Sole Proprietorship Laws in Illinois

By Cindy DeRuyter, J.D.

Sole Proprietorship Laws in Illinois

By Cindy DeRuyter, J.D.

Entrepreneurs in Illinois who decide to start new business ventures have several choices for business entity structure. The sole proprietorship model is attractive for people who do not anticipate bringing on business partners, as it is relatively easy, fast, and inexpensive to create. While a sole proprietor does not have to register their businesses like they would for a corporation or limited liability company (LLC), they must register their business's name under the Illinois Assumed Business Name Act. Sole proprietors must also comply with additional licensing and permit requirements as applicable.

Yellow words that say "sole proprietorship" with related graphics surrounding it

Sole Proprietorship Basics

A sole proprietorship is a business entity that uses the sole proprietor's legal name, although the entrepreneur may decide to create a fictitious or "doing business as" (DBA) name for marketing and banking purposes.

Unlike corporations, sole proprietorships do not have boards of directors or company officers. They also do not have shareholders or members; sole ownership of the business rests with the sole proprietor.

Illinois Assumed Business Name Act Requirements

If you create a DBA name for your sole proprietorship, make sure there is not already another company using the name you want to use. Check with the Illinois Secretary of State and your local County Clerk to determine name availability.

To register your DBA name, locate the County Clerk's office for the county or counties where you intend to conduct business. Obtain an Assumed Name Certificate from the county, complete and submit it, and pay applicable fees. Next, publish three notices in a general circulation newspaper for the county and be sure to understand the county's timely filing requirements for doing so. After publication, the newspaper provides a document called Certificate of Publication. When the County Clerk's office receives all required information, your business gets a Certificate of Ownership of Business.

If you use any name for your business other than your own legal name, the Illinois Assumed Business Name Act requirements apply.

Tax and Other Considerations

Sole proprietors who intend to hire employees and businesses subject to federal taxation need to obtain employer identification numbers (EINs) from the IRS.

Any earnings or losses the sole proprietorship incurs pass through to the business owner. This means the sole proprietor is responsible for reporting business income and paying associated taxes through their personal tax filings.

Another way sole proprietorships differ from corporations and LLCs is that they do not offer the business owner any personal liability protection. If a supplier, customer, or other party sues a corporation or LLC, the individual owners are not personally liable for the company's debts beyond their own contributions to the company. In a sole proprietorship, there is no legal separation between the company's assets and the sole proprietor's assets. Therefore, sole proprietors assume some risk of loss for the property and other assets they own.

Starting Sole Proprietorships

Sole proprietorships are popular with many Illinois entrepreneurs because they are simple and inexpensive to establish and maintain.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.