commenda-logo
Book a demo
Login
Talk to an expert

Doing business in

Illinois

Navigate Illinois’s business landscape with ease—whether you’re incorporating, expanding, or managing tax compliance. Commenda helps you stay ahead with automated solutions for incorporation, compliance, and tax filings.
Book a demo
illinois

Business Overview

Illinois features a diverse economy anchored by Chicago, a global business center. Key industries include financial services, manufacturing, transportation, and technology. The state offers excellent infrastructure, a skilled workforce, and access to global markets through its transportation networks.

Key Facts & Figures

Category Details
Capital Springfield
Major Cities Chicago, Aurora, Naperville, Joliet, Rockford
State Sales Tax Rate 6.25%
Local Sales Tax Rate Up to 4.75% additional local taxes
Corporate Income Tax 6.925% flat rate
Physical Nexus Threshold Physical presence through employees, offices, or inventory
Economic Nexus Threshold $100,000 in annual sales or 200 transactions

Did you know?

Chicago is the third-largest metropolitan economy in the United States, with a diverse economic base including finance, manufacturing, and technology.

Setup & Compliance

Illinois business formation involves multiple state agencies and specific compliance requirements.

Starting a Business in Illinois:

  1. Select Your Business Structure: Consider Illinois tax implications for different entity types.
  2. Register Your Business: File formation documents with the Illinois Secretary of State.
  3. Obtain Tax Registrations: Register with the Department of Revenue for sales tax and withholding.
  4. Secure Business Licenses: Research and obtain necessary state and local licenses.
  5. Register as an Employer: Register with the Department of Employment Security if hiring employees.

Key Compliance Considerations:

  • Annual Reports: Most Illinois entities must file annual reports with the Secretary of State.
  • Sales Tax Collection: Businesses must collect state (6.25%) and local sales taxes on applicable transactions.
  • Franchise Tax: Illinois corporations pay annual franchise tax based on paid-in capital.
  • LLC Annual Fee: LLCs pay $75 annual fee, due with the annual report.
  • Local Business Requirements: Municipalities often impose additional licensing and regulatory requirements.

Hiring & Payroll

Illinois has implemented several worker protections that exceed federal requirements.

Illinois Payroll Taxes:

  • Unemployment Insurance: Rates from 0.725% to 7.625% on first $12,960 of wages.
  • State Income Tax Withholding: Flat 4.95% of federal adjusted gross income.
  • Workers’ Compensation: Required for all employers.

Illinois Employment Laws:

  • Minimum Wage: $13.00 per hour (increasing to $14.00 on January 1, 2024, and $15.00 by 2025).
  • Paid Sick Leave: Chicago and Cook County have local ordinances requiring paid sick leave.
  • Equal Pay Registration: Employers with 100+ employees must obtain certificate.
  • Final Paycheck: Due at time of separation if possible, otherwise next scheduled payday.
  • Illinois is not a right-to-work state.

State Incentives

Illinois offers comprehensive economic incentives to support business innovation.

Key Business Incentives:

  • EDGE Tax Credit: Encourages job creation and retention.
  • Economic Development for a Growing Economy (EDGE) Program.
  • Research and Development Tax Credit: Supports innovative company development.

Small Business & Startup Support:

  • Illinois Small Business Development Center: Comprehensive business consulting.
  • Minority and Women-Owned Business Certification Program.
  • Opportunity Zones: Tax benefits for investments in designated areas.

Regulatory Considerations

Illinois maintains comprehensive regulatory standards across business sectors.

Key Business Regulations:

  • Data Privacy: Stringent laws protecting business and consumer information.
  • Environmental Compliance: Detailed regulations for urban and industrial operations.
  • Professional Licensing: Mandatory licensing for various professional services.

Additional Regulatory Areas:

  • Financial Services Oversight.
  • Technology and Innovation Compliance.

Explore Tax & Compliance Topics

Join hundreds of cross-border businesses growing fast with Commenda

Talk to an expert