COMPLETE GUIDE TO FORMING AN LLC IN CHICAGO (2025)
Navigate both Illinois state and Chicago city requirements to legally establish your LLC in the Windy City.
Starting a Limited Liability Company in Chicago requires compliance with both Illinois state requirements and City of Chicago regulations. The Illinois Secretary of State handles LLC formation at the state level, while the Chicago Department of Business Affairs and Consumer Protection (BACP) oversees local business licensing.
⚠️ UNDERSTANDING THE DUAL REQUIREMENTS
Chicago LLCs must satisfy two distinct sets of requirements. First, you establish your LLC with the State of Illinois through the Illinois Secretary of State's Department of Business Services. Second, you obtain necessary city licenses from the City of Chicago to legally operate within city limits.
KEY BENEFITS OF ILLINOIS LLC:
- • Personal liability protection from business debts
- • Pass-through taxation avoiding double taxation
- • Flexible management structures
- • Enhanced business credibility
- • Simpler compliance than corporations
📋 COMPLETE CHICAGO LLC PROCESS
STATE REQUIREMENTS (1-5)
STEP 1: CHOOSE YOUR BUSINESS NAME
Your Chicago LLC name must comply with Illinois Limited Liability Company Act (805 ILCS 180) requirements and be available for use.
NAMING REQUIREMENTS
REQUIRED DESIGNATORS:
- • "Limited Liability Company"
- • "LLC"
- • "L.L.C."
Must be distinguishable from existing names registered with the Illinois Secretary of State.
NAME AVAILABILITY
Search existing business names through the Illinois Secretary of State's business entity search to verify availability.
OPTIONAL NAME RESERVATION:
Reserve your name for 90 days: Application to Reserve a Name ($25 fee)
STEP 2: DESIGNATE A REGISTERED AGENT
Every Illinois LLC must appoint a registered agent with a physical Illinois address. The Illinois Secretary of State requires this agent to receive legal documents, service of process, and official state correspondence.
OPTION 1: YOURSELF
- • No additional cost
- • Must be Illinois resident 18+
- • Available during business hours
- • Physical address required
OPTION 2: EMPLOYEE/PARTNER
- • No additional cost
- • Must meet same requirements
- • Good for partnerships
OPTION 3: PROFESSIONAL SERVICE
- • $50-$300 annually
- • Privacy protection
- • Reliable document receipt
- • Professional handling
STEP 3: FILE ARTICLES OF ORGANIZATION
Create your LLC legally by filing Articles of Organization with the Illinois Secretary of State.
REQUIRED INFORMATION
- • LLC name with required designator
- • Registered agent name and address
- • Principal place of business address
- • Management structure selection
- • Manager/member names and addresses
- • Organizer signature
FILING METHODS
✓ ONLINE (RECOMMENDED)
File through Illinois Secretary of State's online system for immediate confirmation and 1-5 day processing.
MAIL FILING
Send Form LLC-5.5 to Illinois Secretary of State, Department of Business Services, Springfield, IL 62756
PROCESSING TIMES
STEP 4: OBTAIN FEDERAL EIN
🚨 CRITICAL WARNING
The IRS never charges for EINs. Beware of third-party websites charging fees for this FREE service. Apply directly through the official IRS website only.
Apply for a free EIN from the Internal Revenue Service. This federal tax identification number functions as your business's Social Security number.
WHEN YOU NEED AN EIN
The IRS requires an EIN if your LLC has:
- • Multiple members
- • Employees
- • Files certain tax returns
- • Withholds taxes on non-wage income
Single-member LLCs may use owner's SSN, but banks typically require an EIN.
HOW TO APPLY (FREE)
ONLINE APPLICATION
Apply through IRS online application
Hours: Monday-Friday, 7 AM - 7 PM ET
Get your EIN immediately!
ALTERNATIVE METHOD
Complete Form SS-4 and submit by mail or fax
STEP 5: CREATE OPERATING AGREEMENT
Draft an Operating Agreement to establish your LLC's internal structure and rules. While the Illinois Limited Liability Company Act Section 15-5 does not mandate Operating Agreements, this document protects your interests and prevents disputes.
WHY YOU NEED THIS DOCUMENT
- • Banks require it for account opening
- • Proves separate legal entity status
- • Strengthens liability protection
- • Prevents member disputes
- • Clarifies ownership and management
- • Documents profit/loss allocation
ESSENTIAL COMPONENTS
- • LLC name and registered agent
- • Business purpose
- • Member names and contact info
- • Capital contributions
- • Ownership percentages
- • Management structure
- • Voting rights and procedures
- • Profit and loss allocation
- • Member addition/removal procedures
- • Buy-sell provisions
- • Dissolution procedures
MEMBER-MANAGED
All owners participate in daily operations and major decisions. Best for hands-on businesses.
MANAGER-MANAGED
Specific managers handle operations while other members are passive investors. Good for investment structures.
STEP 6: ILLINOIS TAX REGISTRATION
Register with the Illinois Department of Revenue for applicable state taxes.
REQUIRED FOR CHICAGO LICENSE
Before applying for a Chicago business license, you MUST obtain an Illinois Department of Revenue (IDOR) Account ID Number. This free registration is required for all Illinois businesses.
SALES TAX
WHO: Retail businesses selling tangible goods
COST: Free registration
WHERE: Illinois Department of Revenue
WITHHOLDING TAX
WHO: LLCs with employees
PURPOSE: Withhold state income tax from wages
WHERE: Illinois Department of Revenue
INCOME TAX
STRUCTURE: Pass-through taxation
FILING: Partnerships file Form IL-1065
NOTES: Informational only
STEP 7: VERIFY CHICAGO ZONING
🚨 CRITICAL: DO THIS BEFORE SIGNING A LEASE
Never sign a commercial lease before verifying your business activities are permitted in that location. Include contingency clauses making your lease conditional on obtaining required licenses and zoning approvals.
Before applying for a Chicago business license, verify your business location complies with city zoning regulations. The City of Chicago Zoning Division reviews all business license applications.
UNDERSTANDING CHICAGO ZONING
Chicago divides the city into distinct zoning districts, each permitting specific business activities. Business activities must align with the property's zoning designation.
ZONING TOOLS:
Use the Interactive Zoning Map to check your location's classification before signing a lease.
ZONING REVIEW PROCESS
Every business license, location expansion, and change of location application requires zoning review and approval before processing.
GET HELP:
- • Business Call Center: 312-74-GOBIZ
- • Chicago Small Business Center
- • Interactive Zoning Map
STEP 8: APPLY FOR CHICAGO LICENSE
Most businesses operating in Chicago must obtain a City of Chicago business license from the Department of Business Affairs and Consumer Protection (BACP).
WHO NEEDS A CHICAGO BUSINESS LICENSE
According to Chicago Municipal Code Section 4-4-020, all businesses operating in the City of Chicago require a business license unless specifically exempted. Each separate business location requires its own license.
BEFORE YOU APPLY, YOU MUST HAVE:
- ✓ Formed LLC with Illinois Secretary of State
- ✓ Obtained federal EIN from IRS
- ✓ Illinois Department of Revenue Account ID
- ✓ Verified zoning compliance
- ✓ Government-issued photo ID for all owners
- ✓ Paid all outstanding city debts
ONLINE APPLICATION
Apply through Chicago Business Direct - the city's online business license system.
✓ Faster processing
✓ 24/7 availability
✓ Instant confirmation
✓ Online payment options
IN-PERSON APPLICATION
Chicago Small Business Center
City Hall, Room 800
121 N. LaSalle Street, 8th Floor
Chicago, IL 60602
Phone: 312-74-GOBIZ
Email: [email protected]
Hours: Mon-Fri, 8:30 AM - 4:30 PM
OUTSTANDING DEBTS BLOCK LICENSES
You cannot obtain or renew a Chicago business license if you have outstanding debts to the City, including unpaid parking tickets, fines, or Illinois sales tax.
BACKGROUND CHECKS MAY BE REQUIRED
Some licenses require fingerprint-based criminal background checks ($40 per person) for owners, officers, members with 25%+ ownership, and on-site managers.
STEP 9: FILE ILLINOIS ANNUAL REPORTS
File annual reports with the Illinois Secretary of State by the first day of your LLC's anniversary month. Fee: $75/year. Late filing penalty: $100 if more than 60 days late.
STEP 10: RENEW CHICAGO LICENSE
Most Chicago business licenses are valid for two years and must be renewed before expiration. Renew through Chicago Business Direct. Operating without a valid license can result in fines and closure orders.
Cost Summary for Chicago LLCs
INITIAL STATE COSTS
INITIAL CITY COSTS
ANNUAL COSTS
TOTAL FIRST-YEAR ESTIMATE
Essential Resources & Contacts
ILLINOIS SECRETARY OF STATE
Monday-Friday, 8:00 AM - 4:30 PM
CHICAGO BACP
City Hall, 121 N. LaSalle St, Room 800
Phone: 312-74-GOBIZ (312-744-6249)
[email protected]
FEDERAL & STATE TAX RESOURCES
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Disclaimer: This guide provides general information about forming an LLC in Chicago, Illinois. Business formation and licensing involve legal, tax, and regulatory considerations specific to your situation. Consult with an attorney, accountant, or tax professional for advice tailored to your business needs. Verify all current fees and requirements with official government sources before proceeding.