The foundation of a successful business begins with a well-thought-out and viable concept. Building a business requires dedication, perseverance, and time and aligning your business idea with what you are genuinely passionate about will make it more enjoyable to work on and help you sustain the motivation needed for long-term success.

There are many different types of businesses available to start, ranging from small retail stores to large manufacturing companies, and it is important to research each type of business thoroughly before making a decision. Look for problems or pain points that need solving and consider whether your skills and passions align with these opportunities. This will help you create a business idea that is both relevant and in demand.

Check out our business library to get detailed industry information, trends, costs to start, tips, and lots more.

Once you have a few ideas, validate them by seeking feedback from potential customers, mentors, and industry experts. This will help you refine your concept and ensure it meets the needs and expectations of your target market. Be open to constructive criticism and be prepared to adapt and evolve your idea based on the feedback you receive.

A well-crafted business plan is crucial to the success of any new business venture, as it serves as a strategic roadmap guiding entrepreneurs through each stage of their enterprise. According to the Small Business Administration (SBA), businesses with a formal plan are more likely to achieve viability and the likelihood of receiving funding compared to those without one.

By outlining a company’s mission, objectives, target market, competitive landscape, and financial projections, a business plan helps entrepreneurs identify potential challenges and opportunities, enabling them to make informed decisions and allocate resources effectively.

By providing a clear and compelling vision of the company’s future, a comprehensive business plan demonstrates the entrepreneur’s commitment to their venture and instills confidence in potential investors, partners, and other stakeholders.

Related: How to write a business plan

The next step in starting a business in Illinois is selecting a business entity (also called a legal or business structure). Understanding the differences between business entities is crucial for new business owners, as the choice of entity will impact taxation, personal liability, and the overall management of the business.

In Illinois, there are four common types of business entities: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).

A sole proprietorship is the simplest form of business organization in which an individual operates the business as an extension of themselves. The owner has full control over the business and reports profits and losses on their personal income tax return. However, they are also personally liable for any debts or legal obligations.

There is no filing to create a sole proprietorship (or partnership), however, if the business will operate under a trade name or fictitious business name, an Assumed Business Name Registration, commonly known as a DBA (Doing Business As), will need to be filed with the local county clerk’s office where the business is located.

Related: How to start a sole proprietorship in Illinois

A general partnership involves two or more individuals who agree to operate a business together. Each partner shares in the profits and losses and is jointly and severally liable for the partnership’s debts and obligations. Partnerships do not pay income tax; the profits and losses flow through to the individual tax returns of each general partner.

A corporation is more complex than the first two entities as it requires filing Articles of Incorporation with the state, which creates a separate legal entity that is distinct from its owners (shareholders). It provides limited liability protection, which means that the shareholders are not personally responsible for the corporation’s debts or legal liabilities.

Related: How to form an Illinois Corporation

An LLC is a hybrid business structure that combines the limited liability protection of a corporation with the ease of operation like a sole proprietorship or partnership. LLC owners, known as members, are not personally liable for the company’s debts and obligations.

Related: How to form an Illinois LLC

Business licenses: The state of Illinois doesn’t have a general business license; however, many cities require a business license in order to operate.

Employer Identification Number: The Employer Identification Number or EIN (sometimes referred to as the Federal Employer Identification Number or FEIN) is a nine-digit tax identification number issued by the Internal Revenue Service (IRS). This number identifies a business operating in the U.S. and is used for paying payroll taxes, filing tax returns, and more. Much like what a social security number is to a person, the EIN is similar to a social security number for a business. While most businesses will need to get an EIN, some do not.

Illinois Business Registration Application (Form REG-1): Businesses selling products and certain services will need to register for a Sales Tax Permit and withholding taxes with the Illinois Department of Revenue.

Local licensing: In addition to general registrations, businesses may need additional local licenses or permits depending on their industry and location. For example, food service establishments must obtain a Food Sanitation Certification from the Illinois Department of Public Health. Businesses that sell alcohol must also obtain a liquor license from their local municipality.

Professional licensing: Some professions, such as physical therapists, interior designers, detectives, cosmetologists, barbers, architects, and massage therapists, require licensing in Illinois.  While this isn’t a license on the business, licensing is required in order to operate. The Illinois Department of Financial and Professional Regulation (IDFPR) oversees the licensing for many professions and industries in the state of Illinois.

Related: What business licenses and permits are needed in Illinois?

It is important to separate business and personal funds for a variety of reasons.

First, it can help you track your business expenses more accurately, which is essential for tax purposes. Additionally, having a dedicated business bank account can make it easier to apply for loans or other forms of financing since lenders will be able to see that you are serious about your business. Finally, having a separate bank account can help protect your personal assets in the event that your business runs into financial trouble.

Opening a business bank account in Illinois is relatively simple. The first step is to obtain a Federal Employer Identification Number (EIN) or Social Security Number for a sole proprietorship or single-member LLC with no employees.

Most banks will require some form of identification from the owners, such as a driver’s license or passport and proof of address, before opening an account. In addition, you will also need to provide entity documents such as the Articles of Incorporation or Articles of Organization.

Various funding options are available for small businesses in Illinois, each with its advantages and requirements. These options include conventional bank loans, SBA loan guarantees, and investors.

Conventional bank loans: When applying for a loan from a bank, the business owner will typically need to provide personal investment and demonstrate good credit. In general, the owners of a startup will need to invest 15%-25% of the total costs personally. Bank loans typically have fixed interest rates and repayment terms, with varying loan amounts based on the borrower’s creditworthiness and what the funds will be used for. Lenders generally require a solid credit score, a detailed business plan, financial projections, and collateral or personal guarantees to secure a conventional bank loan.

SBA loan guarantees: The Small Business Administration (SBA) offers loan guarantee programs, such as the 7(a) Loan Program and 504 Loan Program, to help small businesses obtain financing from approved lenders. It’s commonly thought that the SBA loans funds to businesses, but instead, they guarantee the loan to reduce the risk for lenders, making it easier for small businesses to access capital. SBA-guaranteed loans typically require a good credit score, a strong business plan, and collateral or personal guarantees.

Investors: Small businesses can also seek funding from investors, such as venture capitalists, angel investors, or friends and family. In exchange for funding, investors may require equity in the company, a share of the profits, or other forms of return on investment. Attracting investors generally requires a compelling business plan, a strong management team, and a well-defined strategy for growth and profitability.

Related: Understanding the different types of business funding

There are several important steps to take when hiring your first employee, as there are a number of laws and regulations that apply to employers in the state of Illinois.

Not only are employers responsible for registering with the Illinois Department of Revenue and the Illinois Department of Employment Security, but they will also need to report new hires, verify that employees are eligible to work in the U.S., and calculate and report income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.

Related: Steps to hiring your first employee in Illinois

Insurance is crucial for small businesses, providing financial protection against unexpected events that could otherwise lead to significant losses or even business failure. The right insurance coverage helps small business owners manage risks, safeguard their investment, and maintain stability.

Here are some of the key reasons why insurance is essential:

Risk management: Businesses face various risks, such as property damage, liability claims, or employee injuries. Insurance helps mitigate these risks by providing financial resources to recover from adverse events, allowing the business to continue operations with minimal disruption.

Legal compliance: Certain types of insurance are mandated by federal or state laws. For example, businesses with employees in Illinois are required to carry workers’ compensation insurance to cover work-related injuries or illnesses.

Contractual requirements: Clients, vendors, or lenders may require businesses to carry specific insurance coverage such as general liability insurance, professional liability insurance, or bonding as a condition of doing business or securing financing.

Financial stability: Insurance enables businesses to manage unexpected expenses, ensuring financial stability in the face of unforeseen events.

Related: Types of insurance your business may need

A good accounting system is essential for small businesses. Implementing a reliable accounting system allows business owners to track financial transactions accurately, make informed decisions, and meet tax reporting requirements.

While accurate record-keeping is important when it comes to filing taxes, proper recordkeeping is vital for managing your business’s finances. A good accounting system helps you monitor income, expenses, assets, and liabilities, enabling you to analyze the financial health of your business. With accurate financial records, you can identify trends, assess the profitability of your products or services, and make data-driven decisions to improve your business’s performance.

Related: Setting up accounting for a business