Launching a business as a proprietorship is a popular decision for many entrepreneurs. As a business structure, proprietorship offers flexibility, easy setup, and low cost, making it a perfect fit for individuals just beginning their business journey. Additionally, registering as a proprietorship might be the most appropriate choice for businesses that will only have one owner, have minimal legal complexity, and plan on staying relatively small in size and scope.

That said, getting clarity on your legal duties as a proprietorship is still an essential part of setting up your business, and local regulations and laws may vary depending on the location. As someone based in Chicago looking to gain insights into the necessary legal steps, this guide is your perfect starting point to get your venture off the ground in an informed and compliant way.

Why Should I Consider Launching a Proprietorship?

At the most basic level, a proprietorship is a business structure where a single person bears all the responsibility (and usually the profits) of the business. When registering a proprietorship, the individual is not required to file any specific paperwork; in most cases, all you need is the underlying business license to start monetizing your activity. Despite this simplicity and minimal setup, a proprietorship can still give you strong legal protection for your business, making it ideal to start making a name for yourself in the entrepreneurial scene.

Additionally, a proprietorship can help you keep more of your profits since you won’t have to pay any corporate tax structures, meaning that all the money earned by the business will belong exclusively to you. Finally, in terms of tax filing, proprietorships require minimal paperwork, making it easy for sole proprietors to file deadlines each year.

When Might a Proprietorship Not Be the Ideal Business Structure for Me?

While leveraging a sole proprietorship might be the simplest and usually most cost-effective solution, it may not cover all of your business needs. Most notably, full business liability falls directly on the individual, making you liable for everything related to your business, such as debt, legal issues, and more.

Additionally, if your business scales up and grows quickly, you’ll likely have to upgrade to a more structured business entity — such as an LLC — to avoid bloating your business with unforeseen legal risks. Finally, while proprietorships allow for easy tax filing, these may only qualify you for self-employment taxes. If you want to further leverage tax advantages, you may need to register as an LLC, S Corp, or C Corp, as these allow access to different types of deductions.

How Can I Get Started in Chicago?

Chicago requires you to register your business in the state of Illinois to obtain a business license that allows you to operate locally. Fortunately, the online registration process itself is relatively simple, allowing you to complete it in a matter of minutes.

After this, you’ll need to get your Employer Identification Number (EIN) from the IRS, which allows you to open a business bank account, claim your business taxes, and other administrative tasks. Here, you’ll need to provide a Federal Employer Identification (FEIN) number, which is a unique number identifying you as a business entity.

Additionally, depending on the nature of your business, you may need to register for additional licenses and permits. For example, business that sell coffee or other fills, will need to obtain a Food Service Sanitation Manager Certificate to remain legally compliant and operate freely.

What Legal Resources Are Available to Answer my Questions?

If you need any legal counsel or representation on the local business legislation related to your proprietorship, UpCounsel can provide you with access to experienced attorneys in no time. Whether you need a one-time consult or a full-time legal expert to help you manage all legal matters in the long term, they have an extensive network of top-notch lawyers you can rely on.

You can access their platform to get deeper insights into the attorneys’ profile, read client feedbacks, and simply contact them directly. The UpCounsel community comprises experienced attorneys — on average with 14 years in the business — that have served small businesses, Fortune 1000 companies, and more, making them the perfect partners to help you with any legal task.



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