The rules where you work $17
A first 30 days checklist, everyday forms, licenses, workers’ comp and taxes for Illinois, with a yearly calendar. Instant PDF download.
Buy the packet: $17Digital product, all sales final. Informational only, not legal, financial, tax or business advice.
What Illinois expects from a new trade business
Illinois leaves most building trades to the towns but licenses roofers and plumbers at the state level. Construction is named outright in the workers' comp law, so there's no headcount minimum. And its lien law gives you two different clocks, four months and two years, depending on who you're up against.
Roofers and plumbers go through the state. Most others don't.
The state licensing laws here reach specific trades. Roofers get a limited or unlimited license through IDFPR, with a $10,000 or $25,000 bond and a qualifying party on your payroll. Plumbers and plumbing contractors are licensed by the Department of Public Health.
These laws don't set up a state license for general contractors or handymen. Electrical runs through towns: a municipality can require an electrical contractor to register for $25 a year, and one town's registration has to be honored by the others. Call the building department before you bid, because towns can have their own rules.
Home repair and remodeling over $1,000 needs a written contract with the total cost, plus the state's consumer rights pamphlet and a signed acknowledgment. Smaller jobs still get the pamphlet. Anyone in the home repair business also has to carry liability insurance: $100,000 per person and $300,000 per occurrence for bodily injury and $50,000 for property damage, plus $10,000 for work not up to code, unless you have a $1,000,000 net worth. A construction attorney can build this into your paperwork.
Source: 225 ILCS 335/3, roofing contractor license · IDPH plumbing licensing · 65 ILCS 5/11-33-1, electrical contractor registration · IDFPR list of licensed professions · 815 ILCS 513, Home Repair and Remodeling Act (Sections 15, 20, 25)
Who to call: an attorney near you
Construction is automatically in. No minimum headcount.
Illinois lists building, remodeling, demolition, excavating and electrical work as extra hazardous, and the comp law applies to those employers automatically. Hire one person and you're in.
A sole proprietor, partner or LLC member can elect not to cover their own injuries. Corporate officers can withdraw themselves by written notice to the carrier. Ask your agent how that plays out for you.
Your uninsured subs are your problem. If you hire a contractor or sub who isn't insured, you can owe comp to their employees for an accident on the job premises, then try to recover it from them. And paying someone on a 1099 doesn't make them a sub. The Employee Classification Act treats them as your employee unless you can meet its test.
Knowingly going without can bring a work-stop order, fines up to $500 a day with a $10,000 minimum, and a Class 4 felony charge, and owners can be hit personally. An insurance agent who writes contractors can set this up right.
Source: 820 ILCS 305/1, definitions and contractor liability · 820 ILCS 305/3, extra hazardous, officers and owners · 820 ILCS 305/4, insurance and penalties · 820 ILCS 185/10, Employee Classification Act
Who to call: an insurance agent near you
Getting paid: two clocks, four months and two years
If you contract with the owner:
- Record your claim within 4 months of completion, or of finishing extra work, to hold your lien against other creditors, lenders and buyers. Against the owner alone you have 2 years, but don't count on that if the house is being sold or refinanced.
- Sue within 2 years of completion. If the owner or anyone with an interest serves a written demand, you have just 30 days to sue or the lien is forfeited.
- On any job, the owner is due your sworn list of who's owed what before paying you. On an owner-occupied single-family home, also give the required boldface notice before the first payment, and written notice within 10 days after recording a lien.
If you're a sub or supplier, serve written notice on the owner of record and any known lender within 90 days of completing your contract. The law gives no late-notice break on that one. On an existing owner-occupied single-family home, you also have to notify the occupant within 60 days of first furnishing. A late 60-day notice protects you only for what the owner hasn't already paid out.
Not paid 10 days after your notice? You can record or sue, within the same 4-month and 2-year limits. The law doesn't spell out whose completion counts for a sub, so count from your own last day. A construction attorney can set up your forms.
Source: 770 ILCS 60, Mechanics Lien Act (Sections 1, 5, 7, 9, 21, 24, 28, 34)
Who to call: an attorney near you
You pay use tax on your cost. Don't bill it as sales tax.
When you turn materials into real property, Illinois treats you as the end user. You owe tax on your cost of the materials. Buy from Illinois-registered retailers and you can just pay them. Buy from an out-of-state seller who isn't collecting Illinois tax and you have to register and pay the use tax yourself.
Listing materials and labor separately doesn't change that. You still owe tax only on what the materials cost you, not on your markup. If you bill a line called tax on installed materials, the state treats it as an overcollection that has to go back to the customer or to the state. Build it into your price, or show it as reimbursement for taxes paid.
Fabrication works in your favor if you do it yourself: only your actual material cost is taxed, not your processing. Sub out the fabrication to a firm that also supplies the material, and that fabrication counts as part of your taxable cost. A CPA who works with contractors can tell you where your work falls.
Source: 86 Ill. Adm. Code 130.1940, construction contractors · IDOR Sales Tax Audit Manual, ch. 13, construction contractors
Who to call: a CPA or tax pro near you
LLC, sole proprietor, or S-corp?
You file with the Illinois Secretary of State for $150, and the annual report is $75, due before the first day of your anniversary month. If it's still unfiled by the first day of the second month after, the penalty is $100, and the state can dissolve the company.
Illinois taxes individuals at a flat 4.95%. Partnerships and S-corps also pay a 1.5% replacement tax on net income, so that's worth asking about before you elect.
When an S-corp is worth it depends on what the business clears after your floor rate. Bring your numbers to a CPA who works with contractors.
Source: 805 ILCS 180/50-10, LLC fees · 805 ILCS 180/50-1, annual reports · 805 ILCS 180/50-15, late penalty · Illinois Department of Revenue, income tax rates
Who to call: a CPA or tax pro near you
Education, not legal or tax advice. Rules change. Confirm anything here with a licensed pro in Illinois before you rely on it. Last updated November 2026.