state the reason
• Employers may set a minimum increment of use up to 2 hours
• Unused leave carries over annually but employers are not required to allow use beyond 40 hours unless they choose to
• Unused leave does NOT need to be paid out at termination (unlike Chicago’s separate ordinance)
• Recordkeeping required for at least 3 years

If you already offer a paid leave policy that meets the 40-hour minimum and allows use for any reason, you do not need to create a separate PLAWA policy.

Chicago and Cook County: PLAWA Does Not Apply

This is a trap for employers used to following state law. PLAWA explicitly does not apply in Chicago or Cook County because both jurisdictions had their own paid leave ordinances in place before January 1, 2024. Chicago and Cook County employers follow the local ordinance – which is stronger than PLAWA.

Chicago Paid Leave and Paid Sick Leave Ordinance (effective July 1, 2024): Chicago employers must provide both 40 hours of paid leave AND 40 hours of paid sick leave per year – 80 hours total. Employees earn 1 hour of each type for every 35 hours worked. Small employers (50 or fewer covered employees) are exempt from the payout-at-termination requirement for paid leave but still must provide the accrual. Medium employers (51-100) pay out up to 16 hours in year one, full balance after July 1, 2025. Large employers (100+) pay out the full balance. Any employee who works 80 hours in Chicago within any 120-day period is covered. Administered by the Chicago BACP Office of Labor Standards.

Cook County Paid Leave Ordinance (amended 2024 to align with PLAWA minimum): Applies to Cook County employers outside Chicago city limits. 40 hours paid leave per year. See the Cook County Commission on Human Rights for specifics.

If you have employees in Chicago, Cook County outside Chicago, and downstate Illinois, you may be managing three different paid leave rule sets simultaneously. Map every employee’s primary work location before building your payroll policies.

Step 6: Register for Illinois Secure Choice If You Reach 5 Employees

Illinois Secure Choice is a state-administered Roth IRA program that employers of a certain size are required to facilitate if they do not already offer a qualified retirement plan (401(k), SEP IRA, SIMPLE IRA, pension, etc.).

• Mandatory if: You have 5+ Illinois employees in every quarter of the previous calendar year, AND you have been in business at least 2 years, AND you do not offer a qualified retirement plan
• Employer responsibilities: Facilitate the program only – maintain employee roster, submit contributions via payroll deduction
• Employer costs: No fees; no required employer match; no fiduciary liability for plan investments
• Employee default: 5% contribution rate, auto-escalates 1% per year to a 10% cap, invested in a target-date fund unless employee changes allocation
• 2026 change: Vestwell becomes the new program manager in June 2026 (replacing Ascensus). Expect transition communications.
• Enforcement: The Illinois Department of Revenue enforces Secure Choice. Non-compliance penalties scale from $250 per employee (first year) to $500 per employee in subsequent years.

If you hit 5 employees in 2026, you’ll get a registration notice with an access code. You can alternatively offer any qualified retirement plan and opt out of Secure Choice by certifying your exemption.

Step 7: Get Local Business Licenses and Industry-Specific State Licenses

Local Business Licensing

Illinois has no statewide general business license. Local requirements vary dramatically by municipality: See how Illinois compares in our 51-state business license requirements table.

• Chicago: The BACP Small Business Center issues business licenses. The general categories are Limited Business License ($500 for a 2-year term under 2026 rates) and Regulated Business License ($1,000 for 2 years), with many industry-specific categories carrying their own fees. Food establishments, day care centers, tow trucks, mobile food vendors, massage establishments, and other regulated activities have separate license classes. Fees updated January 1, 2026.
• Aurora: City business license required for most businesses operating within city limits. Apply through Aurora’s Division of Community Services.
• Naperville: No general business license for most businesses, but industry-specific licenses and zoning approvals apply.
• Joliet, Rockford, Springfield, Peoria: Each city has its own licensing office and fee schedule – verify directly with the city clerk.
• Home rule vs. non-home rule: Illinois municipalities over 25,000 are automatically home rule (those under can opt in by referendum). Home rule cities have broader authority to impose local taxes and license fees. Chicago, Evanston, Oak Park, and dozens of others use home rule authority extensively.

IDFPR Professional Licenses (State Level)

The Illinois Department of Financial and Professional Regulation (IDFPR) licenses professions including cosmetologists, barbers, estheticians, nail technicians, private detectives and security agencies, roofing contractors, real estate agents and brokers, architects, engineers, physicians, nurses, and dozens of others. Cosmetology license requires 1,500 hours of training; private detective license requires 3 years of investigative experience or equivalent.

Note: Illinois does NOT have a statewide general contractor license, HVAC license, plumbing license (outside plumbers themselves – individual plumbers are licensed by IDPH), or electrical license. HVAC and electrical contractors are licensed at the municipal level – typically Chicago, Cook County suburbs, and the major Illinois cities all have their own contractor licensing offices with different exam and bond requirements.

Illinois’s Unique Compliance Environment in 2026

Three 2026-specific items materially affect small businesses in Illinois and are easy to miss:

1. AI discrimination law effective January 1, 2026. Illinois became the first state to make it a civil rights violation for an employer to use AI in employment decisions in a way that subjects employees to discrimination, or to use zip codes as a proxy for protected classes. Employers must also notify employees when they use AI in employment decisions. If you use AI-powered hiring tools, performance management software, or automated scheduling, audit them for disparate impact.

2. Biometric Information Privacy Act (BIPA) amendments effective August 2, 2024, now applied retroactively by the 7th Circuit (April 2026). A plaintiff’s remedies under BIPA are now limited to one violation per business regardless of how many times data was collected – ending the “per scan” liability that produced billion-dollar class actions. Biometric authorization may now be collected via electronic signature. If your business uses fingerprint clock-ins (common in cleaning, daycare, HVAC), facial recognition, or any biometric identifier, you still need written informed consent and a written retention/destruction policy.

3. Illinois Equal Pay Act pay transparency (15+ employees). Since January 1, 2025, Illinois employers with 15+ employees must include pay scale and benefits information in job postings. Plan job-posting template updates before you cross that threshold.

Illinois Market Context: Chicago, the Collar Counties, and Downstate

Illinois is the sixth-largest state by population (~12.5 million) and anchored economically by Chicago, which alone generates roughly a third of state GDP. Market realities by region:

• Chicago and the collar counties (Cook, DuPage, Lake, Will, Kane, McHenry): ~8.5 million people. Dense, high-income, regulated. This is where most Illinois small business starts – but also where the most overlapping regulation lives (Chicago city ordinances, Cook County ordinances, state law all stacking).
• Collar county suburbs: Naperville, Aurora, Elgin, Joliet, Schaumburg, Oak Brook. Strong residential markets for cleaning, daycare, landscaping, HVAC. Each has its own municipal licensing.
• Downstate Illinois (Rockford, Peoria, Springfield, Champaign-Urbana, Bloomington, Carbondale): Smaller markets but meaningful regional hubs. University towns (Champaign-Urbana, Carbondale, DeKalb, Normal) generate cyclical demand tied to academic calendars.
• Population trend: Illinois has had net domestic out-migration most years in the past decade but remains the 6th-largest state. Chicago metro in-migration from international and intrastate sources offsets much of the loss.
• Transportation hub advantage: O’Hare International, Midway, and six Class I railroads make Chicago the Midwest’s logistics center. This benefits food distribution (food trucks, cleaning supply), equipment supply (HVAC parts, landscaping equipment), and any small business with supply-chain intensity.
• Seasonality: Illinois winters materially affect landscaping (snow removal is a winter revenue stream worth explicitly building for), HVAC (heating system demand peaks November-February, cooling June-August), and food trucks (Chicago festival season runs May-October).

Illinois Business Guides by Industry

Illinois plumbing business guide — IDPH licensing, contractor registration, insurance and bond minimums, and startup steps for plumbing companies.

Illinois electrical business guide — local licensing, Chicago contractor classes, insurance, company setup, permits and home-repair contracts.

Every industry has different licensing, permit, and insurance requirements in Illinois. Select your business type:

• How to Start a Cleaning Service in Illinois – services generally exempt from state sales tax, IDES NAICS 56 rate, PLAWA/Chicago paid leave, workers comp at 1 employee
• How to Start a Food Truck in Illinois – IDPH Food Handling Regulation Enforcement Act, Chicago Mobile Food Vendor licenses, commissary requirements, festival permits
• How to Start a Daycare in Illinois – DCFS licensing under 89 Ill. Adm. Code 407, ExceleRate Illinois quality rating, Gateways credentials, CCAP subsidy
• How to Start an HVAC Business in Illinois – no state HVAC license, Chicago/suburban Cook County municipal licensing, EPA 608, 2024 Illinois Stretch Energy Code
• How to Start a Hair Salon in Illinois – IDFPR cosmetology license (1,500 hours), salon registration under Barber Cosmetology Esthetics Hair Braiding and Nail Technology Act
• How to Start a Landscaping Business in Illinois – Illinois Pesticide Act commercial applicator license, Illinois Lawn Care Products Application and Notice Act, snow removal as second revenue stream
• How to Start a Private Investigation Business in Illinois – IDFPR Private Detective License (3 years experience or degree+training), agency license, fingerprint background check
• How to Get an Illinois Dealer License – $1,000 a year, or $500 if you apply after June 15; $50,000 bond PER LOCATION, insurance at $100k/$300k/$50k, and a full-day class the Secretary of State teaches itself – Illinois issues no wholesale, auction or broker license at all
• How to Get an Illinois Liquor License – BASSET certification required within 120 days of hire (valid 3 years), and your mayor is the local liquor control commissioner who issues the license that matters
• How to Get an Illinois Massage License – IDFPR: 600 supervised hours, MBLEx, Illinois State Police fingerprints valid only 60 days, and CE rising to 25 hours for the 2026 renewal
• Do You Need an Arborist License in Illinois? – No arborist license – a commercial applicator license runs $300 for three years, takes two exams, and carries stated liability insurance minimums

Key Illinois Business Resources

Resource	What It Covers
Illinois Secretary of State – Business Services	LLC formation, annual reports, assumed names, name searches
MyTax Illinois	Sales tax, income tax withholding, unemployment insurance registration and filing
Illinois Department of Revenue (IDOR)	Income tax, sales tax, Personal Property Replacement Tax, Secure Choice enforcement
Illinois Department of Employment Security (IDES)	Unemployment insurance, new hire reporting
Illinois Department of Labor (IDOL)	Minimum wage, Paid Leave for All Workers Act, wage and hour enforcement
Illinois Workers’ Compensation Commission (IWCC)	Workers’ comp insurance requirements, penalties, dispute resolution
IDFPR	Professional and occupational licensing (cosmetology, PI, real estate, etc.)
Illinois Secure Choice	Mandatory retirement program for 5+ employee businesses with 2+ years
Chicago BACP	Chicago business licensing, Office of Labor Standards, consumer protection

How Long Do New Businesses Last in Illinois?

The Bureau of Labor Statistics follows every private-sector establishment in Illinois from the year it opens. Of the businesses opened in March 2024, 79.7% were still operating one year later. Among those opened in March 2020, 55.6% reached the five-year mark — 4.2 points above the national 51.4% — and 38.4% of the March 2015 cohort made it to ten years.

Two things keep those numbers from reading as grimly as they look. A closed establishment is not always a failed one: the BLS count includes owners who sold, merged, moved, or retired. And the businesses that last, grow — nationally, establishments reaching age ten average 11.7 employees, up from 4.4 when they opened. Rates for every state and 19 industries: business survival rates by state.

Frequently Asked Questions

How much does it cost to start an LLC in Illinois?

The Articles of Organization filing fee with the Illinois Secretary of State is $150 – whether you file online or by mail. Online processing runs 5-10 business days; 24-hour expedited service costs an additional $100. After formation, your annual report costs $75 per year, due by the first day of your LLC’s anniversary month. Late filing triggers a $100 penalty and, eventually, administrative dissolution. Optional costs: 90-day name reservation ($25), Assumed Name adoption if you operate under a different name (varies by filing year), and registered agent service if you use a third party.

Does Illinois require workers’ compensation for part-time employees?

Yes – Illinois requires workers’ compensation insurance from one employee, full-time or part-time, including family members. There is no minimum threshold or small-employer exemption. Penalties for operating uninsured are severe: fines up to $500 per day with a $10,000 minimum, Class A misdemeanor for negligent failure, Class 4 felony for knowing failure, and personal liability for corporate officers. The Illinois Workers’ Compensation Commission can also issue a work-stop order that halts operations entirely. Sole proprietors, partners, corporate officers, and LLC members may opt out of coverage for themselves, but not for their employees.

What is the Paid Leave for All Workers Act and where does it apply?

The Illinois Paid Leave for All Workers Act (PLAWA) requires Illinois employers of all sizes to provide 40 hours of paid leave per 12-month period. Employees earn 1 hour for every 40 hours worked and can use leave for any reason without providing a basis. But PLAWA does not apply in Chicago or Cook County because both had their own paid leave ordinances before January 1, 2024. Chicago follows the Chicago Paid Leave and Paid Sick Leave Ordinance (40 hours paid leave + 40 hours paid sick leave = 80 hours total). Cook County outside Chicago follows the Cook County Paid Leave Ordinance. If you have employees in multiple Illinois regions, you may be subject to three different paid leave rule sets at once.

What is the Personal Property Replacement Tax (PPRT)?

PPRT is an Illinois-specific tax on business income that replaced property taxes formerly levied on business personal property. It’s separate from regular income tax and paid to the state, which distributes it to local governments. Rates: 2.5% for corporations (making the combined corporate rate 9.5%), 1.5% for LLCs, partnerships, S-corps, and trusts. Sole proprietorships are not subject to PPRT. Most states do not have an equivalent tax – factor it into your Illinois tax projections.

What is Illinois Secure Choice and do I have to participate?

Illinois Secure Choice is a state-administered Roth IRA program mandatory for employers with 5+ Illinois employees who have been in business 2+ years and do not already offer a qualified retirement plan (401(k), SEP IRA, SIMPLE IRA, etc.). Employers facilitate the program via payroll deduction – no employer match required, no fees, no fiduciary liability. Employee default contribution is 5% with 1% annual auto-escalation. Vestwell takes over as program manager in June 2026 (replacing Ascensus). Non-compliance penalties start at $250 per employee in year one and $500 per employee thereafter, enforced by the Illinois Department of Revenue.

Does Illinois have a general business license?

Illinois has no statewide general business license. Most businesses need a sales tax account if they sell taxable goods (free to register on MyTax Illinois), a local business license in cities that require one (Chicago in particular – $500/$1,000 for 2 years under 2026 rates), and an IDFPR professional license if they practice a regulated profession (cosmetology, private investigation, real estate, etc.). HVAC, plumbing, and electrical contractors are licensed at the municipal level – Illinois has no statewide contractor license.

What is Illinois’s income tax rate for small businesses?

Illinois uses a flat individual income tax rate of 4.95% with no brackets. LLCs, partnerships, and S-corps pass income through to owners’ personal returns at 4.95%, and the business itself pays the 1.5% Personal Property Replacement Tax. C-corporations pay 7.0% corporate income tax plus 2.5% PPRT for an effective rate of 9.5%. Estimated quarterly payments are required if you expect to owe $500 or more.