Everything You Need to Know About Opening a Business in the Land of Lincoln from PRIME Corporate Services.
When it comes to being business friendly, Illinois has a lot going for it. In fact, CNBC’s 2021 list of Top States for Business puts Illinois at the very top of the list for infrastructure, and number three for access to capital. These two aspects, combined with a large workforce, a diverse economy, and a location at the epicenter of North America, make Illinois an appealing place to start a business. Chicago is the state’s largest and most iconic city, but Illinois also boasts several other large cities, charming towns, and miles of farmland. If you’re interested in forming a business in Illinois, you can find everything you need to know right here in our clear and simple How-To Guide.
We’ve got all the info you need to get your business started in Illinois, so read on for more details. Want to skip the required reading and get a faster start? Reach out to one of our PRIME advisors for a free consultation!
Forming a Business in Illinois: Six Simple Steps
We’ve broken the business formation process into six basic steps:
- Name your business and write a business plan
- Choose a location for your business operations
- Decide how you will finance your business
- Choose a legal structure for your business and register your entity
- Identify your business tax obligations
- Obtain all necessary permits and licenses
Step 1: Create a Business Plan
Business plans are the roadmaps of life, getting you from idea to execution quickly and efficiently, using the straightest and most profitable path. The business plan allows you to think through your new business idea and develop a strategy for establishing yourself as a registered business with a clear set of operating instructions. If you’re not sure how feasible your idea is, the Illinois Department of Commerce and Economic Opportunity has a handy Feasibility Checklist you can use. When you’re ready to write your plan for opening a business in Illinois, be sure to include the purpose of your business, the value proposition and competitive advantages, the structure of your business, and your financial plans. The U.S. Small Business Administration (SBA)’s site has some great examples and templates if you want to DIY it, or you can schedule a consultation with a PRIME advisor for personalized help in setting up for your business in Illinois.
One of the first things you will do when planning your new Illinois business will be to choose a name.* Before registering a business in Illinois, make sure your business name is available by checking the database maintained by the Illinois Secretary of State. It is also a good idea to go a quick Google search to make sure there is no risk of your business being confused with another. Choose a business name that means something to you and one that will be easy to use in your marketing efforts. Don’t choose something that is difficult to spell or pronounce, and make sure you can secure a domain name that works for your new Illinois business.
If you are thinking about registering your business in Illinois, you may be tempted to choose a name that reflects your Illinois location. If your business is local and that’s an important part of your strategy and identity, this can be a great strategy. For example, if you specialize in creating personalized gear for University of Chicago students, Chicago College Swag might be a great name for your new business. But if you’d like to design and create for clients all over the country or the world, you may want to consider a more geographically generic business name.
*Note—although the business name is important, it’s ok to pick a name now and decide later that you want to expand to new markets or do business under another name. In that case, you will simply file for a DBA, which allows you to legally operate your business under multiple names. You can check out this article for more information about DBAs, or schedule a consultation with a PRIME advisor for more information.
Step 2: Choose a Location For Your Business
You know you want to register a business in Illinois, but do you know exactly where your business will operate? To choose the right location, you need to understand the specific needs of the business you will be operating. Will you have an office with employees or will you work alone from your home? Will you operate a brick and mortar retail shop in Springfield, Peoria, or another Illinois town? You’ll need to check zoning ordinances and assess the ease of operating your business from that location. How easy will it be to access your supply chain, your customers, and your potential employees?
Step 3: Figure Out the Finances
When you’re forming a new business, it’s important to know how you will pay for your new enterprise. Will you self-fund—using your own savings and paychecks from your current job? Will you solicit money from family and friends or start a crowdfunding campaign? Or will you apply for a bank loan or a federal loan for your business through the SBA (Small Business Administration)? Other options include seeking cash infusions from angel or venture capital investors, and using personal debt or other personal financing options
PRIME advisors always recommend establishing business credit and keeping your business and personal funds separate when possible. To help our clients with that goal, we’ve developed a unique program designed to help you build business credit quickly and efficiently. However you choose to fund your business, you’ll want to think through all the details of your plan. Using personal funds may feel easy, but are you willing to risk your personal credit and assets? Outside investors can also be appealing in some circumstances, but be sure to crunch the numbers and make sure the trade makes sense—almost all investors will demand a return in the form of equity, dividends, or other income. Accepting outside investment often means giving up some of the control and/or profits of your business.
No matter what mix of funding you decide to use when starting a business in Illinois, there are three basic steps that all new business owners should take:
- Open a business bank account: This protects your personal assets by keeping them separate from your company’s assets. It also makes accounting and tax filing more simple.
- Obtain a business credit card: Opening a business credit card helps you separate personal and business expenses and build your company’s credit history. A credit history will become very important as your company grows..
- Set up business accounting: Whether you use specialized software or hire a business accountant, having a system makes annual tax filings much easier and helps you track the performance of your business. If you’re looking for an expert, PRIME has an experienced staff of CPAs who specialize in helping businesses in Illinois and around the country keep more of their earnings through smart tax planning and strategies.
Step 4: Entity Structure and Business Registration
Selecting the right structure for your business is critically important in ensuring your long term success and profitability. You can register a business in Illinois as a sole proprietorship, a partnership, an LLC, or a corporation. The entity structure you choose will affect your filing costs, reporting requirements, and tax situation. In a sole proprietorship, you are the only employee of the business—you take all the risk, you keep all the profits, you pay for all of the losses. A partnership is similar to a sole proprietorship, except in this case two or more owners share all of the risk and rewards of the business. In Illinois, sole proprietorships and partnerships need to register and file the business name (DBA or assumed name) with their local county clerk’s office. (Click here to find your local office.)
Although sole proprietorships and partnerships can be simple and easy ways to set up a business in Illinois, they don’t offer any protection for you—the business owner. If you’ve explored some of the information on our site or had a free consultation with a PRIME advisor, you know we normally recommend registering as an LLC (Limited Liability Corporation). An LLC provides protection for you and your assets by setting up your business as a separate legal entity. Registering as a corporation in Illinois is another option, but that path requires much more stringent reporting and other requirements. Setting up your Illinois business as an LLC gives you both flexibility and protection, and in the state of Illinois the filing fee for an LLC is only $150.
No matter what business structure you choose, follow these basic steps to register your business in Illinois:
- Choose a registered agent: A registered agent is an individual or entity that you legally designate to accept tax and legal documents on behalf of your business.
- Obtain an Employer Identification Number (EIN): The IRS will assign an EIN to identify your business for tax purposes.
- File formation documents: The required formation documents, and the associated fees, will be determined by the business structure you choose.
If you decide to set up your Illinois business as an LLC or corporation, you can find information and register on the Illinois Department of Commerce website. Or reach out to a PRIME advisor and let us handle the entire process for you! Our experts know all the nuances and regulations involved in setting up businesses in Illinois, and we can make the entire process fast and painless for you.
Step 5: Business Tax Responsibilities
Once you’ve registered your business in Illinois, you will need to determine the tax responsibilities of your new business with all of the appropriate federal, state, and local authorities. The Internal Revenue Service (IRS) handles federal tax obligations, while state tax filings are done through the Illinois Department of Revenue (IDOR). The IDOR website contains lots of great information for Illinois business owners. Contact your local municipality to determine if you are responsible for any taxes at the local level.
Step 6: Licenses and Permits
When you are starting a business in Illinois, you will need to secure the required licenses and permits. The best place to start is the Illinois Department of Financial and Professional Regulation (IDFPR), where you will find a list of professions regulated by the state. The list is a great resource as it contains copious amounts of regulatory information, contact information, and links to all of the necessary forms and documents.
You’ve Formed a Business in Illinois…Now What?
You’ve planned, you’ve researched, you’ve filed your paperwork, and you’ve paid your fees. Now you’re ready to focus on what you do best—running your business and making money! Here are a few things you’ll want to consider several things as you move forward:
- Employees: If you need to staff up for your new Illinois business, make a plan to attract qualified candidates and think about compensation and benefits. Make sure you follow all of the relevant federal and state employer requirements. The Illinois Department of Commerce and Economic Opportunity site details your responsibilities as an Illinois employer, and includes a link to the Illinois Department of Employment Security (IDES) site. Most Illinois businesses that have one or more employees are required to make contributions to IDES.
- Insurance: Business insurance helps you manage risk while allowing you to focus on growing your business. Different businesses may need different types of insurance, but everyone should consider General Liability Insurance. Other types of insurance to consider are Worker’s Compensation Insurance and Professional Liability Insurance. You can learn more about Worker’s Compensation Insurance in Illinois here.
- Marketing: A good marketing strategy lets the world know about your new business. Even before you open your doors, you should create a website and social media profiles. Your website can be a simple landing page with contact and service information, or it can be a sophisticated communication and sales tool that is optimized for Google’s search engine. There are many DIY options for building a website, but if you want a site that is truly high performing, you may want to consider hiring a professional. Once your site is built, you can consider using other marketing tools, including Google My Business, email campaigns, and traditional flyers and signs. Digital marketing efforts can be especially important, and positive customer reviews on Google and other sites are priceless as you build your business in Illinois.
Navigating the red tape involved with starting a business in Illinois can be a daunting process, but it doesn’t have to be painful. You can find a large library of information and resources on our blog, and our advisors are just a click away for a free consultation. We’ll help you bring your business to life and stay with you as your business grows, offering comprehensive tax and planning services.
Starting a Business in Illinois: FAQs
How much does it cost to start a business in Illinois?
Registering an LLC or corporation in the state of Illinois costs $150. More information about other types of business entities can be found on the Illinois Department of Commerce and Economic Opportunity website.
Do I need an attorney or accountant to start a business in Illinois?
It may seem like starting a business in Illinois is complicated, but you do not necessarily need professional help. All of the steps, including requesting an Employer Identification Number and filing LLC or corporation registration documents, can be done on your own if you are patient, diligent, and detail oriented. If you’d rather focus on operating your business, PRIME advisors have helped thousands of entrepreneurs get their companies legally registered and set up for success, and they can help you too!
What makes Illinois a good state for starting a business?
Illinois is known as one of the most culturally diverse economies in the world. The state has a strong labor force, good access to capital, and excellent infrastructure to help propel your business to success.