Starting a business as a Sole Proprietorship is by far one of the simplest business structures to form in the United States. It is the most common type of business structure and it only requires the filling out of a few documents to become a Sole Proprietor in Chicago. It allows entrepreneurs to begin their businesses without the need for complicated operations paperwork. But, there are a few key pieces of information that a person should know before getting started.

A Sole Proprietor in the state of Illinois is an individual who operates a business as the sole owner. In other words, the owner is the business, and can expect to have full control over any assets or liabilities associated with the business. Sole Proprietors aren’t required to file a separate business entity, and they can be held liable if something goes wrong within the business. It is the most flexible type of business structure in that the owner can easily establish and dissolve it at any time. However, in addition to the responsibilities of any business, Sole Proprietors in Chicago should be aware of the following:

Registering Your Sole Proprietorship in Chicago

Registering a Sole Proprietorship in Chicago requires a few steps. First, you will need to register with the Illinois Secretary of State. This can be done by filing a Statement of Registration of a Trade Name online using the Illinois Secretary of State’s online "BizFilings" system. It's important to remember that if the business operates under a name other than your own name, you will need to file a “Doing Business As”, or “DBA”.

It's important to note, that in Chicago, a business license is a requirement prior to engaging in business activities in the city or County. Once registered through the Illinois Secretary of State, the next step would be to obtain the proper city or County business license. For that, you need to visit the Office of the Mayor, City Council or County Clerk in the jurisdiction the business is located.

The City of Chicago offers online registration and application for a business license. Certain business activities may require additional permits or approvals by the Chicago Department of Business Affairs and Consumer Protection (BACP). For example, if you're engaged in warehousing or any type of product retail sale, you may need to obtain a Retail Food Establishment, a Wholesale Food Facility, or a Farmers Market Permit.

Tax Requirements for Sole Proprietors in Chicago

Typically, tax requirements for Sole Proprietors in Chicago are similar to those of any other business structure. All self-employed workers in Illinois must file the necessary forms, pay taxes, and submit to possible audits.

Your business will likely need to submit taxes via an Employer Identification Number (EIN). This can be obtained by filing Form SS-4 through the Internal Revenue Service (IRS). At the state level, Sole Proprietors in Illinois must pay the Self Employment Tax, as well as any local taxes. In Chicago, certain businesses may be subject to the City’s Shared Responsibility Payment, or the “soda tax”. The soda tax is 1.25% of all retail coffee and sugar-sweetened beverage sales, and so it applies to certain establishments in the city.

Employing Others in Your Sole Proprietorship in Chicago

For Sole Proprietors who are interested in hiring employees, the employee recruitment process and procedures will be much the same as for any other employer in the country. An employer should not be engaging in any unlawful recruitment or hiring practices that discriminate against protected classes. Such protected classes include race, gender, ethnicity, and religion. Furthermore, employers should make sure to thoroughly screen and vet any potential employees before bring them on board.

Once the appropriate employee background check process has been completed, any employee you hire will be subject to the same wage and hour protections as any other employee. Employers must also provide the necessary withholdings from their employees’ wages and pay them the regular pay schedule required by law. Employers should also be aware of the Chicago Sick Leave Ordinance, which requires that employers provide sick time accrued to certain employees.

Finding the Right Legal Support for Your Sole Proprietorship

In Chicago, it is important to have the proper legal support for your business. Working with an experienced lawyer from a reputable law firm can prove invaluable as you navigate the legal and business landscape. One good source to find legal support may be UpCounsel. UpCounsel is a network of experienced attorneys who have years of expertise an understanding of the law and can provide comprehensive counsel to businesses of all sizes. From contract drafting, to legal strategy, to litigation, UpCounsel's network of attorneys provide the best in legal service.

As a Sole Proprietor in Chicago, it is important to understand the legal requirements that go hand in hand with running your business. From registering with the Illinois Secretary of State to obtaining the proper permits by the City of Chicago, to understanding local wage and hour requirements, the law can be complex and it is important to stay up to date. With the right legal counsel and representation, your business can be more successful and profitable.


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Business Licensing