Illinois has a thriving economy, making it an ideal place to start a new business. But an entrepreneur needs to make sure they have everything in order before taking this large financial plunge.
There are several logistical steps to set a business up for success and ensure everything is correct in the eyes of the law. This checklist will help you jump over the red tape and guarantee that any potential pitfalls are avoided, giving your business the strongest start possible.
Identify Your Company Structure
Your company’s structure determines many key business factors, including your level of control over the business and your tax and civil liability.
If you’re looking to maintain total control over day-to-day decisions, your best bet is to register as a sole proprietor. Doing so will give you full control but a greater liability. If you have a business partner, it’s possible to register as equal proprietors giving you identical power.
On the other hand, many businesses start as limited liability companies (LLCs). LLCs protect business owners from most personal liabilities, but they also require all LLC members to pay self-employment taxes.
Register Your Business Name
A business’s name is its brand, and one of the first things you should do before you file is to ensure your brand belongs to you. Illinois passed the Assumed Business Name Act, which bans people and businesses from conducting business under an assumed name unless they have the proper certificate.
All businesses ranging from small home businesses to large corporations have to file with their local county clerk, and the information will be published for maximum transparency.
Register for Federal, State, and Local Taxation
To avoid any penalties, business owners should ensure they’re registered with all relevant tax agencies. Starting at the federal level, the Internal Revenue Service (IRS) offers a checklist for new businesses and makes most of their forms downloadable.
The Illinois Department of Revenue requires most businesses to register with them if they plan to buy, sell, or manufacture products or hire employees.
Additionally, some municipalities, like major cities, levy their own taxes. Business owners should check with their local revenue department to see if they need to register or follow any other local regulations.
Apply for the Required Permits and Licenses
Illinois requires separate permits for many activities beyond registering your business with the Illinois Department of Registration. Their website can guide you through the process, but common permits and licenses can include selling liquor or authorizing construction. Other trades like plumbing, nursing, and taxidermy have separate registration requirements. It can take time to have a permit or license processed, so the earlier you file, the better.
Purchase the Legally-Mandated Insurance
Regardless of your level of personal liability, it’s critical to ensure your business is covered. Illinois requires almost all businesses to carry workers’ compensation insurance, with exceptions for sole proprietors, business partners, and corporations that choose to exempt themselves and carry the full liability.
Following Illinois state law for workers’ compensation insurance is critical for a new business. Employers who don’t purchase the proper insurance can be fined up to $500 a day, with corporate officers liable for the fines.
Any company that uses vehicles is also required to carry a separate liability insurance policy for injuries caused in or by these vehicles. While these are the only required types of business insurance in Illinois, experts recommend additional policies (such as business owners insurance, professional liability insurance, and product liability insurance) to protect yourself from potential losses as a new business.
Time to Open the Doors
It may seem like there are a lot of steps before your business can start running, but following them carefully gives you an advantage. Unexpected events can upend any business plan in a hurry, especially for a new business trying to find its niche in the market. Following this checklist will help avoid any unpleasant surprises while you’re trying to establish your brand in the state of Illinois.