Does a Nonprofit Need a Business License in Illinois?
Nonprofit organizations serve important roles in their communities, providing charitable, educational, religious, and social services. If you are starting a nonprofit in Illinois, you may be wondering whether your organization needs a business license to operate legally. The answer depends on several factors, including the type of nonprofit, its location, and its activities. Below, we break down Illinois law regarding nonprofit licensing requirements and what organizations need to do to stay compliant. For customized legal advice and assistance tailored to your specific situation, contact MacDonald, Lee & Senechalle, Ltd., to speak with a skilled and knowledgeable Chicago, Illinois, non-profit business lawyer.
Illinois Business Licensing Requirements for Nonprofits
While Illinois does not have a statewide business license requirement, some municipalities require all businesses—including nonprofits—to obtain local business licenses or permits. Nonprofits should check with the city or county where they operate to determine whether they need a business license.
For example:
- The City of Chicago requires most businesses, including some nonprofit organizations, to obtain a business license through the Department of Business Affairs and Consumer Protection (BACP). Certain nonprofit organizations, such as religious institutions, may be exempt from this requirement depending on the activities conducted.
- Other municipalities, such as Naperville and Springfield, may also have specific licensing requirements that apply to nonprofits operating within their jurisdictions.
Registration and Compliance for Illinois Nonprofits
Even if your nonprofit does not need a business license, it must comply with several other state requirements to operate legally in Illinois.
1. Registering with the Illinois Secretary of State
Many nonprofit organizations choose to incorporate which requires filing Articles of Incorporation with the Illinois Secretary of State under the General Not For Profit Corporation Act of 1986 (805 ILCS 105/101.01 et seq.). This registration provides the organization with independent legal status and enables it to apply for tax exemptions.
2. Registering with the Illinois Attorney General
If a nonprofit solicits charitable contributions, it must register with the Illinois Attorney General’s Charitable Trust Bureau under the Solicitation for Charity Act (225 ILCS 460/0.01 et seq.) with certain limited exceptions. This applies to most nonprofits that accept donations from the public.
3. Applying for Tax-Exempt Status
Nonprofits seeking exemption from state sales tax must file Form STAX-1 with the Illinois Department of Revenue. To be recognized as a 501(c)(3) tax-exempt organization, most nonprofits must apply to the IRS using Form 1023 or 1023-EZ with some exceptions such as churches.
Municipal Licensing Exemptions for Nonprofits
Some cities in Illinois provide exemptions for nonprofits from business license requirements. However, exemptions are not automatic, so nonprofits should check with local authorities to confirm whether an exemption applies to them.
Special Licenses for Certain Nonprofit Activities
While a general business license may not always be required, some nonprofits may need specific permits or licenses for certain activities, including:
- Fundraising and Raffles: Nonprofits conducting raffles must obtain a raffle license under the Illinois Raffles and Poker Runs Act (230 ILCS 15/0.01 et seq.).
- Food Service: Nonprofits that serve or sell food may need health permits from local health departments.
- Childcare and Educational Services: Nonprofits providing childcare or educational programs may require additional licensing from the Illinois Department of Children and Family Services (DCFS).
Contact an Experienced Chicago Area Nonprofit Business Lawyer Today
Whether a nonprofit in Illinois needs a business license depends on the municipality in which it operates and the nature of its activities. While Illinois does not impose a statewide business license requirement, many cities and counties do. To ensure compliance, nonprofits should check with local government agencies and obtain any necessary licenses, permits, and registrations. Consulting with an experienced business law attorney can help nonprofits navigate these requirements and maintain good standing with state and local authorities.
If your nonprofit needs legal guidance on registration, compliance, or licensing issues in Illinois, contact MacDonald, Lee & Senechalle, Ltd. Our experienced attorneys can help your organization meet all legal requirements and focus on its mission.
