1. Choose a business name for your sole proprietorship and check for availability.
- Please see our section on choosing and checking the availability of a name for your small business, as well as our section on the trademark law aspects of choosing a name.
2. Register the business name with local, state, and/or federal authorities.
- If you will be operating your sole proprietorship under a name that is different from your own name, then you will need to register the name as a "fictitious" or "assumed" business name. In Illinois, you do this by applying for permission to use an "assumed name" with the county clerk's office in the county where your principal place of business will be located.
- Although you are not required to do so, you should consider registering your business name as a federal and/or state trademark. Please see the Trademark for Business Naming section for details.
3. Obtain any required local licenses.
- Please see the general section for details.
4. Determine what tax and other regulatory obligations your sole proprietorship has, and take care of any necessary registrations.
- If you have an employee or employees, you need to apply for an Employment Identification Number from the IRS. You can apply for an EIN online. You may apply for an EIN even if you have no employees. Doing so may make it easier to open a bank account and reduce your risk of identity theft. There is no filing fee.
- If you have an employee or employees in Illinois, you must register with the Illinois Department of Employment Security. You can find additional information on the Tax Registration Page of the Illinois Business Portal.
- All new business owners must register for business taxes with the Illinois Department of Revenue. For details, see the the Tax Registration Page of the Illinois Business Portal.
- Whenever you hire an employee in Illinois, you must inform both the IRS and the State of Illinois. The IRS details all of the necessary steps to complete, including verifying work eligibility and withholding allowances certificates, on its page entitled Hiring Employees. You can find information on what to do on the state level on the New Hire Reporting section of the Illinois Business Portal.
- If you have one or more employees in Illinois, you must carry workers' compensation insurance. You may choose to obtain workers' compensation insurance for yourself, but you do not need to. (If you have a workers' compensation policy for your employees, you must contact your insurance company if you DO NOT want to be covered.)
- As a small business owner or employer, there may be other informational returns that you have to file annually or semi-annually with the IRS. For more information, take a look at the IRS Guide To Information Returns.
5. Open a bank account for your business.
- It is a good idea to keep your business's finances separate from your personal accounts. A good way to do this early on is by opening a bank account for your business. The bank will probably require your Social Security Number or EIN and a copy of your business name filing, although you may not need any documentation if your business's name includes your surname. (Here is an example of what banks may require.)