Ask most people what Illinois is known for and you’ll get a list of references to Chicago, including the Bears, deep-dish pizza, the Cubs, and much more. Cultural cache aside, Chicago also ranks first among Midwest cities for startups, and Illinois cities like Champaign, Peoria, Bloomington, Rockford, and Springfield score high on these lists as well.
Starting a business in the Prairie State can be a great choice, but you’ll have some housekeeping to do before you start to rack up sales. From choosing a business structure, reserving a name, and writing a business plan, knowing how to start a business in Illinois is all about the details.
Benefits of Opening a Business in Illinois
Owning a business in Illinois can give you flexibility, income growth, and control over your workflow and finances. Illinois has distinct advantages for new business owners, including a per-capita personal income 6% over the national average, a less competitive labor market, and plenty of access to capital.
The state’s 4.95% flat tax on personal income is a particular benefit to Illinois small business owners, most of whom claim profits on individual tax returns. The state also serves as a national transportation hub with more than 10 commercial airports and 25% of all U.S. freight traffic moving through Chicago.
How to Start a Business in Illinois Checklist
Marketing, insurance, and financial services tend to do well in Illinois thanks to a rich telecommuting workforce that helps keep operating costs low. Follow these steps to keep your new venture above board and start making money.
1. Create a Business Plan for Your Illinois Company
The phrase “business plan” can sound intimidating, but it’s an important and necessary step when starting a business. A solid plan will underscore the feasibility of your business idea. It’ll also help you forge a plan of action for developing, operating, and growing the business.
Include sections on customer personas, competition, the challenges you’ll face, and how you’ll overcome them. By doing so, you’ll gain credibility with potential investors. Set S.M.A.R.T. goals, look into the market and the competition, and think through your business structure and plans to receive tax breaks, grants, and loans.
Start with the Small Business Administration (SBA) offices in Chicago or Springfield, or any of the SCORE mentors throughout the state. The Illinois Department of Employment Security can also provide information on labor market conditions and industry projections. Likewise, there are different Illinois Small Business Development Centers available that can offer professional guidance for startups and existing businesses.
2. LLC vs Sole Proprietorship: Choose a Business Structure
Before you start serving customers, you’ll choose a structure for your business with the Illinois Secretary of State. Most small startups choose between a sole proprietorship and a limited liability company (LLC). There are pros and cons to both.
A sole proprietorship is the simplest business entity to set up. As a sole proprietor, you won’t have to file much more than a “doing business as” (DBA) form with your local county clerk to abide by the Illinois Assumed Name Act. All business income and losses are reported on your personal tax return, but you won’t have the same liability protections as an LLC.
An LLC structure protects your personal assets from being tied to the company’s debts and liabilities, which is helpful if your company gets sued or goes into debt. Plus, you’ll still pay taxes on profits through your individual tax return, but you’ll avoid being taxed twice for it.
There’s some additional paperwork involved with structuring as an LLC, but you won’t need to shell out big bucks for a lawyer. A registered agent service can serve as your go-between for official paperwork and filing deadlines, often for less than 0/year in Illinois.
3. Determine Your Illinois Business Costs
Your business type will dictate one-time, fixed, and ongoing expenses. A home-based business, for example, won’t have costs for office space or warehousing but may have special transportation and equipment needs. You might have ongoing expenses like phone, internet, and insurance. You may also face the Illinois State LLC filing fee, the cost of creating a website for your business, and a small expense to apply for the aforementioned assumed business name, or “doing business as” (DBA) name.
Estimate your one-time and monthly costs for marketing, employees, healthcare costs, insurance, travel, unemployment insurance, and workers’ compensation expenses. Figure out both your startup costs and scaled-up costs once the company starts to grow.
4: Create a Name for Your Illinois Business
There are two important rules to consider when coming up with a name for your Illinois business. First, it should give at least a general idea of the products or services you offer. Second, it must be unique within the state of Illinois.
So, while Peoria Enterprises doesn’t say much about your offerings, Peoria Landscaping does. To ensure your choice of the business name isn’t already in use by another organization in the state, do a name search on the Illinois Secretary of State website. This will help prevent legal issues, confusion among customers, and ultimately wasted time and money.
Once you’ve secured a name, you’ll be able to register a domain name for your business website and start creating social media profiles on Facebook, Twitter, LinkedIn, and other platforms. If you struggle to come up with a unique and memorable name, consider using a business name generator.
5. Register Your Illinois Business and Open Financial Accounts
Once you’ve chosen your business structure and filed the registration with the Illinois Secretary of State, apply for a federal employer identification number (EIN) with the IRS. Use the tax ID number to open a business bank account. You can do this yourself or have a partner do it by creating a special document called a banking resolution. Dedicated business bank accounts will keep the company’s finances separate from your personal funds. That’s important to preserve LLC status.
Next, apply for any permits or licensing required to do business in Illinois. That starts with a search of the state’s registration, licenses, and permits site. Permits and business licenses vary by industry, so you’ll have to do a little research to determine which agency oversees the regulations in your field.
For example, opening a pet shop will require you to understand the Illinois Department of Agriculture’s pet shop rules. But a business that provides hospice care is licensed by the Illinois Department of Public Health.
Finally, invest in a business owner’s policy to protect your company with general liability, commercial property, or additional coverage options based on your specific needs.
6. Market Your Business in Illinois
After determining your target market, craft a marketing plan that includes the major social media platforms, online communities, and local or online directories. Claim a free business profile on Google My Business to engage with Illinois customers across Google Search and Maps. Also consider joining the Illinois Chamber of Commerce or a local chamber, which refers prospective customers to members first.
Print material, such as brochures and business cards, can elevate your marketing at Illinois trade shows. Search engine optimization can help customers find your business website or blog when they use Google and other search engines.
Finally, customize your marketing approach. While it makes sense for a home-based web design company in Naperville to market globally, a plumber in Carbondale will want to limit marketing efforts to a smaller area.
Examples of Good Businesses to Start in Illinois
With one of the biggest cities in the country, plus miles of farmland, forests, and Great Lake coastline, Illinois supports a wide variety of different business types. Food trucks, florists, coffee shops, blogging companies, and digital marketing agencies can all thrive in the Land of Lincoln.
Consider also starting up a cleaning service, virtual assistant business, consultancy, or a cake shop. And keep in mind that nearly 2 million businesses in the state have fewer than 100 employees, so companies that support other firms can carve out their own niche.
Chill the Champaign
Whether you launch a home-based business in Chicago or lease a retail space in downtown Champaign, the state of Illinois has the resources, workforce diversity, and economic climate to help entrepreneurs start and grow a business. Even during the massive business closures caused by COVID-19, Illinois’s small companies were among some of the most resilient in the country.
How to Start a Business in Illinois FAQs
What business and tax regulations are compulsory for an LLC business in Illinois?
Unless you’ve elected to have your LLC taxed as a corporation, be prepared to pay 1.5% of your business’s net income to the Illinois Department of Revenue. LLCs in Illinois must file articles of organization, annual reports, and register their business names. In addition, every LLC in Illinois must have a registered agent.
What is a good city to start a business in Illinois?
Based on local economies, disposable income, crime rates, and unemployment figures, Deerfield, Western Springs, and Hinsdale top the list.
How much does it cost to open an LLC in Illinois?
Illinois charges a $150 fee to file articles of organization.
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