How to Start a Business in Chicago: The Six Steps and What They Cost
Most people start a business in the wrong order. They buy a domain, print cards, and open a bank account, then discover three months later that the business name was already taken, the bank wanted an EIN they did not have, and the storefront needed a license that takes weeks to issue.
The sequence matters, because each step depends on the one before it. Here is the order, what each step actually costs, and where the real delays are.
If you would rather walk through it with someone first, CEDE offers free one-on-one support to new business owners across the Chicago area.
First, Clear Up the Licence Confusion
Illinois has no general state business licence. There is no single document that makes your business legal statewide, which is the thing most people spend their first week looking for.
What you actually need is a combination: a registered legal entity at the state level, a tax registration with the Illinois Department of Revenue, and a city licence from Chicago if you operate inside city limits. Three different agencies, three different processes, none of which replaces the others.
The short answer Form the entity with the state, get an EIN from the IRS, register with the Illinois Department of Revenue, then get your Chicago licence. In that order. Budget around $800 for a straightforward business, and allow six to eight weeks. |
The Six Steps, In Order
1. Choose a Structure
For most small businesses this is a choice between operating as a sole proprietor and forming an LLC. A sole proprietorship costs nothing to start and offers no liability protection — legally, you and the business are the same person. An LLC separates the two.
Worth knowing now rather than later: a sole proprietorship cannot build its own credit file, because there is no separate entity to attach credit to. If you expect to borrow, that matters more than it sounds.
2. File With the Illinois Secretary of State
To form an LLC, file Articles of Organization (Form LLC-5.5) with the Illinois Secretary of State's Department of Business Services.
Filing fee: $150, whether you file online or by mail
Expedited processing: an extra $100 for 24-hour turnaround
Name reservation, if you need to hold a name before filing: $25 for 90 days
Series LLC, if you are running multiple distinct operations: $400
Search the Secretary of State's business entity database before you commit to a name. Illinois requires names to be distinguishable from existing registered entities, and discovering a conflict after you have printed signage is an expensive way to learn this.
Online filings process faster than mail. Illinois also has no newspaper publication requirement, which saves the few hundred dollars that step costs in some other states.
3. Get an EIN From the IRS
An Employer Identification Number is your business's tax ID. You need one to open a business bank account, hire anyone, and file business taxes.
It is free, and it takes about fifteen minutes online at irs.gov. Any website charging you for an EIN is reselling a free government service. There are a lot of them, and they buy ads that sit above the IRS in search results.
4. Register With the Illinois Department of Revenue
If you sell taxable goods, have employees, or owe other state taxes, you must register with the Illinois Department of Revenue. This applies even to sole proprietors.
Registration is free and is done through MyTax Illinois. This is the step that gets skipped most often, usually by service businesses who assume sales tax does not apply to them — and sometimes they are right, but the registration requirement can still bind if you have employees.
5. Get Your Chicago Business Licence
Every business operating inside Chicago city limits must be licensed through the Department of Business Affairs and Consumer Protection. Applications go through the BACP Small Business Center and the Chicago Business Direct portal.
Licences fall into broad categories, and the fee depends on which applies to you. Under 2026 rates, a Limited Business Licence runs about $500 for a two-year term, and a Regulated Business Licence about $1,000 for two years. Industry-specific licences carry their own fees — retail food runs from roughly $660 to well over $1,600 depending on the size of the establishment, and a general contractor's Class A licence is $2,000 a year.
Where the delay lives: if your business occupies a physical space, licensing usually involves zoning review and inspections. This is the step that turns a two-week plan into a two-month one. Start it early.
6. Open a Business Bank Account
Take your filed Articles of Organization, your EIN letter, and your ID to a bank and open an account in the exact legal name of the business.
This is not administrative housekeeping. Commingling business and personal money undermines the liability protection you paid $150 for, makes your tax return harder, and makes it impossible for a lender to read your cash flow. It is the single cheapest thing on this list and the one that causes the most damage when skipped.
What It Actually Costs
Step | Cost | Timing | Paid to |
Business name search | Free | 10 minutes | Illinois SOS |
Articles of Organization (LLC) | $150 | Days to weeks | Illinois SOS |
Expedited processing (optional) | +$100 | 24 hours | Illinois SOS |
EIN | Free | 15 minutes | IRS |
Illinois Dept of Revenue registration | Free | Same day | IDOR |
Chicago Limited Business Licence | ~$500 / 2 years | Weeks | Chicago BACP |
Chicago Regulated Business Licence | ~$1,000 / 2 years | Weeks | Chicago BACP |
Illinois Annual Report | $75 / year | Annually | Illinois SOS |
The Ongoing Obligations People Forget
The annual report. Every Illinois LLC files one each year and pays $75. It is due before the first day of your anniversary month. Miss it repeatedly and the state can administratively dissolve your LLC — which quietly removes the liability protection you formed it for.
Licence renewal. Chicago licences run on two-year terms. Put the expiry in a calendar the day you receive it.
The Personal Property Replacement Tax. Illinois charges this on top of the 4.95% flat income tax. It is roughly 1.5% of net income for most pass-through entities, and it surprises people in year one.
Workers' compensation insurance. Required in Illinois from your first employee, including part-time employees.
The mistake to avoid Do not pay a service to do the free steps. The EIN is free from the IRS. Department of Revenue registration is free. The name search is free. Formation services bundle these with the $150 filing and charge a few hundred dollars for the convenience — which is fine if you want it, but know that roughly half of what you are buying costs nothing. |
Where to Get Free Help
Everything above is public information, and several organizations will walk you through it at no cost.
The BACP Small Business Center runs free business education webinars every Wednesday and Friday, including sessions specifically on Chicago licensing taught by the people who administer it.
The Illinois Small Business Development Center network provides free one-on-one advising on business planning and structure.
Your local Neighborhood Business Development Center knows the licensing quirks of your specific commercial corridor.
CEDE is free, and we will help you work out which of these steps actually apply to your business.
Related: Free Business Resources for Chicago Entrepreneurs — the full map of free advising and training in the region.
Get Started With Help
The paperwork is not difficult. The hard part is knowing which parts apply to you, and that depends on what you sell, where you operate, and whether you have employees.
CEDE is a free resource for small business owners across Chicago, Oak Park, River Forest, and Berwyn. We help people go from idea to open without paying for free resources or missing required items.
Browse our resource and toolkit library
Register for a workshop on licensing, operations, or planning
Get matched with an experienced mentor
Look into funding options for startup costs
Understand what lenders look for before you need capital
Not sure where to start? Get in touch, and we will map it out with you.
Fees and licensing requirements change. Figures here reflect 2026 rates and were verified in October 2026 against the Illinois Secretary of State, the IRS, the Illinois Department of Revenue, and Chicago BACP. Confirm current fees with each agency before filing.
Tags: #StartingUp · #Licensing · #SmallBusinessHelp · #Chicago
Comments