Incorporating a Business in Chicago: How to Get Started
Chicago is home to some of the largest businesses in the country, with hundreds of small businesses being incorporated every year3 min read
Chicago is home to some of the largest businesses in the country, with hundreds of small businesses being incorporated every year. Yet when it comes to incorporating, it can be difficult to know where to start. From drafting documents to understanding the city’s regulations, incorporating a business in Chicago can seem like an intimidating task. Fortunately, with the right advice and resources, it can be a smooth and efficient process.
Your First Steps
In order to get started with incorporating a business in Chicago, the first step is to consider what kind of business structure makes the most sense. Different types of entities have different levels of tax exposure, legal liabilities, and compliance requirements. It is important to consider which of these will fit best with your business’s needs and goals. The most common structures include:
Sole Proprietorship A sole proprietorship is the simplest business structure, and requires no registration with the state. It is a business owned and run by a single individual, and its profits and losses are reported on the owner’s personal tax return. This type of business carries the highest risk of personal liability for the owner, but offers the benefit of tax simplification.
Partnership A partnership is an association of two or more individuals who jointly conduct a business and share profits and losses. It is important for partners to create a binding agreement that establishes rules for management, as well as what will happen in the event of a dissolution.
Limited Liability Company (LLC) An LLC is a business structure that combines the pass-through taxation of a partnership with the limited liability protection of a corporation. It is the most popular type of business entity in the United States, and the one most commonly used by small businesses.
Corporation A corporation is owned by shareholders, who appoint directors, who in turn appoint officers to manage the business. This structure offers the greatest amount of limited liability protection for owners, but has the most complex compliance requirements.
Once you have decided on the entity structure that is best for your business, you can begin the process of incorporation.
Filing Your Incorporation Document
The next step is to draft and file an incorporation document. This document outlines the essential elements of the business, such as its name, purpose, and ownership. Depending on the state, this document may need to be filed with the Secretary of State or the Division of Corporations.
In Chicago, the incorporation document needs to be filed with the Illinois Secretary of State. Once the document is filed, it is important to keep a copy for your records, as it will be needed for future reference.
Complying With Regulatory Requirements
The next step is to comply with applicable regulatory requirements. To begin, your business will need an employer identification number (EIN). This is the federal tax number for your business, and it must be obtained from the Internal Revenue Service (IRS).
In addition, you may be required to comply with other regulations, such as registering with the Department of Revenue to collect and remit sales taxes, or obtaining a business license. Depending on the nature of your business, you may need other permits or licenses in order to operate.
Getting Legal Support
The final step is to get legal support. Understanding local regulations can be complicated, and attempting to do so on your own can be time-intensive and costly. It is recommended that you get the help of a business lawyer who can guide you through the process.
At UpCounsel, we provide access to experienced business lawyers who are well-versed in Chicago regulations and can help every step of the way. Our network of attorneys have an average of 14 years of experience, and our online profiles show ratings and reviews of past work. Whether you need a one-time consultation or an entire freelance legal department, UpCounsel is your go-to source for high quality legal services.
The main takeaway
Incorporating a business can be a complex and time-consuming process. From considering your entity structure to filing documents and understanding local regulations, it is important to understand the various steps involved. Fortunately, with the right legal support and resources, incorporating a business in Chicago can be done efficiently and effectively.
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