Many self-employed Illinois residents are eager to start their businesses. The simplest and most rational solution to this issue is to join the ranks of sole proprietors.
Organizing and managing a business in this format is the least difficult in America and has no service pitfalls. Although, future business owners will have to adhere to certain norms. Also, be prepared that you will have to face some restrictions regarding the functions of your sole proprietorship.
So, the main task of this manual is to help you answer the essential question – is the business format of an individual enterprise right for you? And, of course, we will tell you which aspects to pay attention to while opening a sole proprietorship and how to set up a business structure in this vein properly.
The Proper Way To Start Business As The Illinois Sole Proprietor
There is no algorithm for organizing the business work of an individual entrepreneur in Illinois as for LLC. In addition, the state does not charge additional service fees for the formation or management of this type of business or company. Are you looking to become an individual business owner and start a sole proprietorship in Illinois? – Just start working!
Though, you still have to go through several additional legal formalities. These service stages are optional. Although many sole proprietors prefer not to neglect them, compliance with these formalities guarantees the legal protection of their interests.
Applying For DBAs
Almost every company and business owner prefers doing business as a DBA. There are many benefits to running a business under an assumed name compared with an entity or LLC. We are talking primarily about creating the business image of your company. Potential clients and consumers will find this approach more professional and give you more confidence. It turns out that a company that uses the real name of its owner is often not competitive.
Let’s clarify that a company owned by sole proprietors can use the DBA to open and manage a business bank account. Customers will appreciate it as one more advantage in favor of the business owner, so they feel more comfortable.
The procedure for registering an administrator in the territory of Illinois starts as the entrepreneur checks the availability of the name. For this, the state provides a convenient Internet service – Business Name Database.
Here, any user will quickly find a name or determine it is already occupied. If your name is free, then you can apply for its registration. Fill out a special form – a Certificate of naming. Then send it for confirmation to the Secretary of State of the place where your company operates.
Different municipalities provide their forms and tax requirements, although they do not differ much depending on the city.
Clarification & Compliance with Tax Requirements
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 (Federal Tax Identification Number) 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 (as with LLC).
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.
Business Licenses & Permits
If you are an entrepreneur in Illinois, then you are exempt from the need to obtain a general type of license. But you must have some other licenses and/or permits nevertheless.
These licenses depend on the type of your activity, and you should find out about them at the start of your enterprise. Get the required permits and conduct business legally.
For example, many types of licenses in the state of Illinois are related to industry permits. You will receive different types of licenses, it all depends on the specifics of your business. You will quickly understand the type of license that is needed for your company if you go to the page Registration, Licenses, & Permits. This is the Internet portal of the Illinois government.
You should also be aware of some local licensing requirements. Likely, your business must also have a local-level work permit from the municipality where the company is registered. For example, in such large cities as Chicago, entrepreneurs receive several local permits that are issued only in this municipality.
Illinois Sole Proprietor: The Notion & Essence
A sole proprietor is not a legal entity! But any corporation and limited liability company (LLC) has this status. As a sole proprietor, you run the business alone (register and manage it on your behalf). It is worth noting that this gives the business owner advantages, though, imposes additional obligations and responsibilities on him.
Make Sure to Pay Attention to the Following Three Aspects
There are obligations to pay taxes to the state
A business owner and an individual entrepreneur are the same people. It means that filing tax returns is not a requirement, as with an entity or LLC. You need to declare your income and expenses and fill out the declaration of an individual;
Business owners who are registered as sole proprietors have the right to enter into contracts on their behalf, unlike an entity. Also, receiving profit from clients, in checks they can indicate their name in the recipient column;
Flexible terms of business management
The advantage difference between individual entrepreneurship and any entity is the ability to combine work and personal assets. Whereas corporations and LLCs must separate personal assets from company assets. It has several positive and negative aspects. For example, if you have financial difficulties, creditors can seize or confiscate your personal property (house, car, etc.). In the case of corporations and LLCs (or any entity), creditors do not have this freedom, as their powers only apply to business assets.
Of course, the structure of doing legal business as a sole proprietor is greatly simplified while in Illinois. You don’t even have to pay any commission fees provided for the entity or LLC. At the same time, based on the nature and structure of the business activity that you conduct, you will all have to go through a series of entity stages.
The issues of taxation, obtaining licenses, and permits require more detailed consideration. Also, pay attention to the possibility of obtaining and using DBA. These aspects are vital, as their omission can result in unnecessary legal penalties for you.
We have prepared this manual so that you can think over the structure of your business to the smallest detail. Manage it correctly and get more legal profit!