Starting your own business is exciting, but to launch a successful business, it’s important to get started in the right direction. Each state has its own unique regulations and requirements for businesses, especially those starting up. In this article, you will learn the steps to starting a business in Illinois.
14 Key Steps in Starting a Business in Illinois
To start a business in Illinois, you’ll need to follow the same steps as any other state. There are a few specific things you need to do to register your business in Illinois, and you’ll also need to familiarize yourself with the rules and regulations that apply to businesses in the state.
- Determine Your Business Name
- Write a Business Plan
- Choose a Business Structure
The first step to starting your own business is to determine your business name. If you are planning to start a sole proprietorship, then you can use your legal name or an assumed (or fictitious) name for your business.
Once you’ve decided on your business name, it’s best to reserve the name with your state. This protects others from using your chosen name and prevents potential complications.
Visit the website of your local County Clerk’s Office to register your business name.
The next step in starting any business is to conduct market research and write a business plan. This document will outline your business goals, strategies, and how you plan to achieve them. It’s important to be realistic in your planning and to include all the necessary information, including financial models. A well-written business plan can help you secure funding from investors or lenders, and it can also be used as a roadmap for your business.
Before you start your business, it’s important to choose what type of legal structure is right for your company. There are several different structures available, and each has its own set of benefits and drawbacks.
Each structure determines how profits are taxed, who can invest in the business, and how much control each owner has over their respective portion of the business. You should consider all of these factors when choosing a structure for your company.
The most common business structures are:
- Sole Proprietorship – An informal business structure where there is a single owner who owns and operates the business. Advantages of this structure are the ease of setup and flexibility, while disadvantages are that assets are held personally, all profits are taxed as personal income, and there is no separation between the owner’s assets and the business assets.
- General Partnership – A partnership is another informal business structure where two or more people own and operate the business. Advantages of this structure are that it’s easy to setup and there is no requirement to file any legal documents with the state, but disadvantages include that all partners share personal liability for company debts and decisions, profits are taxed as personal income, and each partner has unlimited liability (meaning they are personally responsible for all business debts).
- Limited Liability Company (LLC) – An Limited Liability Company is a formal business structure where the owners of the company are referred to as “members.” An LLC offers its owners limited liability protection, meaning personal assets are protected from business debts and liabilities. Advantages of an LLC include that it offers tax advantages, managerial flexibility, protection from creditors, and ease of setup. The main disadvantage of a Limited Liability Company is that it requires filing articles of organization with the state, which entails fees and paperwork.
- C Corporation – The final formal business structure is a C corporation. A corporation has different owners than an LLC (shareholders), but like an LLC, you have personal asset protection from business debts and liabilities. Advantages of this company include limited liability for shareholders, separate taxation from the owners, and ease of setup. The main disadvantage of a C corporation is double taxation for shareholders (dividends are taxed as personal income and then also as corporate income).
- S Corporation – An S corporation is a special type of C corporation where the company meets certain requirements for tax elections. Advantages of an S corporation are similar to advantages of a C corporation, but the main disadvantage is that the shareholders must be US citizens.
Find the appropriate registration forms for your chosen business structure on the Office of Illinois Secretary of State website.
Choose a Business Location
The tax implications of owning a business are different depending on the location where you set up shop. The first step to deciding on a business location is to ensure your municipality doesn’t have an ordinance prohibiting the type of business you want to run. If it’s allowed, think about what areas would be best given your company’s desired image and customer base.
Once you’ve settled on a location, research the cost of commercial property in that area. You should also factor in the cost of utilities and business insurance. Finally, think about how accessible your location will be to employees and clients alike.
Visit the website of your local County Clerk’s Office for more information on local regulations, permits, and more.
Business Licenses and Permits
To operate as a business in Illinois, you must obtain the proper licenses and permits. There are different regulations for each type of business, but here are some guidelines for common types.
No matter what business structure you choose, the state of Illinois requires that you register with the state if you conduct business in Illinois or with Illinois customers. You can easily register your business online here, or download, complete and mail the Illinois Business Registration Application (Form REG-1).
If you plan to hire employees, buy or sell products wholesale or retail, or manufacture goods, you must register with the Illinois Department of Revenue (IDOR) and if you meet the minimum requirements, register your business with Illinois’ Department of Employment Security to pay unemployment insurance.
You must also obtain a federal employer identification number (EIN) through the Internal Revenue Service by applying online via the IRS website.
Depending on the industry, you may also need licenses or permits from the Occupational Safety and Health Administration (OSHA), the Environmental Protection Agency (EPA), and/or one of the many permits regulated by the Illinois Department of Financial and Professional Regulation (IDFPR). You can learn more on their website.
Open a Business Bank Account
To keep personal and business expenses and income separate, you’ll need to open a business bank account for your company. You can do this by visiting the bank of your choice with the required documents (business license, federal employer identification number (EIN), articles of organization).
Once you’ve opened an account, you’ll be able to apply for a merchant account and accept credit card payments.
Learn About Intellectual Property Ownership
If your business is creative in nature, you may want to protect your ideas with copyrights or patents.
Copyrights apply to original works of authorship that are specifically expressed in a tangible medium (i.e., written down, recorded on film, etc.).
Patents can be issued for new inventions or substantial improvements of existing inventions. This might be applicable if you’ve invented a new medical device, for example.
If your business relies on brand recognition, you’ll need to understand trademark laws in Illinois. A trademark is any word, phrase, symbol, design, image, or sound that identifies a product and distinguishes it from other goods in the marketplace. Registering trademarks with the US Patent and Trademark Office (USPTO) is a good first step to protecting your business name and brand.
The United States Patent and Trademark Office (USPTO) provides helpful information on how to trademark your company’s name or logo. You can learn more about it here.
Get Business Insurance
Whether you’re growing a new business from scratch or expanding an existing one, it’s important to get the right mix of insurance coverage for your company. A number of different types of insurance are available for a variety of circumstances.
Here is a list of some basic forms that may be necessary:
- Workers’ Compensation Insurance: This type of insurance can help cover medical expenses and compensate you for lost wages if an employee is injured.
- General Liability Insurance: This insurance is all about protecting your company from lawsuits, such as those involving slip and fall accidents on the premises or copyright infringement.
- Commercial Auto Insurance: Vehicle insurance is a must for any business that relies heavily on transportation.
- Umbrella Insurance: Umbrella insurance is liability coverage above and beyond the limits of your other policies. This could prove necessary if there are numerous claims brought against you or if a lawsuit reaches into high six-figures or above.
- Professional Liability Insurance: This type of insurance can help protect your business when it is sued by a client for negligence or when an employee makes a mistake that results in harm to others.
- Business Interruption Insurance: In the event that your business must shut down due to property damage from weather or other circumstances, business interruption insurance can help protect your income.
Establish Your Accounting and Tax Filing System
Many businesses need to keep both financial and tax records. If you’re looking for a simple way to get started, online accounting software such as QuickBooks may be helpful. Setting up QuickBooks is fairly simple, but if you prefer to use a business accountant for keeping records it’s still important to develop your own filing system.
Taxes will be required at several different junctures of the business cycle. You should establish a system that works for you, whether you choose to file quarterly or annually.
Every tax situation is unique, so be sure to contact the Illinois Department of Revenue if you have any questions regarding your individual accounting and filing requirements.
Create a Marketing Plan
Even if your product or service is the absolute best on the market, no one will know about it unless you tell them. You’ll need to build a marketing plan that sets goals for your company and establishes strategies for meeting those goals in line with your budget.
Your marketing plan should include a description of your target audience, how you will reach that audience (i.e., social media, events, etc.), and the methods by which you will measure your success throughout the entire process.
Obtain Funding For Your New Illinois Business
It’s not always easy to get the money needed to start your business. The Small Business Administration (SBA) is a great resource for small businesses because it offers small business loans and grants for both new and existing companies. Other funding options include:
- Grants – These aren’t as hard to find as you might think. There are state and federal grants available for businesses in all kinds of industries, so look into small business grants before spending time on other options.
- Angel Investors – Angel investors are wealthy individuals who invest their money in local startups or entrepreneurs’ business ideas. Unlike venture capitalists, they tend to be more hands-off with the company, but you’ll have to do a lot of legwork to find them.
- Venture Capitalists – Venture capitalists are professional investors who invest in businesses that show potential. In exchange, they get a percentage of the company and a seat on the board of directors. They tend to be very hands-on with the companies they invest in, so they also expect a big return on their investment.
- Business Loans – These loans are easier to qualify for than most people think, and they’re offered by banks, credit unions, and even non-traditional lenders like peer-to-peer lending networks.
- Credit Cards – There’s nothing wrong with using a business credit card to finance your company if you pay off your balance each month. Just be sure to find a card with low interest and no annual fee.
- Friends & Family – These loans are typically considered the riskiest, but if you can manage to pay them back, they make up a good portion of small business funding.
Recruit and Hire Employees
Whether it’s just one person or a team, you’ll need to go through the process of recruiting and hiring employees. This involves advertising for open positions, interviewing candidates, and making offers as needed until you find the right people for your Illinois business.
Once hired, you’ll need to work with your management team to draft an employee handbook. The handbook should include details about how you expect employees to conduct themselves during their time on the job, including dress code, workplace behavior, and compensation.
When you’re just starting out, it’s easy to get overwhelmed by all the administrative responsibilities that go into running a business. That’s why you should create and implement a system for organizing the paperwork and records that will arise as your business grows and evolves.
The best way to keep your paperwork straight and stay on top of it is to automate as much of the process as possible. Use software like QuickBooks to create invoices, track accounts receivable and payable, generate reports, and perform other important tasks.
Additionally, you should set up a filing system that makes sense for your business type, whether that means using filing cabinets or simply storing files on an external hard drive.
Open for Business
Once you’ve created a well-crafted business plan, obtained funding, recruited and hired employees, and organized your paperwork and records – it’s time to open for business.
As an entrepreneur, you’ll be the driving force behind your company’s success or failure. You’ll need to wear many hats, from managing employees and handling finances to marketing your products or services.
The best way to learn how to start a business is by immersing yourself in the field you want to enter. Attend seminars, read books that are relevant to your industry, join professional associations, and network with others who have already achieved success in the same field.
Make sure to take advantage of all the resources available to you, including Google and other search engines, libraries and offline books, event listings and local business associations.
For more information on starting a business in Illinois, visit the Illinois Secretary of State website.
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