No matter how interested you are in starting a business, making informed decisions alone can be challenging, especially if you want to become a sole proprietor. If you’re eyeing to register a business entity in Illinois, you may need to consider specific requirements.
From the preparation up to the filing fee, our team will help you get acquainted with each step through this sole proprietorship Illinois article.
How to Start a Sole Proprietorship in Illinois?
Before we get into the related entire process, it’s a good idea to understand what it means to be a sole proprietor of a small business.
Despite the common misconception, sole proprietorships aren’t legal entities. It merely implies that the company can take its assumed business name from its owner or operate under a fictitious name. And if you want to be a sole proprietor , you must undergo the following procedures that our team outlined below.
File Your Chosen Business Name
Sole proprietors must register using their legal name or file an assumed business name. However, business owners need to make sure that the assumed name is available and not taken by other registered businesses.
In order to do so, sole proprietors can run a quick business name check in different public government databases such as the secretary of state, US Patent & Trademark Office, and local county clerk’s office.
If you decided to register an assumed business name instead of your personal name, our team would advise you to obtain a name certificate required by the state of Illinois. Filing an assumed name also will also entail a minimal processing fee of $5 to the county clerk’s office. You will need to register with the Illinois Department of Revenue Business Registration.
After you obtain the name certificate, the next step sole proprietors need to take is to publish the assumed business name in local newspapers within three consecutive weeks. And to complete thep process, you must also file the publisher’s certificate to the county clerk. The contact information of each county can be accessed in the Illinois Department of Health.
Accomplish State Licenses
Depending on operational activities, businesses under sole proprietorships may be required to obtain specific licenses. If you need help in figuring out this information, the Illinois has a business portal where you can find all related licenses and permits demanded by the state.
You may also access additional legal information in this comprehensive database, such as local regulations that your business may need to comply with. Our team suggests you check these pieces of information personally with your local county government or seek legal advice regarding this matter.
Acquire an EIN/Tax Identification Number
If a business wishes to hire employees, you must acquire an employer identification number (EIN). This nine-digit number is issued through the IRS website and is required upon submission of reports like employees’ wages and business tax.
Although sole proprietors without employees have the option to use a social security number, we highly discourage you to use it in business transactions as they can be easily used to open a bank account.
Besides submitting employee records to the IRS, your business EIN [1] is also needed when you pay all employment-related taxes through the Illinois Department of Employment Security.
Accomplish Other Necessary Requirements
With the use of your newly obtained business EIN, you should open a bank account to separate your business and personal assets. With the risk of being personally liable for the business’s debts, it’s a wise decision to get compensation insurance to form protection on your assets against unexpected events.
Other than insurance, a business under sole proprietorship should report information like sales tax and use tax on time, as well as register with the Illinois Department of Revenue Business Registration.
For other corporate concerns, you can also check our page about how to issue stock here.
Advantages of Being a Sole Proprietorship
Unlike other types of businesses like Limited Liability Company (LLC), you’re not obligated to file business tax returns because your profits and losses are claimed in personal taxes.
Despite having no asset separation compared to when you form an LLC and corporation, sole proprietors have the freedom to combine personal and business assets.
To expedite business creation, you can consider getting the services of the best LLC formation companies here.
FAQ
How much does it cost to start a sole proprietorship in Illinois?
There’s no specific cost to start a sole proprietorship in Illinois aside from the $5 processing fee for your business name’s filing. You’re also not necessarily required to file any legal document, so all you need to do is find an excellent sole proprietorship Illinois guide to complete the process correctly.
Conclusion
There are distinct requirements when offering products and services in different states. And if this sole proprietorship Illinois guide convinced you to start a business, our team suggests weighing each step carefully and consider the risks attached to it.
Although being the sole owner gives you the ease of process and freedom when managing business funds, always remember that many responsibilities lie under your name. If you find yourself overwhelmed, you can try availing services that can help you with the entire process.
To give you an idea on how dissolving your business in Illinois, you can check our page on how to dissolve a corporation in Illinois here, as well.
