Once you have chosen a name, the first thing to do when you’re ready to start your business is to make sure it is legally registered. You must register certain business entity types before you can conduct business.
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Choosing the Right Business Entity
You can choose from several different business entities when starting your business, but each has its own unique pros and cons that might make it the right choice for you. Some of your options include:
- Limited Liability Company (LLC): Many small businesses choose to register as an LLC because of the tax flexibility combined with the liability protection. LLCs allow you to be taxed as a sole proprietorship or an S-corporation, where the tax loss or gain can be reported on your personal tax return. Read more about how an LLC works.
- Corporation: When choosing a corporation, you can choose either an S-corp or a C-corp. A corporation is typically chosen as an entity type by businesses that expect to scale quickly, or those that are planning on raising capital (because you can divide shares among owners).
- Sole Proprietorship: This is a business entity that doesn’t elect to separate business finances and liabilities from the business owner’s personal matters. If you choose a name that is not your own legal name, you will need to register a DBA (doing business as) registration with the state. There are no formation documents to register for this type of business. Learn more about why a sole proprietorship might be the best option for you.
- Partnership: A partnership works the same as a sole proprietorship, except that there are multiple owners of the business that partner together. If you go this route, you’ll want to make sure that you have a partnership agreement.
- Limited 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 their investment in the company.
- Limited Liability Partnership (LLP): All partners have limited liability, similar to an LLC in this type of business.
You can find business formation papers on the Secretary of State’s website and can submit them by mail with payment of the required fee for your entity type.
In order to register your business entity in Illinois with the Department of Revenue (required for all business types), you have three options. First, you can complete the registration process online. Second, you can mail in your Form REG-1. And your last option is to visit one of the regional Illinois Revenue offices in Chicago, Marion, Des Plaines, Rockford, Fairview Heights or Springfield. You may have to fill out additional schedules to go with your REG-1 if your business sells liquor or involves a utility.
The online Department of Revenue registration process in Illinois can take one to two days to finalize. However, if you mail in the form, then the state asks for six to eight weeks for your application to be finalized.