Launching Your Venture in Illinois: A Clear Path Forward - RVC SBDC

October 4, 2023

Embarking on a business journey requires a blend of inspiration, foresight, and formalities. Below is a streamlined guide designed to navigate you through the essential steps of establishing your business in Illinois:

Craft and Validate Your Business Concept:
  • Identify a market-driven idea considering the competition and your expertise.
  • Engage in comprehensive market research to validate your business hypothesis.

Decide on a Business Structure:
  • Ownership: Two or more business owners.
  • Key Documents: Partnership Agreement.
  • Liability: Each partner is fully liable; even if one partner is at fault, all are liable.
  • Taxation: File a 1065 Partnership Return, each partner receives a K1 form depicting their share of business profits based on ownership percentage.
LLC (Limited Liability Company):
  • Ownership: One or more owners.
  • Key Documents: Operating Agreement (Contract Law).
  • Liability: Creates two entities: Business You (LLC under an EIN) and Personal You (assets under your SSN); it's crucial to keep these entities separate for liability protection.
  • Taxation: Pass-through taxation unless chosen otherwise.
  • Ownership: Stockholders, typically managed by a CEO and overseen by a Board.
  • Key Documents: Articles of Incorporation and By-Laws (Statutes and Regulations).
  • Liability: The corporation is legally deemed a person, with owners (often CEOs) considered employees.
  • Taxation: Files its own tax return form (1120) with distinct due dates; owners often receive a W2 for salary pay and 1099-DIV for dividend distribution.
Sub-Chapter S Corporations:
  • Ownership: Mirrors that of either an LLC or a Corporation.
  • Key Documents: Depends on the underlying structure (LLC or Corporation).
  • Liability: Follows the underlying business structure, either LLC or Corporation.
  • Taxation: S-Corp election is primarily a tax status, not a legal status, which can provide potential tax savings.

Name Your Business:
Officially Register Your Business:

Obtain an Employer Identification Number (EIN):

Secure Required Licenses and Permits:

Establish a Business Bank Account:
  • Opening a separate business account aids in proficient cash management.
  • Typical requirements include your EIN, business registration documents, and ownership agreements like an Operating Agreement.

Implement an Accounting System:
  • Utilize platforms like QuickBooks Online or engage a professional accountant to keep your finances in order.

Adhering to this well-structured pathway will ensure your business is legally compliant and prepared for operational success in the state of Illinois.
If you feel like you need more clarity, please refer to our AI Widget located at the bottom right of the screen. It will be able to provide you with additional assistance to your questions.