There are numerous business organization options available in Illinois. The differences between these options relate to reporting requirements to the state, how the entity is taxed, and the personal liability of the business owners. Prior to choosing which option you wish to pursue, you should consider what type of business you will participate in and what type of risks you will face. Also, you may want to consider hiring an attorney or using an online document provider to help you prepare the necessary documents.
General Registration Issues
Regardless of what business organization you choose, you must file certain documents with the state. You must complete and submit an Illinois Business Registration Application, Form REG-1, to the Central Registration Division, Illinois Department of Revenue, P.O. Box 19476, Springfield IL 62794-9476. If you have employees, you are required to obtain an employer identification number from the IRS. This can be obtained online through the IRS website. After obtaining the EIN, you must then register with the Illinois Department of Employment Security by completing and submitting the UI-1 form. You must also carry workers’ compensation insurance if you have employees. You may also be required to obtain additional licenses if you work in a specialized field, such as law or accounting.
A sole proprietorship does not require any additional formal proceedings to form; if you decide to start a business you are automatically a sole proprietorship. While you will have to report any money you earn on your personal tax return every year, as a sole proprietor you will not have to make any additional ongoing filings with the state. You will also be personally liable for all of your business’s liabilities. If you choose to operate your business with a name other than your own, you must register that name with the county clerk’s office in the county where your business is headquartered.
A general partnership is a business with two or more owners that does not require any additional forms to be filed. If you choose this type of entity, you will be responsible for reporting your share of the business’s income on your personal tax return every year. You will also be personally liable for the business’s liabilities. If the partnership plans on using a name other than the names of its partners, it must register that title with county clerk’s office in the county where the partnership is headquartered.
A corporation is a taxable legal entity separate from its owners that generally protects the owners from being personally liable for the business’s liabilities. To incorporate your business, complete the Articles of Incorporation form found at the Illinois Secretary of State’s website. Submit the completed articles and the required fee to the Secretary of State. After the first year, you will have to file an annual report updating the state on the state of your business and pay a maintenance fee.
Limited Liability Company
A limited liability company is an entity that offers its owners protection from the business’s liabilities, like a corporation, but that is taxed like a partnership. To register an LLC with Illinois, you must complete an Articles of Organization form found on the Secretary of State’s website. Submit the completed articles with the current filing fee to the Secretary of State. Every year you will be required to file a report updating the state on the business and pay a maintenance fee.