License, Permits & Tax Requirements

Because there is extensive cost in time, fees and red tape involved, obtaining licenses, permits, and tax requirements may be one of the last steps to take before opening a business. There are different requirements at the city, county, state and federal levels that apply to different aspects of businesses. This information is arranged by level of government. Local concerns pertain to the Peoria metro area. Inquire with local municipalities if the business is located outside of this area.

Make sure that the business or job function you perform is properly licensed by the appropriate regulatory agency. It is impossible to list all legal requirements for any business. This handout offers guidelines only. This is why it is so important to have experience in or knowledge of the particular business. Business research should be thorough and ongoing to keep up with regulatory changes as they occur. Ask a lot of questions.

Getting Started - Local Requirements

Zoning Approval and Building and Sign Permits

Before applying for a business license, first verify that the type of business and its physical location complies with local zoning regulations. Although there is no fee associated with verifying zoning compliance, permit application fees to change zoning status vary.

• Zoning laws vary significantly throughout the state. Where zoning laws apply, they are strictly enforced.
• Generally, zoning approval is a one-time occurrence.
• Zoning offices can supply business license applications.
• If the proposed business site is not in compliance, you must apply for a permit to change the current zoning.
• Home-based businesses might have certain limitations on the type of business that can be conducted out of the home. Check with the City Clerk.
• If you plan to build a new building or to alter an existing building, apply for a building permit.

Please contact your local Planning and Development Department or City Clerk for further details.

Business License

After verifying zoning compliance, the next step is to check with both the City Clerk and County Clerk to determine if a business license is required for type of business. The application fee for obtaining a business license will vary depending on the type of business.

• Some cities and counties do not issue business licenses.
• Generally, business licenses are renewed annually.
• Apply for a business license in the city in which the business is physically located. If located outside of the city limits, contact the county clerk's office.
• Businesses located outside the city limits may still need a business license to operate within the city limits.
• Depending on the type of business, there may be additional licenses and fees. (e.g. day care requires DCFS approval; restaurants need Health Dept. approval)
• Some, but not many, types of businesses must have a state license to operate legally. Contact the Illinois Dept. of Professional Regulation at (217) 785-0800 or www.idfpr.com, to inquire.

Please contact your local County Clerk's Office for more details

Registering a Business Name

Assumed Name Certificate (DBA)

Sole proprietors and general partnerships operating their business under a fictitious or assumed name must apply for a DBA certificate with the county in which the business is physically located. Contact the local county clerk.

• A DBA application fee is usually available for a nominal fee (approx. $5) and generally a one-time occurrence.
• A business name change, ownership change or business closure, will require filing an amendment at this office.
• File a DBA application if a business is incorporated, but operating under another business name.
• A DBA does not protect or reserve a business name. The first one to use a business name has the rights to it.
• After filing your DBA form, you must publish a notice of the new business once per week for 3 consecutive weeks. Contact the classified dept. of a local newspaper (approx. $55).

Please contact your local County Clerk's Office for more details.

Incorporating Your Business

Contact the Secretary of State's Office (SOS) to incorporate or register a state trademark. A business is not required to incorporate. SOS employees will not give any legal advice regarding the pros and cons of incorporating. Their web address is: www.cyberdriveillinois.com.

• There is a one-time (usually around $150) filing fee to incorporate. A corporation will also pay an annual "franchise fee" in advance- usually a minimum of $25.
• Incorporating a business offers individuals a safeguard in protecting personal assets from liability.
• Incorporating ensures a business name will not be used by other incorporated businesses within the state. However, a trademark offers the best name protection.
• The Secretary of State's Office can conduct a complimentary name or trademark search for the business. (See Internet address to perform a search.)

Please contact your local Secretary of State's Office for more information.

Determining the Legal Form of Business

Be sure to research and discuss the specific advantages and disadvantages of each form of ownership with a qualified accountant or attorney before you finalize your decision. If incorporating, contact the Secretary of State's office. Incorporating can be done using the Secretary of State's on-line services, as well as by searching their database of incorporated businesses to see if the business name is available.

Federal Requirements

Employer Identification (EIN) Number

Employer Identification Numbers (EIN), also known as Federal Employer Identification Numbers, are issued by the IRS and used to report tax responsibilities to the state and federal government. They should be applied for 6-8 weeks prior to beginning business. Complete an EIN application (Form SS-4) if hiring employees, incorporating or operating a partnership, administering a Keogh plan, filing excise, alcohol, tobacco and firearms tax returns, or opening a bank account in the name of the business. The web site below is a link to either downloading the SS-4 application or obtaining your EIN online: www.irs.gov.

• The application can be faxed or mailed to the IRS (see SS-4 instructions) or obtain your EIN from the above website.
• Some vendors or suppliers will ask for a business' EIN.
• Requesting an EIN will not necessarily trigger an IRS audit or place scrutiny on the business.
• Once issued an EIN, the IRS will forward a booklet and materials for remitting federal withholding taxes on a monthly or semi-weekly basis and submitting tax reporting on a quarterly basis.

Please contact the Internal Revenue Service (IRS) for more details.

Federal Labor Laws

Contact the U.S. Dept. of Labor if the business' sales are over $500,000 and there are greater than 4 employees. Ask questions about child labor laws, minimum wage, Occupational Safety and health Administration, the Americans with Disabilities Act and the Family Medical Leave Act.

To learn more about OSHA requirements and workplace safety: www.osha.gov

To learn more about the ADA, contact the following entities: (800) 514-0301 to receive materials and publications. https://www.ada.gov/index.html

Immigration

Employees must complete Form I-9, "Employment Eligibility Verification Form." To learn more about immigration: (800) 375-5283 "Ask Immigration" https://www.uscis.gov/

Please contact the Bureau of Citizenship Immigration Services for more information.

Federal Unemployment Tax (FUTA)

FUTA varies by state.

State Requirements

State Withholding Tax

If the business has employees and has already received an Employer Identification Number, contact the Illinois Department of Revenue for a "Business Registration Kit".

• The EIN issued by the IRS will be the same number used by your state for the purposes of state withholding.
• To register as an employer, you must file form "UI-1" several weeks prior to your first pay period.
• Upon receipt of the request, the Illinois Department of Revenue will forward materials to the business for remitting state income tax on a monthly basis, and submitting tax reports on a quarterly basis.

Sales and Use Tax

To apply for a sales tax permit, submit an application (form REG-1) to the Illinois Dept. of Revenue. Their web address is: www.iltax.com

• This department will issue a sales and use tax permit number. It is not the same number as the EIN.
• All retail businesses, including e-retailers, and some service businesses should have a sales and use tax permit. Use Tax is paid on goods if purchased out of state and the seller does not collect sales tax.
• Generally, sales taxes must be paid to the Illinois Dept. of Revenue monthly.
• Check on the status of tax liability when buying an existing business. Sellers should provide buyers with a current statement from the Sales and Use Tax office.
• To see the publications that the state has regarding sales taxes, go to www.iltax.com/Publications/#sales.
• There are MANY exceptions to the sales tax rules. Check with the Illinois Dept. of Revenue for the rules applying to your business. They can be reached at: (800) 732-8866 or www.iltax.com.

Local Taxes

There are most likely a vast number of local taxes in your state. Local municipalities (cities and counties) define their respective tax rates, so it's a good idea to become familiar with local taxing authorities.

Depending on their location, restaurants and lodging facilities may be required to collect an additional sales tax (sometimes referred to as a "Hotel, Restaurant and Amusement" tax) that is remitted to local advertising and promotion commissions.

Please contact your local City Clerk's Office for more details.

Insurance Requirements

State Unemployment Insurance

• You may be required to pay unemployment insurance premiums to the Illinois Dept. of Employment Security if 1) you employed one or more workers in each of 20 weeks in a calendar year; or 2) you paid at least $1,500 in total wages during a calendar quarter.
• To determine your liability, complete a "Report To Determine Liability" form. If liable, they will issue you an account number and mail reporting forms to you each quarter.
• Currently, the rate is 3.1% of each worker's wages up to $9,000 per calendar year. Rates change periodically.

Contact the Illinois Department of Employment Security at: (800) 247-4984 or www.ides.state.il.us

Worker's Compensation Insurance

You are required to provide worker's compensation insurance for your workers for work-related injuries, accidental deaths, and diseases. Proprietors and partners do not count as employees; however, all members of corporations do count as employees. Contact a registered insurance agent.

• Employers must post a sign in a conspicuous place informing employees how to handle a workplace injury, including the name of the insurance carrier.
• Annual premiums are based on total company payroll, type of business, and past loss experience. For some businesses this can be a huge expense.
• If you are refused coverage by 2 or more companies, the "Assigned Risk Pool" will insure you for 20% higher than the market rate.

Please contact the Illinois Workers' Compensation Commission for more information at (866) 352-3033 or (309) 671-3019 or https://www2.illinois.gov/sites/iwcc/Pages/default.aspx.

Restaurant and Food Services

Contact the County Health Dept., an on-site inspector of restaurants and food preparation facilities. Anyone in food services, such as food processing, restaurants, caterers, mobile food units, convenience stores and bed and breakfasts must have their kitchen plans approved before establishing these businesses. These rules also apply to home-based businesses.

Other Potential Licenses and/or Issues

• Permit to Serve Alcohol
• Permit to Sell Cigarettes, Tobacco, Amusement, and Vending Machines
• Adult or Senior Day Care
• Child Care