The process of starting a business in Illinois seems intimidating at first. Numerous state regulations govern how a business must be established. Understanding these requirements is key to making the process manageable. If you are starting a new business in Illinois, take heed of the following business formation laws.
Business Formation Requirements
Every business must have a valid legal structure to be licensed. The state of Illinois recognizes several types of organizational structures. You may choose to register your business as one of the following:
- Sole proprietorship
- General partnership
- Limited partnership
- Limited Liability Partnership
- Limited Liability Company
- Low-profit limited Liability Company
- Corporation
If you choose to incorporate, you may choose either a C corporation or an S corporation. Under a C corporation, business owners are taxed separately from the business. With an S corporation, the owners are not taxed separately from the business. The income and expenses of an S corporation also flow down to the shareholders. There are several requirements to qualify for S corporation status. This includes obtaining shareholder consent to elect S corporation status and limiting the number of shareholders to 100.
Licensing and Permits
According to the Chicago law firm of Roth Fioretti, all businesses need a license to operate legally within the state. The type of license that is required will largely depend on the functions of the business. Companies dealing with investments will need to seek a license from the Secretary of State’s office. Family care services would need to apply for a license from the Illinois Department of Children and Family Services. Transportation services require a license issued by the Illinois Commerce Commission.
Be aware that local licensing rules also apply. You may have to register your business with the city or county government. You may also have to comply with local zoning laws that dictate how and where your business can operate.
Department of Revenue Registration
Practically every business in the state of Illinois must register with the Department of Revenue (IDOR). This agency handles business-related tax issues such as the granting of tax incentives. Your business may be required to file several forms before beginning operations. Some of the standard documents include the REG-1 or Illinois Business Registration. You will need to contact IDOR directly to determine which forms are necessary.
Immigration Laws
All U.S. employers need to ensure that members of their workforce have the legal right to work in the country. You can check on an employee’s authorization to work by completing an I-9 form. Federal law requires a business to maintain I-9 records for at least three years. It is important to comply with immigration laws to avoid fines and licensing issues.
Worker’s Compensation
Illinois law requires businesses to provide worker’s compensation insurance for employees. This insurance covers workplace injuries and accidental deaths. Premiums for these policies differ depending on the type of business, the number of employees and the company’s loss record. Most companies purchase policies through private insurance agencies. However, you may also obtain a policy through the Illinois Workers’ Compensation Commission.
Unemployment Insurance Contributions
The Illinois Department of Employment Security (IDES) requires businesses to pay into the unemployment insurance fund. Even small businesses that pay more than $1,500 in wages per year must contribute. Furthermore, all start-up businesses need to register with IDES within 30 days of the start of business.
Other Considerations
You have many other legal obligations when starting a new business. In addition to the areas addressed above, you will also have to deal with Occupational Safety and Health Administration (OSHA) standards, wage withholding laws and U. S. Department of Labor regulations. Starting a new business is not an easy task. However, there are several resources available to ensure you are successful in your journey.