Each company type has key advantages and disadvantages. Here are some things to consider if you’re deciding whether to form an LLC, incorporate as an S corporation or C corporation or to file a DBA or Assumed Name.
Filing a DBA or Assumed Name
A DBA filing (doing business as, also called an assumed or fictitious business name) allows a company to transact business using a different name. It generally takes place at the county level, but some states have state-level DBA filings. For sole proprietorships and general partnerships, unless a DBA is filed, the company name is the same as the owner’s or owners’ name(s). For example, Juan Zarate is operating a landscaping business as a sole proprietorship. In order to transact business as Zarate’s Landscaping, he must file a DBA for that name. Otherwise, he must transact business as Juan Zarate.
A corporation or LLC can also file a DBA to transact business under a name different from the one registered with the state (when the business was incorporated). For example, a corporation formed as Juan Zarate and Son, Inc. may want to do business under a name that more clearly states what the company does and could file a DBA to use a more descriptive name like Zarate’s Landscaping.
Advantages & limitations
- For sole proprietorships and general partnerships, the advantage of filing a DBA is that it does not provide the same ongoing compliance requirements of incorporating or forming an LLC. It merely allows the company to transact business with the new name. The limitation is that it does not provide the liability protection and tax advantages of incorporating.
- A DBA filing does not change the official name of the corporation or LLC. It only allows the business to use a different name in trade, which can be in addition to or instead of the official corporate or LLC name.
Forming a Corporation or LLC
To incorporate your business as a corporation or LLC, the Illinois Secretary of State Business Services provide the Articles of Incorporation for corporations and Articles of Organization for LLC’s.
Understanding Corporation types
To formalize your organization, first learn about and decide which business type is right for you:
- C Corporation: A corporation is a separate legal entity set up under state law that protects owner (shareholder) assets from creditor claims. Incorporating your business automatically makes you a regular or “C” corporation. A “C” corporation (or C corp) is a separate taxpayer, with income and expenses taxed to the corporation and not owners. If corporate profits are then distributed to owners as dividends, owners must pay personal income tax on the distribution, creating “double taxation” (profits are taxed first at the corporate level and again at the personal level as dividends). Many small businesses do not opt for “C” corporations because of this tax feature.
- S Corporation: Once you’ve incorporated, you can elect S corporation status by filing a form with the IRS, so that profits, losses and other tax items pass through the corporation to you and are reported on your personal tax return (the S corporation does not pay tax).
- Limited liability Company (LLC): Another business type that is formed under state law and gives you personal liability protection is the LLC. Tax-wise, an LLC is similar to an S corporation (or S corp), with business income and expenses reported on your personal tax return. If you are the only owner of an LLC, you are viewed as a “disregarded” entity. This means you report the LLC’s income and expenses on Schedule C of Form 1040, the same schedule used by sole proprietors.
Advantages & Limitations
C corporations, S corporations and LLCs provide you with personal liability protection. S corporations and LLCs are commonly used for small business activities. Both enable you to grow your business and take on new owners. Both pass through income to owners who report it on their personal returns. The State of Illinois fees are higher for the incorporation and annual reports. One key difference is how owners are affected by employment taxes:
- S corporation shareholders are employees of their corporation so Social Security and Medicare (FICA) taxes apply to compensation they receive, but not to distributions they receive.
- LLC members are self-employed individuals who owe Social Security and Medicare taxes, paid by self-employment tax on their share of business net income.
Incorporating or forming an LLC provides advantages to business owners that operating a business as a sole proprietorship or general partnership does not, including:
- Limited liability protection for the personal assets of the owner(s).
- Certain tax advantages such as tax deductions not available to sole proprietors.
- Opportunity to gain credibility with potential customers, vendors, partners, and employees.
- Capital can be raised more easily.
As of January of 1996, the Department of Internal Revenue Service of IRS, allows people to obtain an ITIN number.
Please call us for an updated list of the requirements, as they are constantly changing.
Everyone who works in the United States must file an Income Tax Return, regardless if you are paid in cash or check and of your legal status.
An I.D., Social Security Number or ITIN of yourself and of all of your dependents. Also, any and all W-2 forms, bank related forms, and/or any other income related forms.
An I.D., SSN or ITIN of yourself and of all of your dependents. Also, any and all W-2 forms, bank related forms, and/or any other income related forms. When you are a homeowner you can benefit from various deductions including:
- Medical / Dental Expenses (subject to 7.5% of your income)
- Medical / Dental Insurance (subject to 7.5% of your income)
- Cash Contributions (you must have a receipt)
- Other Contributions (clothes, furniture, toys, etc.)
- Sales Tax derived from every purchase during the year
- Property Taxes
- Real Estate Taxes
- Interests / Dividends
- ALL work related expenses not covered by your employer
- Children under 19 years of age
- Children between the ages of 19 – 24 who are in school
- Family members whom you financially support more than 50%
- Others whom live in your house and you support more than 50%
- Family members who live in Mexico or Canada who you support more than 50%
If you are married you only have two filing status options:
- Married Filling Jointly
- Married Filling Separately
- It is noteworthy to say that by filing an IncomeTax Return as Married Filling Separately, you will lose all child credits
If you live with and financially support your children you qualify to file as Head of Household. If you do not have children or they do not live with you and you do not support them, you must file as Married Filing Separate.
Yes, if they meet the criteria mentioned below:
- If your child is under 19, you may claim him/her regardless of their income.
- If your child is over 19 – 24 you can claim him/her if they are enrolled in school.
- If your child is over the age of 19 – 24, is not enrolled in school, but makes under $3,900.00.
April 15 of the calendar year. (If this is a Saturday or Sunday, an extension will be made to Monday or Tuesday)
If you are expecting a refund, there will be no penalty. However, if you owe money to the Federal Government there will be interest and penalty fees applied. Note: Generally most States, do apply late penalty fees.
The Federal Government allows you to submitted amended returns for the most recent 3 years. Also, you can receive a refund for the most recent 3 years.
As of January of 1996, the Department of Internal Revenue Service of IRS, allows people to obtain an ITIN number. (Please call us for an updated list of the requirements, as they are constantly changing.)