Sunday, July 14, 2024

How To Set Up A Sole Proprietorship In Illinois

Benefits Of Opening A Business In Illinois

How Should I Set Up My Company? LLC vs Corp vs Sole Proprietor

Owning a business in Illinois can give you flexibility, income growth, and control over your workflow and finances. Illinois has distinct advantages for new business owners, including a per-capita personal income 6% over the national average, a less competitive labor market, and plenty of access to capital.

The states 4.95% flat tax on personal income is a particular benefit to Illinois small business owners, most of whom claim profits on individual tax returns. The state also serves as a national transportation hub with more than 10 commercial airports and 25% of all U.S. freight traffic moving through Chicago.

Appoint An Illinois Registered Agent

Every LLC thats authorized to operate in Illinois must designate a registered agent. A registered agent is an individual or company that accepts legal documents on your businesss behalf. Government entities and legal claimants will send official correspondence to the registered agent, who is then responsible for forwarding the documents to you.

For an Illinois LLC, an individual can serve as the registered agent if they are at least 18 years old and an Illinois resident. A company can act as the registered agent if it is authorized to do business in Illinois and has an office address in Illinois . Should your registered agent change, you should file Form LLC-1.36/1.37with the Secretary of State right away.

In Illinois, you may designate yourself or another owner of the LLC as the registered agent. However, you might not be able to fulfill the duties of a registered agent when youre on vacation or out sick. A more convenient option is to sign up for a registered agent service. An online legal services company like Incfile can serve as your registered agent.

Llc Vs Sole Proprietorship: Choose A Business Structure

Before you start serving customers, youll choose a structure for your business with the Illinois Secretary of State. Most small startups choose between a sole proprietorship and a limited liability company . There are pros and cons to both.

A sole proprietorship is the simplest business entity to set up. As a sole proprietor, you wont have to file much more than a doing business as form with your local county clerk to abide by the Illinois Assumed Name Act. All business income and losses are reported on your personal tax return, but you wont have the same liability protections as an LLC.

An LLC structure protects your personal assets from being tied to the companys debts and liabilities, which is helpful if your company gets sued or goes into debt. Plus, youll still pay taxes on profits through your individual tax return, but youll avoid being taxed twice for it.

Theres some additional paperwork involved with structuring as an LLC, but you wont need to shell out big bucks for a lawyer. A registered agent service can serve as your go-between for official paperwork and filing deadlines, often for less than 0/year in Illinois.

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Market Your Business In Illinois

After determining your target market, craft a marketing plan that includes the major social media platforms, online communities, and local or online directories. Claim a free business profile on Google My Business to engage with Illinois customers across Google Search and Maps. Also consider joining the Illinois Chamber of Commerce or a local chamber, which refers prospective customers to members first.

Print material, such as brochures and business cards, can elevate your marketing at Illinois trade shows. Search engine optimization can help customers find your business website or blog when they use Google and other search engines.

Finally, customize your marketing approach. While it makes sense for a home-based web design company in Naperville to market globally, a plumber in Carbondale will want to limit marketing efforts to a smaller area.

Register An Illinois Dba For A Sole Proprietorship Or General Partnership

How to Set up a Sole Proprietorship in Illinois: 8 Steps

General partnerships, sole proprietors, and professional corporations are required to file their Illinois DBA with the County Clerk in the county where the business is located.A sole proprietorship is a business owned by a single individual that isn’t formally organized. If you run a business and file taxes under your own name, you are a sole proprietor.

A DBA is only used for branding. We recommend forming an LLC to separate your business and personal assets.

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Assumed Business Name Filing

If you’re a sole proprietor and you’ve opted to use a name other than your legal name, the state of Illinois says you must file a certificate of the assumed business name. This isn’t optional in Illinois. To begin the filing process, the assumed business name certificate form is available from the county clerk’s office. You go to the county where your business will be located to get it. The cost to file this form is $5.

After you file the form, you must publish your assumed business name in the local paper. It has to stay published for three weeks in a row. After you do this, the publisher will give you a publisher’s certificate. You need to file that certificate with the county clerk to complete the process of applying for your assumed name. The contact information for your county clerk’s office can be obtained from the Illinois Department of Health.

Build Your Business Website

After defining your brand and creating your logo the next step is to create a website for your business.

While creating a website is an essential step, some may fear that its out of their reach because they dont have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldnt delay building your website:

  • All legitimate businesses have websites – full stop. The size or industry of your business does not matter when it comes to getting your business online.
  • Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own and control.
  • Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You dont need to hire a web developer or designer to create a website that you can be proud of.

Using our website building guides, the process will be simple and painless and shouldnt take you any longer than 2-3 hours to complete.

Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.

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Register Your Illinois Business

Once youve chosen your business structure, the next step is to form your business. No matter what formal business structure you choose, there are a few common steps, including:

  • Naming your business
  • Choosing a registered agent: an individual or business entity that accepts tax and legal documents on behalf of your business.
  • Getting an Employer Identification Number : a number assigned by the Internal Revenue Service to help identify businesses for tax purposes.
  • Filing formation documents.

In addition to these steps, each business structure has its own requirements that are unique to that business structure.

Here are the steps you need to take to register your business:

Form an LLC in Illinois

LLCs are the simplest formal business structure to form and maintain. With less paperwork than other business structures, you can easily form an LLC in five easy steps.

  • Name Your LLC
  • File Your LLC With the State
  • Create an LLC Operating Agreement
  • Get an EIN
  • To file the Articles of Organization for an LLC in Illinois, you must submit your formation documents to the Secretary of State online or by mail along with the $150 filing fee.

    Read our full guide on How to Form an LLC in Illinois or have a professional service form an LLC for you.

    Start a Corporation in Illinois

  • Name Your Corporation
  • File Formation Documents
  • Get an EIN
  • Read our full guide on How to Start a Corporation in Illinois.

    Form a Nonprofit in Illinois

  • Name Your Nonprofit
  • Select Your Board Members and Officers
  • Get an EIN
  • Register Your Illinois Business And Open Financial Accounts

    What Is a Sole Proprietorship? (And Is It Worth It?) – Start Up | Lawyer Up

    Once youve chosen your business structure and filed the registration with the Illinois Secretary of State, apply for a federal employer identification number with the IRS. Use the tax ID number to open a business bank account. You can do this yourself or have a partner do it by creating a special document called a banking resolution. Dedicated business bank accounts will keep the companys finances separate from your personal funds. Thats important to preserve LLC status.

    Next, apply for any permits or licenses required to do business in Illinois. That starts with a search of the states registration, licenses, and permits site. Permits and business licenses vary by industry, so youll have to do a little research to determine which agency oversees the regulations in your field.

    For example, opening a pet shop will require you to understand the Illinois Department of Agricultures pet shop rules. But a business that provides hospice care is licensed by the Illinois Department of Public Health.

    Finally, invest in a business owners policy to protect your company with general liability, commercial property, or additional coverage options based on your specific needs.

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    Tax Registration And Insurance

    All Illinois businesses, including sole proprietorships, must register with the Illinois Department of Revenue. You may register online using the Illinois Business Gateway. You must complete this registration before you make any purchases, sales or hire any employees. In addition, because sole proprietors are personally liable for the debts of their businesses, you may want to obtain general liability insurance.


    City Of Champaign Business Services For New And Expanding Businesses

    Home Based Businesses

    Starting your business from your home can be a great way to grow with low overhead costs. However, there are a number of rules in place for home based businesses to ensure that they do not negatively impact the surrounding neighborhood.

    Partner Agency Licensing

    • State of Illinois 6.25%
    • City of Champaign Home Rule 1.50%
    • Champaign County 0.25%
    • Champaign County 1.00%

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    How To Start A Business In Illinois Faqs

  • What business and tax regulations are compulsory for an LLC business in Illinois?

    Unless youve elected to have your LLC taxed as a corporation, be prepared to pay 1.5% of your businesss net income to the Illinois Department of Revenue. LLCs in Illinois must file articles of organization, annual reports, and register their business names. In addition, every LLC in Illinois must have a registered agent.

  • What is a good city to start a business in Illinois?

    Based on local economies, disposable income, crime rates, and unemployment figures, Deerfield, Western Springs, and Hinsdale top the list.

  • How much does it cost to open an LLC in Illinois?

    Illinois charges a $150 fee to file articles of organization.

  • Illinois Small Business Services

    Clarification & Compliance With Tax Requirements

    How to Set up a Sole Proprietorship in Illinois: 8 Steps

    You can run your business in this format and not hire third-party employees. In this case, you do not need to obtain an EIN because your Social Security number will replace it. Of course, it would be correct to take care of your confidentiality and still use the EIN and not the SSN.

    The nature and the structure of the business activity of individual entrepreneurship determine the list of tax requirements that the state will put forward .

    Individual entrepreneurs of Illinois State have received the status of pass-through organizations. This means they do not pay extensive tax fees but only pay tax on the income of the owner of the enterprise. But at the same time, these organizations have other tax regulations. Sole entrepreneurs of Illinois pay fees in a different format.

    What are these taxes? To find out all the details about them, go to the Business Tax page on the website of the Illinois Department of Revenue. Here you will get all the information about what types of taxes you have to pay.

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    Sole Proprietorship Startup Costs

    As you start a business you may consider setting it up as a sole proprietorship, which is a type of business structure that is run and owned by one person. As with all start-up businesses, there will be expenses to consider.

    There is more to go into business for yourself than just getting business cards printed or sticking up a web pagethe modern-day version of “hanging out your shingle”. Unanticipated business expenses can wreak havoc on both your business and personal life. Great expectations are great realistic expectations are better.

    Pay Illinois Business Taxes

    In all states, including Illinois, LLCs are regarded as pass-through entities for tax purposes. This means that the LLC itself does not pay income taxes. Instead, business profits and losses pass through to each owners personal tax return. Each owner is taxed at their federal and state personal tax rate on their share of the profits.

    Illinois also has a separate tax on LLCs called personal property replacement tax. The current tax rate is 1.5% of the LLCs income, and its due once per year. Single-member LLCs are exempt from paying the personal property replacement tax.

    LLCs can elect to be taxed as a C-corporation or S-corporation by filing paperwork with the Internal Revenue Service and state government. S-corps are pass-through entities, similar to the default tax treatment for LLCs. However, if the LLC elects to be taxed as a C-corporation, then the LLC will pay Illinois corporate tax and federal corporate tax. In addition, the corporation will pay a higher personal property replacement tax.

    Illinois LLCs with employees must withhold payroll taxes from their employees wages and pay the employer share of payroll taxes. A portion of these taxes goes to the federal government, and a portion goes to the state.

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    Obtain Business Licenses And Permits

    There isnt a requirement in Illinois for sole proprietors to acquire a general business license, but depending on the nature of your business you may need other licenses and/or permits to operate in a compliant fashion.

    Most state-issued business licenses in Illinois are industry specific and are determined by the goods or services which your sole proprietorship offers. For help establishing your businesss licensing needs, youll need to consult the Registration, Licenses, & Permits page of the Illinois government website.

    In addition, you should check to see if your business needs any licenses or permits on the local level.

    Larger municipalities such as Chicago will often have their own licensing standards by which businesses operating within their jurisdiction will be required to abide.

    Choose A Business Structure

    Sole Proprietor VS LLC VS Corporation Which One Should You Get?

    Registering your Illinois company as a legal business entity such as an LLC, corporation, or nonprofit has two major advantages:

    • Increased credibility
    • Protection from personal liability in the event your business is sued

    Find out which business structure is right for your new business in Illinois.

    Sole Proprietorship

    A sole proprietorship is an informal business structure that isnt incorporated or separated from its owner. This means that 100% of the businesss profits go to the owner however, 100% of the financial liability should the business accrue debt or get sued falls on the owner as well.


    A partnership, like a sole proprietorship, is an informal unincorporated business structure but with multiple owners. Similarly, partnerships do not have liability protection that you find with a formal business structure.


    A limited liability company combines the personal asset protection of a corporation with the flexibility of a partnership or sole proprietorship. Most small businesses prefer the LLC structure due to its easy maintenance and favorable tax treatment. Find out if you should start an LLC for your small business.


    A corporation is a separate legal entity that is owned by its shareholders. Corporations have more formal regulations than LLCs and tend to be more attractive to investors. Most large companies like Apple fall under the corporate category.


    Find out more about how to file a DBA in Illinois with our guide.

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    Think About The Type Of Business You Want To Start

    Entrepreneurs who wish to create a name for themselves in business must first decide what kind of company they want to run. While certain aspects may be obvious, such as operating an online or physical location, others may be more difficult to decide. Therefore, it’s a good idea to conduct some research and look at other local small companies in your sector to see how you can learn from their successes while avoiding their failures.

    Aside from the mechanics of your daily operations, it’s also essential to determine whether being a business owner is right for you. Some business structures take a long time to start, and when something inevitably goes wrong, can you manage the stress, hassle, and headaches that go with your industry?

    If you’re still enthusiastic about your business idea and nothing seems more satisfying than the startup grind, it’s time to jump into the process. While you may divide each step into smaller, actionable tasks, it is critical to finish the process in time to sell to your future customer base.

    Doing Business As/dba/assumed Name Notice

    A fictitious name filing, also known as Doing Business As or DBA, allows you to create name for your business that is different than your personal name, the names of your partners or the officially registered name of your LLC or corporation. When a business name is different from the owner full legal name, the Illinois Assumed Name Act requires sole proprietorships and general partnerships to register with their local county clerks office. Corporations, LLCs, LLPs, and limited partnerships register an assumed name as part of their required business filings with the Illinois Secretary of State.

    Registering your business name under the Assumed Business Name Act, does not prevent anyone from using your business name. The only way to prevent someone from using your business name is to file as a corporation or have a trademark for your name.

    WHO MUST FILE: Anyone using a name for his/her business. Note: By adding any word to your own personal name constitutes an assumed name .

    HOW TO FILE: Illinois State Law requires that the Notice shall be published in a newspaper of general circulation within the county in which the Certificate is filed. Such notice shall be published once a week for three consecutive weeks.

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