One of the biggest challenges that you learn early on is that in order to venture into your own business, there’s a lot of paperwork to fill out. If you’re flush with money already, you always have the option of hiring someone to figure out all the paperwork, and just sign off on where you signature needs to be. For the rest of us just starting out with our first business and not wanting to be wasteful with our funding, you’ll have to learn just what paperwork needs to be filled out. While there’s something enjoyable about the success of being able to complete the work, there tends to be hours of frustration trying to figure out which form you need, where it needs to go, etc. This post will help you get started with the LLC work you’ll need to be familiar with in starting your journey of opening your own business.
Why set up a business? Because it offers you a level of protection. While the option to set up as a sole proprietorship is tempting, especially with the low cost and low amount of paperwork, by doing so, you have not separated your personal assets from your business assets. Sounds simple, but it has high repercussions when you run into trouble, namely if you’re sued or go bankrupt or default on loans, this which are somewhat uncontrollable in the business climate. By setting up an LLC or S-Corp, you basically have added a layer to your personal assets so that others cannot get at them as easily. It’s still possible, unfortunately, but it’s definitely more difficult. And from the horror stories I’ve heard about from small business owners, you want to set up as much protection for your personal assets as possible… You never know what may happen and who may want to sue, so do yourself a favor and do the paperwork.
First and foremost, you’ll want to figure out whether you want to be an LLC or S-corp. While there are many modifications of this (LLC partnership, S-Corp, C-Corp, etc.), these two are the most commonly used for start ups. I won’t go into the details here, but Mashables has a fairly decent explanation of consideration here. After a week of reviewing with lawyers, accountants, and with each other, we decided that an LLC made the most sense for us right now. From here, it’s time to begin setting up the business… now’s a good time to note that every state has slightly different rules/policies/costs associated with opening your own business, so I”ll be focusing on the Illinois LLC process from here on out. If you’re looking for info around another state, Google is your best friend and your worst enemy at the same time, as usual. Just make sure you look up multiple links and articles so that you get a full picture in whatever state you’re in.
Step 1: Pick a name! The first rule is that the name of your new business must have “limited liability company” or “LLC” or “L.L.C” in it. Also, the name of your LLC needs to already not be taken. Check this website to do a corporation/LLC name search around name ideas, and see what companies may sound similar to what you have in mind as well. If you find a name you like, you can reserve the name for up to 30 days for $300. This cost can be completely avoided if you don’t need to reserve the name, and just go to the next step and file incorporation papers.
Step 2: File Articles of Incorporation! This is where you fill in the information of the names of the business, who are the owners/managers, name of the LLC (note, you’ll be rejected if you didn’t check the existence of the name as suggested in the first step!) The form you need is form LLC 5.5 at the time I’m writing this. Since we didn’t hire anyone to do paperwork for us, the registering agent is you, as well as the owner. Perhaps the only part that’s not completely clear in terms of what you should fill in is the free text field for “purpose of the LLC”. You could definitely write the purpose of your company along the lines of “to serve great food in Chicago” or “to raise money for 3rd world countries” etc. In actuality, the standard language is: “The purpose for which the company is organized is for the transaction of any and all lawful business for which limited liability companies may be organized.” You may add a little specificity if you’d like but don’t really want to get so specific that you’ll lock yourself out from doing certain business either. You’ll also need to state if you’re filing for a series LLC or not. A series LLC basically allows you to form multiple LLCs that have separate assets protected in separate areas. For instance, if you open three restaurants and set them up as a series LLC, a customer who is bent on suing can only go after the one restaurant they were at, and not all three. The pain is that you’ll have to keep separate assets for each restaurant as well (revenue, expenses, payroll, etc.) but think of it as minimizing your risk by diversifying. Each part of your LLC is insulated and protected from the other portions.
Articles of incorporation cost $500 to file via paper (which can take a LONG time) or $600 via online (24 hour approval stated, 2 hr turn around was my experience). It’s $750 for a series with $50 for each additional series LLC, and prolly $100 more for the online convenience. You can file on line here.
And you’re done! Mostly anyways… at this point, you just have to wait for the response from Illinois to appoint your LLC. A key thing to remember is that as an LLC, you need to file a annual report each year ($250) which is due on the first day of the month your LLC was formed. I haven’t done it yet, but next year, I’ll be visiting this page to better understand what needs to be done. If you’re late, it’s a $300 penalty to file (unsure if that’s in addition to the $250 or not). If you don’t file, they can shut down your LLC.
Congratulations on your LLC! It’s the first step of many that we’ll go through in order to get your business up and running in Illinois. Next time, we’ll talk about how to set up your FEIN and notify the state that you’re planning to business. (Yes, I know, confusing… one would think the LLC would’ve done that!)
Before we go, a new test pie that I worked on just this morning based on some suggestions of Za Pi fans:
On the whole pie: Tandoori chicken (soaked overnight in yogurt/masala seasoning, cooked in oven briefly), sliced red onions, and diced orange peppers
On left side of pie: Mango chutney base
On right side of pie: Tandoori paste base
On top of pie: Fresh mozz
On bottom of pie: Cubed paneer (to test for melting and flavor)
Overall impressions – Mango chutney base is sweet and tasty! Tandoori paste is overly salty, I may have added too much. I made a cilantro yogurt to finish on top of the tandoori paste side, and it definitely helps. Mozz melds the food together well, while the paneer doesn’t even begin to melt at 550 degree oven under broiler. Will have to test on a WFO at 900+ degrees to see if it melts any better.
What do YOU think Za Pi fans? Any thoughts on what would be great on an Indian based pie? Looking to hear your thoughts!