Many solo entrepreneurs in Illinois choose to operate their businesses as sole proprietorships. Others decide to register a company with the Secretary of State. Both methods are valuable. While a sole proprietorship can be simpler to manage, an LLC can offer you more personal protections.
Some businesses may not need an LLC. If you sell handmade clothing items occasionally through an Etsy account, you may prefer to operate a sole proprietorship. The side income is nice, but you also have a full-time job. You probably do not need to file for an LLC in this case.
The protections an LLC offers may be vital to some individuals. A limited liability company affords the owner some liability protection for his or her personal assets. For example, imagine you are a licensed massage therapist with a registered single-member LLC. You accidentally injure someone during a massage, and he or she decides to sue you. The lawsuit might bankrupt your business but cannot touch your personal assets.
The handmade craft maker is unlikely to face a lawsuit. An unsatisfied customer may demand a refund but has no reason to sue. If the massage therapist has a sole proprietorship, all personal assets could be at risk during the lawsuit.
According to the Illinois Department of Revenue, you can own a single-member LLC but still file your taxes as a sole proprietor. You report all your business income on the standard individual Illinois tax return. Other LLCs, such as partnerships, corporations and S Corporations, have different tax requirements.
This information is educational and is not intended as legal advice.