Once you've decided on a name and are ready to start your business, the first thing to do is make sure it's legally registered. Before you can do business, you'll need to register your particular business entity type.
Choosing the Right Business Entity
When starting a business, there are several different business entities to choose from, each with their own advantages and disadvantages, and it can be difficult to know which one will be the best choice for you. Your options include:
- Limited Liability Company (LLC)Many small businesses choose to register as an LLC because of the combination of tax flexibility and liability protection it offers. With an LLC, you can be taxed as a sole proprietor or S corporation and report any tax losses or gains on your personal tax return. Learn more about how LLCs work here.
- Co., Ltd: When choosing a corporation, you can choose between an S corporation or a C corporation. Corporations are typically chosen as the entity type by businesses that expect to expand rapidly or that plan to recapitalize (as shares can be divided among owners).
- Sole proprietorship: This is a business entity that chooses not to separate the business's finances and liabilities from the business owner's personal affairs. If you choose a name that is not your legal name, you will need to register a DBA (doing business as) with your state. There are no incorporation documents to register this type of business. Learn more about why a sole proprietorship is the best option for you.
- partnership: A partnership works similarly to a sole proprietorship, except that two or more business owners work together to run a business. If you choose this option, you will need to sign a partnership agreement.
- Limited Liability Partnership (LP)In this type of partnership, there are general partners who are personally liable for the company's debts, and limited partners who are liable only up to the amount of their investment in the company.
- Limited Liability Partnership (LLP): In this type of business, just like an LLC, all partners have limited liability.
Business formation documents are available on the Secretary of State's website and can be filed by mail with the required fee depending on the type of business entity.
To register your Illinois business with the tax department (required for all business types), you have three options. First, complete the registration process online. Second, mail in Form REG-1. The final option is to visit one of the Illinois local tax offices in Chicago, Marion, Des Plaines, Rockford, Fairview Heights, or Springfield. If your business sells alcohol or engages in public services, you'll need to complete an additional schedule to attach to your REG-1.
The Illinois Department of Taxation's online registration process takes one to two days to complete, but if you mail the form, the state will allow six to eight weeks to complete your application.
