Forming a Partnership in Illinois

Here is an outline of the steps you need to follow in order to form a partnership in Illinois. You should also read the general section on forming a partnership for information applicable in any state.

1. Choose a business name for your partnership and check for availability.

2. Register the business name with local, state, and/or federal authorities.

  • If you will be operating your partnership under a name that is different from your name and that of your partners, then you will need to register the name as a "fictitious" or "assumed" business name. In Illinois, you do this by applying for permission to use an "assumed name" with the county clerk's office in the county where your principal place of business will be located.
  • Although you are not required to do so, you should consider registering your business name as a federal and/or state trademark. Please see the Trademark for Business Naming section for details.

3. Draft and sign a partnership agreement.

  • Although not legally required, it is strongly suggested that you and your partners sign a partnership agreement laying out the rights and responsibilities of the partners. For details, please see the Partnership Agreements section.

4. Obtain any required local licenses.

5. Determine what tax and other regulatory obligations your partnership has, and take care of any necessary registrations.

  • Request an Employer Identification Number (EIN) from the IRS. This can be done via its online application. There is no filing fee.
  • Whenever you hire an employee in Illinois, you must inform both the IRS and the State of Illinois. The IRS details all of the necessary steps to complete, including verifying work eligibility and withholding allowances certificates, on its page entitled Hiring Employees. You can find information on what to do on the state level on the New Hire Reporting section of the Illinois Business Portal.
  • If you have one or more employees in Illinois, you must carry workers' compensation insurance. You may choose to obtain workers' compensation insurance for yourself, but you do not need to. (If you have a workers' compensation policy for your employees, you must contact your insurance company if you DO NOT want to be covered.)
  • As a small business owner or employer, there may be other informational returns that you have to file annually or semi-annually with the IRS. For more information, take a look at the IRS Guide To Information Returns.
  • Partnerships must pay property replacement tax at a rate of 1.5% of net income by filing this form annually.

6. Open a bank account for your business.

  • It is a good idea to keep your business's finances separate from your personal accounts. A good way to do this early on is by opening a bank account for your business. You will probably need a Tax ID number (EIN) and either a copy of the partnership agreement or a business name filing indicating the partners' names. (Here is one example of the documentation banks ask for.)
 

Last updated on January 31st, 2008

   
 
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