I am by no means a business expert. But I’ve been through the struggle (and am currently still struggling! Although, maybe in a different way) of beginning a business. Starting any business is tough. It literally feels like a bajillion balls of information swarming around your brain and all you want to do is follow that yellow brick road to the answer. You want it to be a direct, straight-forward path where questions are followed up by only one and true answer. BUUUUUT, it’s not! Yay!! You might as well get used to it now and just enjoy the swirling up and down ride that is business.
In any case, there are some direct paths to take when starting your own business. Again, I’m no expert, but I’ve been asked a few times on how to do this so I thought I’d try and share with you the ‘way’ in as simplest a way as possible. Please keep in mind too this is specific to the city of Chicago. If you’re reading this in another city, I imagine a lot of the steps would be similar. I would recommend finding your city’s Small Business Center and reach out to them. If you don’t have one, try visiting your city hall.
Also head’s up, if you don’t know me, I’m from the creative world; an artist-type, a jewelry designer to be exact. So I’m basing this path on that fact and directing it towards other jewelry designers or individual artists of any sort who are wanting to take their creative expression, sell it to the public, and turn it into a small business.
Ok! Here’s your yellow brick road as suggested by me, Tina, owner of small business Tytin Jewelry: Studio & Shop…
1. Figure out your business name. Google it. Make sure no one else has it or has it trademarked. And then go and claim it on all social media outlets and buy the domain name.
2. Decide your legal entity. How are you going to structure your business: Sole Proprietor, LLC, or CORP. It mostly means how will my business be taxed? How will the IRS and the State take taxes from me? So a lot of your decision depends on how much your business is going to make and what is the most beneficial for your situation. A lot of individuals just starting out, structure as a Sole Proprietor. It’s the easiest one and the cheapest one. But please don’t base your decision on how much it costs to file. You really need to take a look at how it’s going to affect you financially and make the best decision based on how you want your business to be. You can change it later on but also keep in mind, it may cost more in the end/be a bigger hassle to do so. Talking to an accountant can also help aid your decision. I started out as a Sole Prop. Once I decided to open a physical location where I would be dealing with the public a lot more, I changed to an LLC.
If you decide to structure as Sole Prop and you are NOT using your given name as your business name, you must next file an Assumed Business Name Registration with the Cook County Clerk. Go here to find a detailed list of steps to do so.
Here’s an in depth guide to LLCs in IL. If you decide to structure as an LLC, you will need to deal with the IL Secretary of State. Small tip: If it’s possible for you to do so, I found out if you just go to their office and hand in the paperwork, it’s a lot better than mailing it to their Springfield office. The 2 offices do not communicate well with each other and they handle paperwork separately from each other. So if you mail yours to Springfield and talk to someone at the Loop office, they won’t know what’s going on with your Springfield paperwork. I did have a very nice man help me through the whole ordeal though. He advised to just hand it in at the Loop office and sometimes it can be processed just as fast as the $100 expedited service AND they can keep track of it better.
If you decide to structure as a Corporation, I suggest getting an accountant to help set this one up for you as it goes beyond my knowledge. But in time, as my business grows, I may come back and update this part.
3. Get a Federal Employer Identification Number (EIN). This is like the social security number for your business. If you become a sole prop, you don’t have to get an EIN. You can use your personal social security number too. BUT I highly recommend getting an EIN. It’s always a good thing to keep your business life separate from your personal life as much as possible. On that note too, I’ve heard other professionals recommend if you’re serious about getting into business, don’t structure as a sole prop because there isn’t enough separation between you and the business. Again, you’re going to have to figure out what’s best for you and your business.
4. Get your Illinois Account ID Number (aka Illinois Business Tax (IBT) Number) through the IL Department of Revenue. Just an fyi, they phrase it as ‘registering your business with the IDOR’. So you’re applying for this number which in turn let’s the IDOR know that you’re an official business that will be collecting sales tax and/or not paying any sales tax on goods used to create your work. Don’t confuse this number with the EIN. EIN is your business’s social security number used to identify your business when filing your income taxes. This IL Acct ID Number is used to identify your business when you’re reporting sales tax.
5. To get a business license or not? This step is up for debate. A business license is kind of like the driver’s license of your business. It signifies that the city has recognized your business and has given you permission to perform the activities related to your business at an address they deem legitimate/zoned appropriately for the type of business you’re running. To be honest, I didn’t have one until I opened the studio because there really is no way to get around that one if you have an actual brick & mortar. But I asked a city official directly, “Does a jewelry designer who works out of their home or rents a studio and is selling their goods at craft fairs and to small boutiques need a business license?” He could not give me a direct answer and kept saying, “It all depends.” He said once a torch gets involved, it’s actually illegal to be running the business out of your home because it becomes categorized as manufacturing and you’re not allowed to ‘manufacture’ out of a residential area. But he knows a lot of people do it and if they (the city) don’t know, then...they just don’t know and what can they do about it? But technically you’re not supposed to be doing that so in that case you wouldn’t even be approved for a business license. If you’re working out of a studio, then yes you should get a business license. But then the city would have to approve of that studio’s zoning to make sure you’re allowed to be running your type of business there and based on some experience, the city has some weird qualifications so who knows if they would even approve of that. He presented this scenario as well, “What do you do if you’re out selling your jewelry or want to do business with say, Walmart, and they ask you for your license? What do you do?” He shrugged his shoulders and gave me a look that said, “See, you would need a license.” And I responded, “But no one ever asks us for one. Craft show organizers don’t. Small boutiques don’t. So….” He shrugged his shoulders again as if to imply, “Well if they don’t ask then ok. But when someone does, you’re gonna need it.” The overall conclusion I came to? It doesn’t become a problem until it does...but it’s highly recommended to get one if you can. If you do decide to pursue one, you would do so with the Small Business Center.
6. And finally! Go open a separate bank account!!!! If you’re serious about trying to make this a business, open that separate business bank account. Again, it’s best to keep business and personal life separate, especially the money. When it comes tax time too, you’ll thank yourself.
And that’s the jist of how to set up your legit small business (at least in Chicago). I’m sure I’m missing some small details or perhaps I’m mistaken about a few things. But this is what I’ve learned about the whole process based on my own personal experience. If I am missing anything or wrong about anything, please do share it with me. The worst part about this process is having to do it alone. I had to do it alone and don’t wish that on anybody. So if we can all share our experiences with each other, it not only builds community but helps build more small businesses. And wouldn’t that be awesome? Because who wants to sell their art to Walmart??
Oh and one more small note, sometimes people that work for the city can be very grumpy. And it’s easy to be grumpy back. But I’ve found it helps to deal with them if you think of it as a game: How much nice does it take to get what I want from them? May not always work but people generally respond pretty well to some extra nice-ness.
Till next time!