There are many advantages to incorporating a firm, but there are also expenses and tax repercussions. Many business owners prefer to incorporate in Illinois because of the state’s well-known friendly business climate. The cost of incorporating in Illinois and the tax repercussions of a doing business as (DBA) entity will be covered in this article.
A number of variables affect how much it will cost to incorporate in Illinois. In Illinois, there is a $150 filing cost for business incorporation. Businesses must also submit an annual report to the state, which costs $75. Obtaining business licenses and permissions could incur additional fees as well.
The Illinois state’s flat corporate income tax rate is one of the advantages of doing business there. The corporate income tax rate in Illinois is 7%. The local level, however, may impose additional taxes on firms. Does a DBA Substitute Filing a Separate Tax Return?
A DBA does not file a separate tax return because it is not a separate legal entity. Instead, a DBA’s earnings and costs are disclosed on the owner’s personal tax return. Self-employment taxes, which are dependent on the business’s net income, must be paid by the owner of a DBA. Tax Advantages of a DBA
The use of a DBA has a number of tax advantages. The ease with which taxes can be reported is one of the key advantages. There is no requirement to submit a separate tax return because a DBA is not a distinct legal entity. Furthermore, a DBA might be eligible for tax benefits that aren’t available to other kinds of companies. Is It Worth It to Get a DBA?
The nature of your firm will determine whether or not acquiring a DBA is worthwhile. Businesses that operate under a name other than the owner’s legal name are an ideal candidate for a DBA. It is also a fantastic choice for business owners who wish to keep their personal and professional finances separate. However, it can be worthwhile to think about incorporation as a separate legal entity if you intend to grow your company and add staff. Can More Than One Business Use the Same EIN?
Yes, several businesses may share a single employment identification number (EIN). Each company, however, is required to register with the state independently and can need its own business licenses and permits. Each company also needs its own bank account and financial records.
In conclusion, there are expenses and tax repercussions associated with incorporating in Illinois. Although incorporating in Illinois is reasonably inexpensive, getting the necessary company licenses and permits can be expensive. For firms that operate under a name other than the owner’s legal name, a DBA is a good alternative. However, a DBA is not a separate legal organization and does not submit a separate tax return. One EIN can be used for several businesses, but each one must be registered individually with the state, have its own bank account, and maintain its own financial records.