Registering Your Startup To Do Business in Illinois

Forming your business entity in Illinois—specifically, a corporation—gives you a lot of flexibility, but you may still need to follow local laws depending on what state you operate in.

Specifically, if you do business in Illinois, you need to register with the state. We’ll walk through the process and simplify it. But first, how can you tell whether you’re legally doing business in Illinois?

Delaware C corps—and all other corporations formed outside of Illinois—are referred to as “foreign” corporations by the State.

Illinois statutes do not specifically define what is considered doing business in the state. However, Illinois statutes provide that the following activities would not require you to register with the State:

• Defending or settling a lawsuit
• Having a bank account in the state
• Selling through independent contractors

Every state has rules about when a company is required to pay sales tax. These are called sales tax nexus rules.

You can think of the nexus as a special version of that state’s border; if you perform certain business activities within that border, you fall into the state’s sales tax nexus, and you’re required to register for and collect state sales tax.

Typically, these actions take the form of buying and selling goods and services.

In Illinois, the sales tax nexus rules only apply to sellers who sell physical goods or services to Illinois residents.

Until 2018, selling or buying non-physical goods—like subscriptions to streaming services, SaaS memberships, etc.—did not, generally speaking, qualify you for sales tax nexus. After an important court ruling in 2018, that changed. Now, if you buy or sell non-physical goods or services in a state, you may fall within its sales tax nexus.

You may need to register with the Illinois Department of Revenue in order to collect sales and use tax if you sell, lease, or deliver tangible personal property or taxable services.

If your selling activities occur within Illinois, then you will need to register and pay state and local retailers' occupation tax. If your selling activities occur outside of Illinois, then use tax must be collected and remitted for that sale.

You can learn more about physical presence for sales tax purposes through the State’s website.

The new state sales tax laws applying to non-physical (ie. internet) sales allow you to qualify for sales tax nexus even without physical presence or goods. In Illinois, you need to cross a certain threshold to qualify.

You will need to remit sales if you have:

• $100,000 or more in cumulative gross receipts from sales of tangible personal property to purchasers in Illinois; or
• 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois.

If you would like to take a deep dive, you can check out the State’s website.

As usual, this isn’t legal advice—just a guide. If you’re not 100% clear on whether you fall within Illinois’ sales tax nexus, it’s best to confer with your legal counsel and/or an accountant that has expertise in Illinois’ legal code and tax regulations.

• Select a name under which to do business. This doesn’t have to be the name you registered when incorporating in Delaware, but it can be.
• Fill out an application. You’ll need to file an Application for Authority to Transact Business in Illinois. You’ll need two copies of this form along with a Certified Copy of your Articles of Incorporation and a Delaware Certificate of Good Standing.
• Pay the fee. Now you pay the Illinois Secretary of State a $175 filing fee. Note that your filing fee may vary based on the paid in capital you listed in the initial application.
• Submit your Application for Authority to Transact Business in Illinois.
• Wait. Processing typically takes two to four weeks.

Once you’re approved to operate as a qualified foreign business in Illinois, you’ll need to comply with certain requirements.

To stay in compliance and continue legally doing business in Illinois, you need to meet two requirements:

1. Maintain a registered agent
2. Filing your annual report

On top of that, you will also need to pay a corporate income tax.

Your registered agent in Illinois is your point of contact with local authorities. If you don’t have a physical address for your company in Illinois, it may be advantageous to find a registered agent to receive state notices on your behalf.

Foreign corporations are required to have a registered office in Illinois. The office cannot be a P.O. box, rather it must be a physical address of your registered agent or a licensed registered agent service.

Your registered agent will forward any important information, such as business mail, to you. There are a number of firms that contract out registered agents. They typically cost $50 – $100 per year.

Every year, you must file a statement with the State, updating any changes to the company address or the composition of the Board and officers. You’ll include info like:

• The legal name of your business
• The name and address of your registered agent
• The names and addresses of board members, managers, and officers
• Certified copies of any amendments to the Articles of Incorporation or of any merger to which the corporation may be a party.

There is a $75 fee for filing your annual report. Please note that there is a franchise tax that you may include with your annual report filings. Illinois has eliminated their franchise tax, but the tax is not completely phased out until 2024. If you would like to take a deep dive on Illinois’ franchise tax repeal, you can check out this article from Seyfarth.

Lastly, Illinois has a corporate income tax. A corporate income tax which is a tax imposed directly on the income of your corporation. For more information on filing and paying your annual taxes, please see the following guidance from Illinois Department of Revenue.

If you fall within the Illinois sales tax nexus, your company will need to register for a sales tax license. The state offers three ways in which you can register with the Department of Revenue:

1. Register through the Department’s online portal
2. Complete and mail in an Illinois Business Registration Application
3. Visit a regional office

When you hire a new employee in Illinois, federal and state laws require that you report new hires within 20 days of their hire. You can report your new hires using the Illinois employer website portal.

In addition, once you pay out $1500 in wages over a 20 week period, you’ll be required to contribute to the state unemployment insurance fund.

Your payroll provider should be able to take care of paycheck withholdings, but it’s up to you to register as an employer with the State and set up an online employer account.

For a comprehensive guide of your responsibilities, Illinois provides the following information.

To register your business in Illinois, you’ve got to keep track of a lot of moving parts. Failing to file the right forms, provide the right information, or stay on top of compliance laws can lead to serious headaches.

Capbase makes it easy. When you incorporate your Delaware corporation on Capbase, we will generate the required information needed to register to do business in Illinois and keep you up to date on any required filings.

The compliance calendar inside your Capbase account will notify you of upcoming fees, reporting, or other requirements, so you can keep your startup in good standing with Illinois state officials. Try Capbase now.