Whether you are a new business owner, or someone who is experienced, you will always have the questions in your head and you will always want to know the legal side of things, such as how much tax you would need to pay depending on which state you are applying for an LLC. Here are some things that you need to know.
How much tax do I need to pay?
Luckily, if you start up an LLC in Illinois, there is a flexible tax agreement. If you are a single member of an LLC, you are only taxed as a sole proprietorship. If there are multiple members for your LLC, then you are taxed as a corporation. However, this is all down to the federal tax purposes and election. You have to also keep in mind that if you do not pay your taxes or any other fees on time, you will face penalties and fines. The tax that you need to pay in Illinois is 1.5% of your net income.
If you have a company that consists of selling actual products, then you also have to register for a seller’s permit through the tax website. That way you are certified and can prove that you have the eligibility to make sales, collect tax sales and show the transaction of goods.
If your company has employees, you also need to register on the tax website, by registering for unemployment tax insurance and for employee withholding tax.
The limits of Liability
The reason why so many businesses apply for an LLC in Illinois, is because of the benefits that they offer. One of those benefits is called an asset protection feature, which means that once you have completed your set up for an LLC, your business is then protected from any liabilities that your company faces, such as debt. This also applies to business owners, however, you have to consider the fact that if you go ahead with this, tax options are more restricted. There are also no limits to the amount of members under the LLC, which means you have that flexibility to add as many as you want.
The set up process
Setting up an LLC is very easy, which is another reason why budding business owners want to sign up in that state. You have to pay $150 to the Secretary of State. There are five steps on setting it up:
Give yourself a name: You need to come up with an easy, memorable and legitimate name for your business, that doesn’t sound similar to others.
Choose a registered agent: You need to assign a registered agent to be able to help you and be responsible for all the legal and tax paperwork.
File Articles of Organisation: You need to file Articles of Organisation online and pay $150 to the Secretary of State.
You need to create an LLC Operating Agreement: This is when you secure and lock each role for each person in your organisation.
You need to get an EIN: EIN stands for Employment Identification Number and it is basically what helps the federal government track your business on their database.
In order to get a full detailed guide on how to set this all up, you can read more about it.
What else do I have to consider when getting an LLC?
Depending on the state you are in and the circumstances, you might have to pay more tax as a sole proprietor in comparison to corporations. Also, salaries and profits that you have through your LLC are subject to self-employment taxes. Those who are employees of an LLC receive a fringe benefit which includes medical and group insurance and reimbursement plans, but these benefits are still viewed as a taxable income. However, employees under an LLC corporation company don’t need to report the fringe benefits as a taxable income.