Starting a New Business in Illinois

When you start a new business, one of the first decisions you must make is the type of business formation. The basic choices are sole proprietor, partnership, LLC, and corporation.

A sole proprietorship is the easiest form of business to setup and maintain. You choose a business name and register the name in the Illinois County where the business will be located. If you are doing business in your own name, this step is not required. There are minimal fees and legal costs in starting your business and it is generally easier to manage than the other business forms.

“Sole” means only one but actually, a husband and wife can own a sole proprietorship. For federal income tax purposes, generally a husband and wife sole proprietorship is classified as a partnership. You need to make an election each year to not be taxed as a partnership.

The main disadvantage of the sole proprietors 

hip is that you have unlimited liability for your business’ debts and losses. For example, if an employee creates a liability for your business, you may be personally liable. If you are concerned that your personal assets are at risk, then you should maintain adequate insurance and also consider a limited liability form of business.

The following steps are common to all businesses:

• Obtain an Employer Identification Number (EIN) from the IRS - For a sole proprietorship, this step is recommended but not required.  If you have employees, you will list your business EIN on their payroll forms such as the W-2 so they won’t know your personal Social Security number. You should also open a bank account in your company name using your EIN. Deposit all business revenue into the company bank account and pay all business expenses from the account.  Many business owners fail to maintain adequate accounting records. By having a separate company bank account, you will at least some record or revenue and expenses. 
• If you have employees, you must register with the Illinois Department of Employment Security. They administer unemployment insurance in Illinois. Generally, you will be required to make unemployment insurance contributions on behalf of your employees on a quarterly basis.
• You must register with the Illinois Department of Revenue if you conduct business in Illinois, or with Illinois customers.
• If you have one or more employees in Illinois, you must carry workers' compensation insurance. The sole proprietor does not need to be covered by worker’s compensation insurance.
• If you have employees, you must make certain filings with the IRS and the state such as employer informational returns.

It is a difficult business climate to start a new business in Illinois but hopefully you can start your business off on the right foot.  Look for future articles that will discuss other business entities such as LLCs and corporations. We will also highlight tax credits that may save your business money.

My Law, LLC                                            
Immigration & Tax Law Firm

www.mylawllc.com

Phone: (630) 903-9625

1230 E. Diehl Rd. Suite 106

Naperville, IL 60563

E-mail: attorney@mylawllc.com