You’re about to embark on a long and exciting journey, one full of hard work and rewards: starting a new business.
With wide eyes and big dreams, you’re about to enter the world of business ownership.
But beyond the initial thrill of the startup decision, there’s a lot to consider. In fact, if you’ve never done it before, starting a business can seem like an intimidating mountain of work. Out of all your responsibilities and tasks, you might not even know where to start.
But have no fear. The good news is that once you have everything planned out and understand the process, the formation process is smooth sailing. And this is your go-to guide.
Everything you’ve been wondering about, everything you need to do, every question you have – it’s all right here. By the time you’re through these 16 steps, you’ll be a bonafide business owner who’s prepared for sustained success.
Illinois Entrepreneur Hack
When you form a business through business formation services (Example: ZenBusiness and LegalZoom), they’ll register your business with the state and help you check off most of the startup-steps in this list. They assist you with everything from building a website to opening a business bank account.
If you’d like to cut through the clutter and compare the best LLC services, see our comparison of the top 7 deals.
1) Write a Business Plan
Jumping into this endeavor without goals, directives, or a sense of direction can lead to a scattered, unproductive business.
A business plan lays the groundwork for your future success. It helps you analyze key elements of your business and forge pathways to achieve your goals. Here are a few things you should consider including in your business plan:
- Executive Summary (a separate document that gives a complete overview of your business’ purpose, plans, goals, competition, opportunities, etc.)
- Company description
- Market Analysis (opportunities, competition, etc.)
- Managerial or organizational structure
- Products and/or services
- Marketing strategies
- Funding goals
- Financial projections
Business plans aren’t just great for internal operations, but they give your business legitimacy in front of potential investors, customers, partners, and more. Need help? Check out this guide from the U.S. Small Business Administration.
2) Decide on a Business Name
You might’ve come up with the perfect name right away. If so, consider yourself lucky.
Sometimes, deciding on a business can be difficult, requiring brainstorming meetings and late-night rap sessions. That’s because your name is your business’ identity and reputation. It should be something that’s unique and memorable but also defines your business purpose.
While you can certainly be creative with your business name, you don’t have completely free reign. The business type you choose will have its own naming requirements. For example, your name must include a term that identifies its business structure, like “LLC” or “Ltd.” for LLCs or “corp.,” “incorporated,” or “inc.” for corporations.
But that’s not the only determining factor in your name’s validity. It also has to be completely unique and available. Perform a name search to see if any other Illinois business is using your desired name. If not, you’re good to go. Claim it by either filing a name reservation or using it on your formation documents.
3) Decide on a Legal Structure
There are only a few types of business structures, but each one dictates some important parts of how your business will run.
The most popular types are the sole proprietorship, general partnership, limited liability company (LLC), S corporation, and C corporation. Most small businesses go with the LLC because of its unique blend of flexibility and personal asset protection.
However, you shouldn’t make this decision without reading up on all of your options. We’ve done plenty of research on each business type and developed side-by-side comparisons. Check out our LLC vs. Corporation and LLC vs. Sole Proprietorship comparison guides for a closer look.
4) Choose a Registered Agent
The Secretary of State needs a point of contact for your business, someone who will be available at your registered office address during typical business hours – 9am to 5pm.
This person is called a registered agent, and they serve as an intermediary with the state, receiving all of your company’s important legal communications and relaying them on to you. The Illinois registered agent ensures that no important state documents, deadlines, or payments fall through the cracks, so you’ll want to choose a person or company you trust.
You can choose either an individual or a business entity as your registered agent in Illinois, but they must:
- Be an individual Illinois resident or a business entity authorized to do business in Illinois.
- Have a physical address in Illinois (P.O. boxes are not allowed).
- Have a mailing address in Illinois.
Your LLC cannot be its own registered agent, but there are a ton of other options. If you’d like to appoint an individual as your agent, you might consider someone who has an in-depth understanding of business maintenance, like an attorney or one of your managers/members. Although friends and family members are also viable options if you prefer.
Or, you can choose a registered agent service instead. These companies take care of all your registered agent responsibilities, and some will even handle your business formation and annual reporting as well.
Important: You must continuously maintain a registered agent on file with the Secretary of State. If your agent resigns or you appoint a new one, you’ll need to notify them by filing the appropriate documents.
5) Register Your Business
This is the big one, the step that officially creates your business. No matter which business type you choose, you’ll need to register it with the Secretary of State.
LLCs: When you’re ready to put your LLC on the official state record, go ahead and file an Articles of Organization.
You have two submission methods for this Illinois LLC filing: online and by mail. Hard copy filings cost $150 and are processed in 10-15 days unless you pay the extra $100 fee for 24-hour expedited processing. Online filings cost $250 because they automatically receive expedited processing.
Corporations: Filing processes are the same for corporations, but instead of the Articles of Organization, you’ll instead file an Articles of Incorporation.
Sole Proprietorship/General Partnership: There are no official forms or fees to register as a sole proprietor or general partnership. Simply start doing business and that’s it! While this is obviously faster and easier, we recommend incorporating your business because of the personal asset protection LLCs and corporations provide.
Foreign Entities: If your business is already established in another state and you want to expand to Illinois, it’s considered a foreign entity. Don’t worry about filing an Articles of Organization or Incorporation. Instead, you’ll need to apply for foreign qualification by filing an Application for Admission to Transact Business.
6) Get an EIN
The Employer Identification Number (EIN) is your ticket to doing state and federal taxes. It’s a nine-digit number, much like a Social Security Number, that identifies your business on tax documents.
If you’re forming an LLC, it will be considered a “pass-through” entity, so the business itself won’t pay federal income taxes. Instead, you and the other members will report income and losses on your personal tax returns.
But this doesn’t mean you can go without an EIN. If your LLC pays any type of business taxes – like Sales, Use, or Unemployment Taxes – or hires employees, you’ll need to get one.
Unsure if you need one? The IRS provides a useful “Do I need an EIN?” link on this page, where you can also apply for an EIN. If you go through the online application process, you’ll receive your number immediately.
Otherwise, you can submit a Form SS-4 by fax to (855) 641-6935 or by mail to :
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
7) Open a Business Bank Account
LLC and corporation owners are required to keep their personal and business finances completely separate, or they risk losing their personal asset protection. To do so, you’ll need a business bank account.
The good news is that opening a business bank account is pretty simple. Just pay a visit to your bank’s local branch and sit down with one of the bankers there. You will need to present your formation documents, an EIN number, and some personal information. Then, you can direct all of your business income and expenses to that account instead of a personal one.
It doesn’t really matter which bank you choose, whether it’s a national giant like Chase or Bank of America or a small, local bank. However, it’s usually easiest to go with the one where you have existing accounts.
8) Handle Any Tax Obligations
Ah, taxes. They’re always part of the picture, especially when you run a business.
Familiarizing yourself with your business’ tax requirements will help you establish a solid financial plan going forward. LLCs don’t need to file a corporate tax return and pay federal income taxes, so you’ll handle these taxes as part of your personal return.
Corporations, on the other hand, will need to file a Corporate Income Tax Return, while sole proprietorships/general partnerships will need to pay self-employment taxes.
There are a few other taxes your business may owe in Illinois, depending on your circumstances:
Personal Property Replacement Tax: All Illinois corporations, partnerships, trusts, S corporations, and public utilities must pay this 1.5% annual tax. Local governments once collected personal property taxes from their businesses, but this practice was abolished by revisions to the state constitution. This tax serves to recompense local governments for the property taxes they would have been collecting.
Sales and Use Taxes: Sales and Use Taxes are necessary for any businesses that sell and purchase goods in Illinois, although the rates can change from year to year. Find all the information and forms you’ll need on this page.
Withholding and Unemployment Taxes: If you hire employees, your business will be subject to employer taxes, including a Withholding Tax (or Payroll Tax) through the Department of Revenue and an Unemployment Insurance Tax through the Department of Employment Security.
Visit Illinois’s Department of Revenue website for additional information on taxes.
9) Find an Accountant
Sometimes it’s easier to hand off your financial responsibilities to a professional. Not only will an accountant ensures that your taxes are filed and paid correctly, but they might also find a few ways to save your business money.
Bookkeeping and tax procedures are time-consuming and require some specialized knowledge. Balance sheets, financial reports, cash flow, audits, and much more – an accountant can ensure that your company operates smoothly and streamlines its expenses.
This can be expensive depending on the complexity of your finances, but the benefits an accountant offers can be well worth it.
10) Create an Operating Agreement
An operating agreement constructs a framework of procedures and standards for your business. This is where you can lay out processes for member conduct, asset allocation, compensation policies, voting procedures, dissolution, and much more.
While operating agreements aren’t technically required in Illinois, they are essential to your business’ stability and success. They provide a safety net in legal disputes and legitimacy in front of banks, courts, government agencies, and other businesses.
You can either draft one yourself using an online template, or you can hire an attorney or an incorporation service to take care of it for you.
Once you’ve drafted your agreement, it must be approved by each of your LLC’s members, then filed with the rest of your business documents. You do not need to submit it to the Secretary of State.
11) Acquire the Necessary Licenses
After filing your formation documents, your business is legitimate, but it might still need specific licenses before opening its doors in Illinois. Which ones you’ll need depend on your business type and activities, but there are a few you’ll want to keep in mind:
Certificate of Registration: This is required for every business classified as a retailer, reseller, or provider of goods/services that require taxes. Apply for registration online through MyTax Illinois or by completing and submitting a Form REG-1 to the Department of Revenue.
Professional/Occupational Licenses: Specific vocations and business activities require licensure through certain state boards. You can find more information on licenses and licensed professions on Illinois’ Department of Financial & Professional Regulation website.
Local Licenses: Your specific city, county, or municipality might have its own licensure requirements. Take a look at your local government’s website to find out.
12) Consider Business Insurance
Even though it’s not pleasant to consider, there’s always a chance that unforeseen events might take a toll on your assets.
While forming an LLC or corporation offers some personal asset protection, additional business insurance can also protect your business assets in cases of lawsuits, damages, etc. You can acquire insurance for your business products, vehicles, specific occupations and much more.
If you hire employees, you’ll also need to get workers’ compensation insurance. SBA.gov has a useful guide for determining which forms of insurance your new business might need.
13) Build a Website
Your company’s digital presence is just as important as its physical one. Like it or not, most potential customers will find your business online, and if you don’t exist online, you’re missing out.
But don’t worry, you don’t need to be an HTML or web design expert to build a website. Sites like WordPress and Squarespace make it easy to construct an elegant and responsive website, no coding necessary. But if you’re not comfortable or confident doing it on your own, you can always hire a professional web designer to take care of it for you.
14) Launch Social Media Accounts
Making your mark on the digital landscape doesn’t start and end with your website. Most successful businesses also have a robust social media presence on multiple platforms. Facebook, Twitter, and Instagram are all great ways to connect organically with potential customers and develop your brand voice.
Just don’t forget to publish consistent social media content, or you’ll have trouble building a base of followers.
15) Understand Ongoing Illinois Requirements
After you’ve launched your business, things will likely be moving at 100 miles per hour as you evolve and grow. But in all of the excitement, you can’t forget your state’s ongoing compliance requirements. Every state has its own annual or biennial business requirements.
Every Illinois business must submit an Annual Report to the Secretary of State every year. This report is due before the first day of your business’ anniversary month (the month it was formed). So, for example, if you originally formed your business on September 19, your Annual Report would be due by August 31. You can file this form online or by mail. It costs $75 and you can pay an additional $50 for expedited processing.
Make sure to file your Annual Report on time! If you haven’t filed by 60 days after your due date, you’ll be charged a $100 late fee. And if you don’t file for 120 days, the state will dissolve your business.
16) Check Out Illinois Small Business Resources
You’re not on this journey alone. There are plenty of free resources available to make starting and growing your business a smoother, easier process.
You can find a wealth of great information and support for your business on SBA.gov. Networking events, loan opportunities, counseling services, and more – you can find it all on the Illinois district office webpage. They even provide this helpful document that keeps it all in one place for you. It’s a great jumping-off point to put your business on the path to success.