Sole Proprietorship Laws in Illinois

By Elizabeth Rayne

For individuals looking to start a business without partners, a sole proprietorship is a common business entity because it is straightforward to set up and has minimal tax and reporting requirements. In Illinois, as in other states, you do not have to register your sole proprietorship with the state. However, you are required to register an assumed business name, if you use one, and depending on the nature of your business, you may also be required to obtain other permits and licenses.

Business Name Registration

In Illinois, if you want to operate your business under a name other than your own, you must file a certificate for an assumed business name. The filing is completed with the County Clerk in the county where your business is located and any other counties where you intend to conduct business. You can look up contact details in the Illinois County Clerk Office Directory (link in Resources) and then call your County Clerk's office or visit the website to obtain the required form. After you have registered, you must publish a legal notice of your assumed business name in a county newspaper. The notice must be published once a week for three consecutive weeks, and you must then submit proof of publication to the County Clerk.

Name Availability

Although not a requirement for sole proprietorships, you may search the Illinois Secretary of State website and county records to determine if the business name you've chosen is already being used. To see if an existing corporation or LLC is using the name, browse to the Certificate of Good Standing search page on the Secretary of State's website (link in Resources). For locally registered sole proprietorships and partnerships, check with your County Clerk to see if your name is already being used by another business.

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Licenses and Permits

Depending on your type of business and location, you may be required to obtain various licenses, permits and zoning clearances. All Chicago businesses must obtain a city business license; in other Illinois municipalities, you may be required to apply for a restaurant permit, taxi driver permit or other licenses based on the nature of your business. All professional businesses must be licensed with the state; and if you plan to build or remodel, you must apply for appropriate zoning and construction permits. The State of Illinois website, as well as city and county websites, provide a list of licenses and permits that may apply to your business.

EIN Registration

If you have employees or are required to pay federal taxes such as alcohol or tobacco tax for your business, you must apply for an employer identification number (EIN) from the Internal Revenue Service. An EIN is a unique number for your business that you will use on all federal tax filings. You can apply for an EIN online at the IRS website (see Resources).

Tax Registration and Insurance

All Illinois businesses, including sole proprietorships, must register with the Illinois Department of Revenue. You may register online using the Illinois Business Gateway. You must complete this registration before you make any purchases, sales or hire any employees. In addition, because sole proprietors are personally liable for the debts of their businesses, you may want to obtain general liability insurance.

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