Starting a Business in Illinois

A new business in Illinois can be yours. Have you been wondering: precisely how do I start a business in Illinois? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Illinois during a recession?

A New Business in Illinois: Pros and Cons

Business Insider says Illinois is the seventh best state to start a new business in, per a 2016 article. And this is for the entire country. There is, however, a low rate of new entrepreneurs. The state’s per capita GDP is above the national average. At the same time, the cost of living is on the lower end. Also, business owners have a wide pool of potential employees they can pull from to hire.

Illinois is ranked high for key economic indicators. These include the high tech share of all businesses, growth in share of national exports, and business tax climate.

Recent Slippage

In 2018, Forbes puts Illinois at number 39. Also in 2018, Fit Small Business clocks in Illinois at number 26. Keep in mind, all three websites have different criteria.

Forbes praises Illinois for its top 15 quality of life. But all of the other measures are worse than average. They are: business costs, labor supply, regulatory environment, economic climate, and growth prospects (number 40).

Fit Small Business praises Illinois for its top ten startup activity. Its labor market is also very good. Labor market is a measure of the desirability of an area and the number of people with bachelor’s degrees. All of the other measurements hover right around the middle. They are: taxes, cost of living, quality of life, costs of starting a business, and access to capital.

Illinois remains a decent place to start a new business, but there has definitely been some slippage. If you are looking to start a new business in Illinois, you may have trouble hiring – but the pool of applicants seems to be more likely to have a bachelor’s degree. If this matters to your business, then Illinois could be the place for you.

Start a New Business in Illinois – Illinois Top Industries

Strong sectors and industries in Illinois include high tech, apparel and textiles, and business and financial services. However, the state is currently working to promote and support the creation of new jobs and businesses in diverse sectors. This is via enacting programs such as EDGE and Illinois Jobs Now!

The state is also actively promoting public and private sector cooperation to better encourage economic development. In addition, there is a concerted effort to provide support specifically to small businesses. There are large amount of funds being set aside specifically to help these companies, especially those within the high tech sector.

Smart business owners can take advantage of the more seasoned industries in the area by offering goods or services such as trucking for any industry. They can also create fashion and fashion accessories. Another possibility is computer work for financial services companies.

Here is precisely how to start a new business in Illinois.

Start a New Business in Illinois – Illinois New Business Secretary of State Requirements

Register a Business Name

The Illinois Government’s official website has links and information on selecting a business entity and registering a business name.

A corporation in the state of Illinois must have a unique name. They can search online records and databases as well as other catalogs to find out if the name that they have chosen is in use or not.

To search a database of Illinois businesses, go to the Illinois Corporation on the Cyber Drive Illinois website.

If a business owner finds out that the corporate name that they want to use is not in use in Illinois, they might want to reserve that name until the time when they are able to incorporate.

The application to reserve a corporate name can be found online at Reserve a Illinois Corporate Name on the Cyber Drive Illinois website. The cost is $25.00 to reserve a corporate name. The business owner should submit the completed name reservation application form to the office of the Secretary of State.

Business Permits and Licenses

The Illinois Government official website has a catalog of links. They will lead you to the various licenses available.

Local Permits and Licenses

Check with your local municipality, city or county office or website. See if there may be any local licensing or permit requirements.

For example, in Chicago, you must go to the “Business Licensing: What Do I Need?” page on the Chicago city website.

Start a New Business in Illinois – Business Registration

Find the necessary forms on the Secretary of the State website.

Tax Registration

You can sign up with the Illinois Department of Revenue.

Start a New Business in Illinois – Virtual Offices

Alliance offers Illinois virtual office space in the following cities: Chicago, Glenview, and Gurnee.

For Joliet, use Regus.

Go to DaVinci for the following cities:

Northern Illinois (mostly Chicago area)

DaVinci has spaces in Arlington Heights, Aurora, Geneva, and Glenview. They also have space in Hoffman Estates, Lake Forest, and Oak Brook. DaVinci also offers space in Oakbrook Terrace, Schaumberg, Warrenville, and Wheaton.

Central Illinois

The only available DaVinci virtual office space is in Springfield.

Southern Illinois

DaVinci and the other bigger providers have no virtual offices in Southern Illinois. One option can be to try neighboring Indiana and Missouri.

For other areas of the state, business owners might want to ask local business owners. Or they could try computer user groups to find help in this area.

Start a New Business in Illinois – Build Business Credit

Small business credit is credit in a small business’s name. It doesn’t tie to a business owner’s personal credit, not even when the owner is a sole proprietor and the only employee of the small business.

Hence, a business owner’s business and personal credit scores can be very different.

The Benefits

Considering that company credit is independent from consumer, it helps to secure a business owner’s personal assets, in case of court action or business insolvency.

Also, with two separate credit scores, a business owner can get two different cards from the same vendor. This effectively doubles buying power.

Another benefit is that even startups can do this. Going to a bank for a business loan can be a recipe for frustration. But building business credit, when done right, is a plan for success.

Consumer credit scores rely on payments but also other factors like credit use percentages.

But for small business credit, the scores actually just hinge on whether a business pays its invoices promptly.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Establishing small business credit is a process, and it does not occur automatically. A business needs to actively work to establish business credit.

That being said, it can be done readily and quickly, and it is much quicker than establishing individual credit scores.

Vendors are a big aspect of this process.

Doing the steps out of sequence will cause repetitive denials. Nobody can start at the top with small business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

Start a New Business in Illinois – Company Fundability

A small business must be fundable to credit issuers and vendors.

Due to this fact, a small business will need a professional-looking web site and e-mail address. And it needs to have website hosting from a company such as GoDaddy.

And also, business phone and fax numbers need to have a listing on ListYourself.net.

Likewise, the company telephone number should be toll-free (800 exchange or the like).

A small business will also need a bank account dedicated only to it, and it has to have every one of the licenses necessary for running.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Working with the IRS

Visit the IRS web site and acquire an EIN for the small business. They’re totally free. Select a business entity like corporation, LLC, etc.

A business can get started as a sole proprietor. But they will more than likely want to switch to a sort of corporation or an LLC.

This is in order to minimize risk. And it will take full advantage of tax benefits.

A business entity will matter when it comes to taxes and liability in the event of a lawsuit. A sole proprietorship means the owner is it when it comes to liability and taxes. No one else is responsible.

Sole Proprietors Take Note

If you operate a small business as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the company name. Consequently, you can end up being personally liable for all company financial obligations.

Plus, per the IRS, using this arrangement there is a 1 in 7 possibility of an IRS audit. There is a 1 in 50 chance for corporations! Prevent confusion and significantly decrease the chances of an Internal Revenue Service audit simultaneously.

Starting Off the Business Credit Reporting Process

Begin at the D&B website and obtain a cost-free D-U-N-S number. A D-U-N-S number is how D&B gets a company in their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s websites for the company. You can do this at fastcs.wpengine.com/reports. If there is a record with them, check it for accuracy and completeness. If there are no records with them, go to the next step in the process.

In this way, Experian and Equifax will have activity to report on.

Vendor Credit Tier

First you need to build trade lines that report. This is also called the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can start to acquire credit in the retail and cash credit tiers.

These types of accounts have the tendency to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture. But to start with, what is trade credit? These trade lines are credit issuers who will give you starter credit when you have none now. Terms are usually Net 30, versus revolving.

So, if you get approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term, such as within 30 days on a Net 30 account.

Details

Net 30 accounts have to be paid in full within 30 days. 60 accounts must be paid fully within 60 days. In comparison with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you made use of.

To start your business credit profile properly, you should get approval for vendor accounts that report to the business credit reporting bureaus. When that’s done, you can then make use of the credit.

Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Tier – It Makes Sense

Not every vendor can help like true starter credit can. These are vendors that will grant an approval with negligible effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may have to apply more than once to these vendors. So, this is to prove you are dependable and will pay on time.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move onto the retail credit tier. These are businesses which include Office Depot and Staples.

Only use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use the company’s EIN on these credit applications.

One good example is Lowe’s. They report to D&B, Equifax and Business Experian. They want to see a D-U-N-S and a PAYDEX score of 78 or higher.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are companies such as BP and Conoco. Use this credit to buy fuel, and to fix, and maintain vehicles. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the company’s EIN.

One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or better and a 411 small business telephone listing.

Shell may say they want a particular amount of time in business or revenue. But if you already have adequate vendor accounts, that won’t be necessary. And you can still get approval.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit Tier

Have you been sensibly managing the credit you’ve up to this point? Then move to the cash credit tier. These are businesses like Visa and MasterCard. Only use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or more. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Also, they want you to have an established company.

These are businesses like Walmart and Dell, and also Home Depot, BP, and Racetrac. These are frequently MasterCard credit cards. If you have 14 trade accounts reporting, then these are doable.

Start a New Business in Illinois –Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and deal with any errors ASAP. Get in the practice of checking credit reports and digging into the details, and not just the scores.

We can help you monitor business credit at Experian and D&B for only $24/month.

See: fastcs.wpengine.com/monitoring.

Update Your Record

Update the details if there are inaccuracies or the relevant information is incomplete.

Fix Your Business Credit

So, what’s all this monitoring for? It’s to dispute any errors in your records. Errors in your credit report(s) can be corrected. But the CRAs typically want you to dispute in a particular way.

Disputes

Disputing credit report mistakes usually means you mail a paper letter with duplicates of any proof of payment with it. These are documents like receipts and cancelled checks. Never mail the originals. Always mail copies and retain the originals.

Fixing credit report inaccuracies also means you precisely spell out any charges you dispute. Make your dispute letter as clear as possible. Be specific about the concerns with your report. Use certified mail so that you will have proof that you mailed in your dispute.

Start a New Business in Illinois –A Word about Business Credit Building

Always use credit sensibly! Don’t borrow more than what you can pay off. Monitor balances and deadlines for repayments. Paying off punctually and completely will do more to boost business credit scores than pretty much anything else.

Establishing company credit pays off. Good business credit scores help a business get loans. Your lender knows the business can pay its financial obligations. They recognize the business is for real.

The small business’s EIN connects to high scores and lending institutions won’t feel the need to call for a personal guarantee.

Business credit is an asset which can help your company in years to come.

Learn more here and get started toward opening a new business in Illinois.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.

Illinois’s Response to COVID-19

This is what Illinois is doing about the COVID-19 situation. On March 9, Governor JB Pritzker issued a disaster proclamation giving the state access to federal and state resources to combat the spread of the virus. The state of Illinois is also releasing recommendations for an infectious disease outbreak response plan. 

See: dph.illinois.gov/topics-services/diseases-and-conditions/diseases-a-z-list/coronavirus 

And  see dph.illinois.gov/topics-services/diseases-and-conditions/diseases-a-z-list/coronavirus/business-guidance