Illinois is the fifth-largest restaurant state in the country, with Chicago accounting for the majority of independent restaurant activity. The Illinois Restaurant Association estimates over 25,000 independent restaurants operate in the state. Closing one involves state-level compliance, Chicago-specific requirements, and a liquor licensing system that is more complex than most owners realize.
Illinois Liquor Control Commission
State liquor licenses in Illinois are issued by the Illinois Liquor Control Commission (ILCC). When you close, you must surrender your state license by submitting written notice to the ILCC. However, if you operate in Chicago, you also hold a City of Chicago liquor license issued by the Chicago Department of Business Affairs and Consumer Protection (BACP). Both licenses must be surrendered separately.
Chicago liquor licenses have secondary market value, particularly in high-demand neighborhoods like River North, Wicker Park, and Lincoln Park. A Chicago tavern license can sell for $10,000 to $50,000 depending on location. Do not surrender without first exploring the transfer option.
Illinois Final Paycheck Law
Under the Illinois Wage Payment and Collection Act (820 ILCS 115), if you discharge an employee, final wages are due at the next regular payday. Illinois requires payout of all accrued, unused vacation if your written policy provides for it -- and unlike Texas, Illinois courts have found that a consistent practice of paying vacation creates an implied obligation.
The Illinois Department of Labor enforces wage payment violations. Penalties include the unpaid wages plus 2% per month interest plus attorney's fees. File a complaint response within 30 days if you receive a wage claim.
Illinois WARN Act
Illinois has its own WARN Act, the Illinois Worker Adjustment and Retraining Notification Act (820 ILCS 65), which mirrors the federal law in most respects. It applies to employers with 75 or more full-time employees who lay off 25 or more employees within a 30-day period. Required notice is 60 days to the Illinois Department of Commerce and Economic Opportunity (DCEO) and to affected employees.
Illinois Sales Tax
File a final sales tax return with the Illinois Department of Revenue. Illinois has a complex sales tax structure -- food and beverage sold for immediate consumption is taxed at the full rate (6.25% state plus applicable local rates), while grocery items are taxed at a reduced rate. Ensure your final return correctly categorizes all sales. Cancel your Illinois Business Registration after the final return is accepted.
Chicago-Specific Requirements
If you operate in Chicago, you hold a City of Chicago Business License in addition to state licenses. Notify BACP of the closure and request license cancellation. Chicago also imposes a Restaurant Tax (0.25% of gross receipts) that must be reported and remitted on a final return to the Chicago Department of Finance.
Illinois Secretary of State Dissolution
To dissolve an Illinois LLC, file Articles of Dissolution (Form LLC-35-15) with the Illinois Secretary of State. For an Illinois corporation, file Articles of Dissolution (Form BCA-12.20). The filing fee is $5 for LLCs and $100 for corporations. Illinois requires that all state taxes be paid before dissolution is approved.
For the full cost picture, see What Does It Actually Cost to Close a Restaurant. For the lease negotiation, How to Negotiate a Restaurant Lease Buyout covers the key leverage points.
The Correct Sequence
Determine WARN Act applicability, notify employees, pay final wages by next regular payday, file final Illinois and Chicago sales tax returns, cancel all licenses (state and city), file final state income tax return, obtain clearance, file dissolution with the Secretary of State.