How To Start a Construction Company in Illinois

But once you understand state and city-specific nuances, you can build a thriving construction business. One missed step, however, and you risk losing money, licenses, and even your reputation.

I’ve put together step-by-step guidance on how to start a construction company in Illinois so you have a clear path forward and can hit the ground running. 

Starting a Construction Company in Illinois: A Step-by-Step Guide

Here are the 8 key steps to follow when starting a construction business in Illinois. 

• Understand the Illinois construction landscape

Understanding the lay of the land is key to finding a sector or location that sets you up for success. 

According to the Cumming Group’s latest construction market analysis, Illinois’ construction industry is thriving due to urban growth, record investments, and strong federal support. 

Most of the action is concentrated in Chicagoland, where you can find a wide range of opportunities, including residential redevelopments, commercial projects like casinos and quantum computing labs, and major public infrastructure projects. 

Statewide, you can see some investment in manufacturing facilities and healthcare projects, but there’s a significant focus on developing data centers in smaller cities, such as Yorkville and Elk Grove. 

So, if you’re thinking of stepping into the construction space or expanding your existing business into Illinois, consider your personal area of interest and expertise, but also think about sectors that are expected to continue growing versus those that are taking a back seat in the state. 

This Might Interest You

Read our complete guide to 8 types of construction businesses you can start, including pros, cons, and real-life examples for each. 

• Choose your business structure and consider Illinois taxes

Next, you must decide how you want to legally set up your company in Illinois. This determines how much risk you carry, how you pay taxes, and how clients and lenders view your business. 

Here are the key types of business structures, who should consider them, and their associated state tax rates in Illinois. 

Legal structure	Information	Illinois state taxes*
Sole proprietorship	-This is the most affordable and straightforward type of business entity to establish in Illinois. -There’s no legal separation between you and the business, so income is reported on your personal tax return. -Your personal assets are at risk if a client sues or the company is in financial trouble. -This structure is better suited for solo contractors or small companies taking on light, low-risk residential projects—think handymen, painters, and electricians.	4.95% (individual income tax)
General or limited partnerships	-This structure works well if you’re going into business with a family member, friend, colleague, or industry peer. -You split profits and liability (your legal and financial responsibility for debts or claims) with your partner. -A limited partnership lets 1 person manage the day-to-day, while the other could choose to just be an investor.  -Partnerships lack the liability protection and credibility needed for larger commercial or infrastructure projects in Illinois.  -Profits “pass through” to partners’ personal returns. Each partner pays income and self-employment taxes on their share.	4.95% individual income tax + 1.5% personal property replacement tax
Limited Liability Company (LLC)	-LLCs are the sweet spot for small to medium-sized contractors in Illinois.  -Electing this structure protects your personal assets. -Single-member LLCs are taxed like sole proprietorships, and multi-member LLCs may be taxed like partnerships.  -You can also elect C-corp taxation, where you pay corporate income tax, or an S-corp, which passes income to owners’ personal returns.	Depends on single vs. multi-member, or C-corp vs. S-corp taxation
Corporations	-Corporations are legally separate from their owners, so you have no personal liability in case of lawsuits or debts.  -Ownership is divided into shares, making it easy to bring in outside investors or transfer ownership when needed.  -C-corps pay corporate income tax, and shareholders are taxed again on their dividends.  -S-corps avoid this double taxation by passing income through to owners’ personal returns, but they have strict rules on the number and type of shareholders.  -This structure is best if you need to raise capital, scale fast, and bid on large-scale commercial, residential, or public projects in Illinois.	C-corp: 7% individual income tax + 2.5% personal property replacement tax S-Corp: 1.5% property replacement tax

*Doesn’t include federal taxes.

• Name your business and register with Illinois authorities

Once you’ve chosen your structure, you must name and register your business with the relevant authorities. Pick a name that’s professional, easy to remember, and not already taken by another business. You can use the Illinois Secretary of State’s Business Entity Search to check if you’re good to go, and even reserve a name before filing your paperwork. 

Here’s how to register your company. 

• File your Articles of Organization (for LLCs) or Articles of Incorporation (for corporations) with the Illinois Secretary of State to formally legalize your business.
• Obtain a Certificate of Good Standing from the Secretary of State, as municipalities and contractors often need this document as proof that your business is active and compliant.
• Register with the Illinois Department of Revenue (IDOR) electronically via MyTax Illinois (Form REG-1) to obtain a Certificate of Registration and your taxpayer ID, which you’ll need for sales tax, payroll tax, and bidding. 
• File a DBA (Assumed Business Name) with your county clerk if you want to operate under a different name than your sole proprietorship or partnership—for example, Windy City Builders instead of WCB Construction LLP. LLCs and corporations must file with the Illinois Secretary of State. 
• Chicago-based businesses must register for a business license from the Department of Business Affairs and Consumer Protection.

Pro Tip

Use the Illinois Business One-Stop portal to handle entity registration, tax setup, and employer accounts from a single place.

• Seek local business support and funding in Illinois

Securing funding is necessary for getting your business up and running and boosting your credibility. It shows lenders and clients that you’re vetted and backed by others. And, it can help you compete for bigger projects. 

Here’s a roadmap for raising capital if you need it. 

Use DCEO’s Business Information Center

The Illinois Department of Commerce and Economic Opportunity (DCEO) doesn’t just provide guidance on regulatory requirements for your construction business. It also gives you access to grants, loans, tax credits, and more via incentive programs. 

For example, construction companies and employees could qualify for: 

• The Blue Collar Jobs Act tax credit gives back up to 75% of income taxes on wages paid to construction workers in specific projects.
• You can get sales tax exemptions on building materials if your construction work is in an Enterprise Zone or similar program.
• Small Business Capital and Infrastructure Grants fund new construction, expansions, or renovations.
• The EDGE tax credit incentivizes businesses to expand or relocate in Illinois by offering them tax credits.

Tap into diversity-driven funding initiatives if you’re eligible 

Programs like SCALE UP, run by the Illinois Treasurer, provide women, ethnic minorities, military veterans, and other eligible construction owners with access to affordable loans through partner banks. Similarly, the Business Enterprise Program (BEP) helps construction firms owned by women and other minorities bag public projects.

Other funding options 

Construction business owners looking for access to emergency relief funds in Illinois can apply through programs like the Small Business Emergency Loan Fund, which provides low-interest loans of up to $50,000, or Downstate Stabilization Grants, which offers up to $25,000 working capital. 

• Meet Illinois licensing requirements

There’s no statewide general Illinois contractor license, so you’ll need to apply for licenses depending on the municipality and construction sector you’re operating in. Below, I’ve provided examples of licenses that could apply to different locations and types of construction services. 

License	Who needs to apply	Where to apply
General contractor license (Chicago), Class A-E, depending on project size and insurance	All Chicago construction general contractors need to apply.  Subcontractors, specialty traders like plumbers or electricians, or companies only providing building materials don’t need this license.	Chicago Department of Buildings
Municipal licenses (Aurora)	All general contractors operating in residential or commercial sectors in Aurora must apply for Aurora’s contractor licensing.  There’s a separate license for public works contracting.	Aurora Contractor Registration portal
Municipal license (Joliet)	All general contractors must register, and certain subcontractors (electrical, plumbing, HVAC) also need local registration.	Joliet City Clerk’s office (local application).  View the full list of licenses required here.
Rockford contractor registration	General and specialty contractors must register for their specific business area if they’re working on larger residential and commercial jobs.  Minor jobs don’t require a license, but state specialty trade licenses apply (see below).	Rockford City Hall – Building and Permits Division.  View all forms and applications here.
Peoria contractor registration	General contractors working on permitted projects in Peoria must apply.  Subcontractors will follow state licensing.	Mail to City of Peoria, Office of Accounts Receivable.  View the application form here.
Statewide Specialty Trade Licenses (E.g., Plumbing, Roofing, Asbestos)	Any business or individual performing these specialty trades anywhere in Illinois must hold the relevant license.  If you’re a general contractor, you can subcontract this work to licensed professionals instead of holding the license yourself.	Illinois Department of Public Health for Plumbing and Asbestos abatement.  Illinois Department of Financial and Professional Regulation for Roofing.

Did You Know?

Many contractor and subcontractor licenses have expiration dates. You can use Connecteam’s team documents center to store existing licenses and set an expiration date to get timely reminders for renewal. 


• Get mandatory insurance and secure bonding in Illinois

Here are the types of insurance coverage and bonding you’ll need to protect your own business and your clients in Illinois. 

General liability insurance: 

• This covers injury or property damage claims. 
• You’ll need it before pulling permits in many cities, including Chicago.
• Get quotes from licensed private insurance agents like The Hartford or Next Insurance. 

Workers’ compensation insurance: 

• It’s mandatory for all Illinois businesses with employees. 
• It protects your business if a worker gets hurt on the job. 
• Apply through licensed insurers or request coverage through the Illinois Assigned Risk Plan if you’re unable to obtain coverage from standard providers due to high-risk operations. 

Commercial auto insurance: 

• It’s needed for any vehicles used in business in Illinois. 
• Minimum liability standards apply, so talk to an agent to obtain a compliant policy. 

Builders’ risk insurance:

• This covers damage to structure or materials used during construction—for instance, theft, vandalism, or weather damage. 
• Some clients or lenders require it. 

Surety bonds:

• Public Construction Bonds are required on most public contracts over $150,000 in Illinois.
• They guarantee project owners that their work will be completed and subcontractors will be paid. 
• Municipalities like Aurora need surety bonds to qualify for a contractor license.

• Meet Illinois zoning and permit requirements

Zoning laws and local permits are required all over Illinois. Skip them, and you risk fines, stop-work orders, or, in some cases, having to tear down your building. To know which permits apply and what documents to prepare, contact your local building department directly.

Here are some of the more generic ones.  

Zoning compliance and building permits

Check with your local zoning office before applying for permits. Zoning determines whether the land you want to build on is residential, commercial, or industrial. It also sets limits like building height or setbacks, and sometimes regulates parking or density.

You must get the necessary permits from your city or county. For example, in Chicago, apply through the Department of Buildings Permit Portal. They even offer tracks, from the Easy Permit Program for small jobs to full Standard reviews for larger builds. 

In Illinois, if you’re within city limits, permits and zoning come from your city’s building or planning department (like Chicago, Aurora, or Peoria). But if you’re in an unincorporated area like Cook County, the county government handles zoning and permits.

Environmental permits 

Large projects may trigger state rules around environmental impact. For instance, if you disturb 1 acre or more, you’ll need a Stormwater permit and a Stormwater Pollution Prevention Plan. For asbestos and other hazardous materials, you’ll need separate permits (as previously discussed). 

• Comply with Illinois labor laws

Unless you’re a solo specialty trader or subcontractor, you’ll need to hire W2 employees or 1099 contractors for everything from onsite work to admin roles. Staying current with Illinois labor laws is crucial for avoiding penalties, prohibited projects, and civil claims. 

Key labor laws to know include: 

• Employer Misclassification of Workers laws penalize construction companies for misclassifying workers—for instance, classifying employees as 1099 contractors to avoid providing benefits. 
• Wage and Hour laws cover minimum wage, when workers must be paid, and rules for recordkeeping. The minimum wage is $15/hour as of January 2025.
• Overtime, breaks, and rest requirements determine things like when overtime kicks in (in Illinois, it’s after 40 hours in a week) and tell you how much you owe workers for overtime (in Illinois, you must pay 1.5x the standard wage). 
• The Wage Payment and Collection Act determines pay frequency and ensures timely payments.  Currently, employers must pay wages at least semi-monthly, and wages must be paid no later than 13 days after the end of the pay period in which wages were earned. 
• The Prevailing Wage Act states that public works contractors must pay the county’s set wages, including fringe benefits, and you must submit certified payroll records as proof. 
• You must withhold state income tax from workers’ paychecks and pay unemployment insurance (UI).
• Illinois OSHA (Occupational Safety and Health Administration) sets and enforces regulations around safe and healthy working conditions on construction sites. 

Did You Know?

Connecteam provides a host of features to keep you compliant with labor laws. For example, the employee time clock and time off management let you track work hours, set breaks, prevent overtime, and pay employees fairly, while digital forms let you create safety checklists, view incident reports, and more. 

How Much Does It Cost To Start a Construction Business in Illinois?

The cost of starting a construction company in Illinois varies greatly depending on your chosen location, type of construction business, team size , and so on. The lowest possible cost to start a bare-bones construction LLC is approximately $2,425. 

Here’s the breakdown:

Don’t forget about costs for running your business, which include purchasing tools and supplies, marketing your construction business, and hiring and paying your workers. 

Tips for Starting a Construction Business in Illinois

Here are some additional top tips: ghfghfh

• Make the most of Illinois’ green building incentives: Cities like Chicago offer expedited permitting, fee reductions, and more for residential, commercial, and institutional projects that meet LEED or sustainable construction standards.
• Be aware of Cook County’s special use taxes: Contractors working in or around Chicago may incur use tax on materials, tools, or equipment. Budget for them in advance.
• Register with the Illinois Procurement Gateway (IGP): This centralized pre-qualification system for state-funded or infrastructure projects can speed up approvals and improve your chances of winning public contracts.
• Use the Capital Development Board (CDB) resource hub: Bulletins and notices on this board can give you early insights into upcoming opportunities if you plan to work on state facilities.
• Check local apprenticeship requirements: Some municipalities (for example, Chicago) require public works contractors to hire apprentices from state-approved programs.
• Tap into union networks: Illinois’ strong construction unions might be a good place to build relationships and access skilled labor pools.
• Opt for construction management software with free small business plans, like Connecteam. 

FAQs

Disclaimer

This guide is provided for general informational purposes only and does not constitute legal, tax, or professional advice. Construction licensing, labor laws, permitting requirements, and tax rules in Illinois are subject to change and may vary by city, county, or project type. Compliance obligations also depend on the specific facts and circumstances of your business. Before taking action, consult with a qualified attorney, accountant, or the appropriate state or local authority to ensure you meet all legal and regulatory requirements.