Do I need an EIN to start a business in Illinois?

An EIN is required for businesses that hire employees, operate as a corporation or partnership, or need a separate tax identification for banking and payroll; obtaining one simplifies tax reporting and payroll setup.

When should I register for sales tax and payroll accounts?

Register for sales tax if you sell taxable goods or services and register for payroll accounts before hiring employees; timing depends on your business activities and local registration requirements.

How to Start a Business in Illinois: Accounting and Tax Checklist

Actionable guidance and lists for registration, bookkeeping, taxes, payroll and compliance.

One of the most exciting events in a person’s life is the first time you start your own company, and yet, with it comes an endless list of accounting and taxes that need to get done unless there is a well-thought-out plan. This accounting and tax to do list will help entrepreneurs looking to open a business in Illinois track financial related tasks from the time their business is formed through its first year of operation. Follow this guide to establish compliant records, understand your tax responsibilities and avoid costly pitfalls.

Decide on an Appropriate Legal Structure and Be Aware of the Tax Implications

Choosing the appropriate form of legal structure -- a sole proprietorship, partnership, limited liability company (LLC) or corporation--will have an impact on how you record income, pay taxes and protect personal assets. Each type of formation has varying filing and accounting requirements. Before you make a decision, chart out the tax implications of each structure and how it will impact bookkeeping, quarterly tax payments, payroll obligations.

Get an EIN and Other Identifiers

Obtain an Employer Identification Number (EIN) to identify your business. You will need an EIN if you are going to have employees, are established as a corporation or partnership, or want to open a business bank account. Hold onto your EIN along with the state tax account numbers for payroll, sales tax reporting and end-of-year filings.

Establish a Separate Business Bank Account and Payment Systems

Open a dedicated business bank account to help keep your personal and business finances distinct. Decide how you will receive payments: In cash, or by check, credit card and/or online payment; make sure you are able to reconcile deposits with records of sales. Clean separation makes paperwork easier and minimizes errors with the tax man.

Create a Chart of Accounts and Set Up Bookkeeping Schedule

Set up a chart of accounts customized to your business operations that is specific for each of the following: revenue streams, cost of sales, operating expenses, payroll, taxes payable and owner distributions. Choose whether you will use the cash or accrual method and get in the habit of doing you-bookkeeping on a regular basis. You should keep your bank statements up-to-date and monitor receipts, bills, and other items of expenditure.

Sales Tax Registration and Collection

Has a business that sells tangible property, products and goods (even if done this in another state) Or A business that performs services subject to sales tax or A business making retail or wholesale sales or Anyone who wants to take advantage of the Texas “exemption certificate” program. If you need to know the tax rates for your jurisdiction and how often sales tax is to be filed. Maintain good records of taxable and nontaxable sales, exemptions, and resale certificates to defend correct returns and audits.

Payroll Setup and Employer Tax Duties

If you plan to employ staff, register with the state for employer withholding and unemployment accounts. Deduct federal and state income tax automatically from the employee, pay payroll taxes, deposit employer’s shares of Social Security and Medicare on time, file payroll tax returns accordingly. Keep track of the payroll details for each employee, such as wages and withholdings.

Estimated Taxes and Payment Schedules

Even many small firms are required to pay estimated federal and state taxes every quarter. Project how much income tax you may owe at year-end and pay estimated taxes timely to ensure no penalties for underpayment. Keep an eye on cash flow to guarantee you have the available funds to pay taxes without disrupting your activities.

Maintain Accurate Records and Backups

Maintain good records for a few years at minimum, such as receipts or invoices, contracts, payroll records, bank statements and tax filings. Back up digital records regularly, and keep physical copies when possible. Good documentation will back up deductions and provide insurance against audits.

Establish Internal checks and Fraud Preventive Measures

Implement some internal controls like segregation of duties, approval workflow for expenses and regular reconciliation. Restrict access to accounts or save tax info in a secure location. Safeguarding against errors and fraud Small businesses that use controls minimize the risk of error or theft.

Plan for Deductions and Credits

Identify the most frequently deductible business expenses (rent, utilities, supplies, advertising and marketing costs, professional fees and depreciation) that qualify for a tax deduction and document them diligently. Record miles in a notebook when taking vehicle usage. Investigate state-level credits that may help offset the cost of hiring, investment or energy efficiency improvements.

Get Ready for Year-End Reporting and Compliance

At year end, prepare financial statements and reconcile accounts as well as file the tax returns or any informational returns required. Issue all necessary tax slips to contractors and employees, and create work papers for business Be sure to refer to filing deadlines for federal as well as state obligations so returns and payments are on time.

Keep in Mind Professional Assistance and Continuous Advisory

Although many business owners can handle simple accounting on their own, it is best to leave tax planning, payroll set-up and year-end filing up to an accountant or tax advisor. Professional advice can make sure you are in the right tax room, adhere to state regulations and free up your time to grow the business.

Develop a Tax Calendar and Regular Reviewing Process

Create a tax calendar that lists the dates by which estimated taxes are due, payroll tax is to be filed, sales tax returns need to be filed, and annual reports of LLCs must be submitted in relation to your Illinois business incorporation. Hold quarterly meetings to review financial results and liabilities due for estimated payments, and also to discuss any new problems.

Final checklist recap:

Decide on legal structure and document tax consequences
Comprehensive Illinois Business Registration (state and local)
Get an EIN and state tax account numbers
Open a business account and establish payment systems
Create chart of accounts and bookkeeping schedule
If applicable, register for and collect sales tax
Payroll and Employer Tax Compliance SetUp
Pay estimated taxes when they are due
Organized documentation and backups
Put in place internal controls and plan for withholdings
Get ready for end-of-year filing and reporting
Seek professional advice when necessary and keep a tax calendar

Using this accounting and tax checklist will help you to start a new business in Illinois feeling more confident. Well-ordered financials, reading filing and accurate record keeping are all critical components in ensuring that your company does not feel the stress of unforeseen an/or retroactive penalties.