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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 attractions 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 formal business structure, reserving a name, and writing a business plan, knowing how to start a business in Illinois is all about the details.
Owning a business in Illinois can give you flexibility, income growth, and control over your workflow and finances. Illinois has distinct advantages for a new business owner, 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.
Marketing, insurance, and financial services tend to do well in Illinois thanks to a rich telecommuting workforce that helps keep operating costs low. If you’re in one of these fields and want to start a business, Illinois could be the place to do it.
Follow these steps to keep your new venture aboveboard and start making money.
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.
Think about including 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 Service Corps of Retired Executives (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.
Before you start serving customers, you’ll need to choose a business structure for your company and, depending on the structure you choose, register it with the Illinois Secretary of State. Many small business owners choose between a sole proprietorship and a limited liability company (LLC). Both have pros and cons.
A sole proprietorship is the simplest business entity to set up. As a sole proprietor, you may not have to file much more than a “doing business as” (DBA) form with your local county clerk’s office to abide by the Illinois Assumed Name Act. Without a DBA, you’ll have to operate under your personal legal name (e.g., John Smith) rather than a more professional-sounding business name (e.g., Smith Automotive).
All business income and losses are reported on your personal tax return, but you won’t have the same liability protection as an LLC. In other words, someone suing or otherwise trying to collect money from the business can go after your personal assets.
An LLC structure usually 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, as a corporation would.
There’s some additional paperwork involved with structuring as an LLC, but not as much as would be required for a corporation.
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 business website, and a small expense to apply for the aforementioned assumed business name, or “doing business as” (DBA) name, if you want or need one.
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.
You have important considerations 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. In addition, your business name must abide by Illinois’s rules for naming businesses.
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, think about registering a domain name for your business website and 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.
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 Internal Revenue Service (IRS). You’re required to have if you have multiple business owners or plan to hire employees. Use this tax ID number to open a business bank account. You can open your business bank account yourself or have a partner do it by creating a special document called a banking resolution. Dedicated business bank accounts will keep personal and business accounts separate. That helps preserve LLC status.
Next, apply for any permits or licenses 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.
Business licenses and permits can be needed on the federal, state, and/or local levels. Because there’s no one central place to confirm whether your own business has all the licensing needed to operate legally, you’ll have to do some research. Our business license report can do the work for you.
Finally, research any insurance requirements for your business. For example, you’ll need workers’ compensation insurance if you have employees. and consider investing in a business owner’s policy to protect your company with general liability, commercial property, or additional coverage options based on your specific needs.
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 that 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 (SEO) 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.
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 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.
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.
If you want to register a business in Illinois like an LLC, corporation, or S corporation, we’re here to help. And, once you’re up and running, check out our other services for helping you run and grow your business.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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 and annual reports. In addition, every LLC in the state must have an Illinois registered agent (we can help you secure one).
Based on local economies, disposable income, crime rates, and unemployment figures, Deerfield, Western Springs, and Hinsdale top the list.
Fees are subject to change, so check the Illinois Secretary of State website to see the current fees for filing Articles of Organization for an LLC.