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STARTING AND OPERATING A BUSINESS IN ILLINOIS Copyright © 2000, Michael D. Jenkins
CONTENTS OF THIS CHAPTER:
I. INTRODUCTION I. INTRODUCTION Illinois has is a fairly typical northern industrial state that has experienced a considerable revitalization of its economy and infrastructure since the doldrums of the "Rust Belt" days it experienced in the 1980s. While it has a more or less typical tax and legal structure under which businesses must operate, it has much lower income tax rates than most other large industrial states. Like most states, Illinois imposes an income tax, a franchise tax on corporations, a sales and use tax, various excise taxes, with property taxes imposed at the local level. The state has also adopted a limited liability company (LLC) law and, more recently, a limited liability partnership (LLP) law, so that businesses operating in Illinois in LLC or LLP form may now obtain the advantages of limited liability, without incorporating or becoming subject to corporate taxation, generally. At present, the state's economy is relatively robust, in terms of the level of unemployment, which is slightly higher than the national average, but somewhat lower than most of the other large industrial states. In February, 2000, the Illinois unemployment rate was 4.3%, up from 4.2% a year before, and just higher than the national rate of 4.1%. To view the latest federal Bureau of Labor Statistics unemployment rate data for Illinois or any other state, visit the BLS website. II. LEGAL ENTITIES -- FILING FEES AND REPORTING REQUIREMENTS. (a) In General. A business that operates in Illinois can operate as a sole proprietorship, a general or limited partnership, a corporation, or a limited liability company. In addition, like the federal tax law, the state income tax law also recognizes S corporations, for income tax purposes, and generally allows the income or losses of an S corporation to "flow through" and be taxed or deducted at the shareholder level, rather than taxing the corporation itself as an entity. However, unlike most other states, Illinois does impose a small (1.5%) tax on the income of partnerships and S corporations. Illinois also provides for registered limited liability partnerships, in which no partner is liable for debts of the partnership, in general, as in the case of a corporation or LLC, but with fewer legal formalities than are required for either a corporation or an LLC. Each of the above entities is discussed below, along with the basic requirements for forming such an entity and any general ongoing (non-tax) reporting requirements that are applicable to it. The tax treatment of each form of legal entity is discussed in Section IV below. (b) Sole Proprietorships. In general, sole proprietorships in Illinois can be formed with no formalities. However, as discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, as well. No separate tax form filing is required, generally, for a sole proprietorship, under the Illinois income tax law. Instead, as with the Schedule C on your federal Form 1040, you simply report the net income or loss from your sole proprietorship on your state personal income tax return. See Section IV(c) for information on the Illinois income tax and filing requirements for individuals. As a sole proprietor, if you have no employees, you are not required to pay any unemployment taxes, withhold any federal or state income tax from wages, nor obtain workers' compensation coverage for yourself. (c) Partnerships. As a rule, general partnerships in Illinois can be formed with no formalities, although it is highly advisable to have a written partnership agreement. However, as discussed in Section IV(b), it will typically be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, for any type of partnership, including general or limited partnerships, or registered limited liability partnerships. A limited partnership, in which there is at least one general partner (who is liable for partnership debts) and at least one limited partner (who is not liable for partnership debts), may also be formed under Illinois law. Unlike a general partnership, a limited partnership must generally have a written partnership agreement, and must file a certificate of limited partnership with the secretary of state, together with a filing fee of $75. Foreign limited partnerships must also register before being allowed to do business in Illinois, and must also pay a registration fee of $75. Both domestic and foreign limited partnerships are also required to file an annual renewal report and pay an annual fee of $15. For information on limited partnership filing requirements, see the contact information for the offices of the Limited Partnership Division of the Illinois Secretary of State, listed in Section VI(a). Limited liability partnerships (LLPs) are a form of partnership permitted under the laws of Illinois. Like an LLC, an LLP provides limited liability for its owners, while retaining the tax advantages of a partnership for federal and Illinois state income tax purposes. However, unlike an LLC, an LLP typically operates like a regular partnership, and is not required to file articles of organization. To form an LLP in Illinois, you must file a registration form and pay a filing fee of $100 per partner, to the secretary of state. The minimum fee is $200 and the maximum is $5,000. The same fee calculation must be made annually with each annual renewal application, for domestic partnerships. Foreign LLPs, those created under the laws of another state, must register with the secretary of state and pay an application fee of $500 initially, and a yearly fee of $300 with each annual renewal application. For more information on LLP registration and reporting requirements, see the contact information for the offices of the secretary of state, listed in Section VI(a). Note that one potential drawback of LLPs, if you will do business in other states besides Illinois, is that some states, like California and New York, only recognize certain types of professional partnerships as LLPs. If yours is not a professional partnership, such other states may simply treat your LLP like an ordinary general partnership, with no limitation of liability. A partnership agreement, for any type of partnership, should spell out in considerable detail such matters as the following:
Unlike most states, which do not tax the income of a partnership at the partnership level, Illinois imposes a tax, based on income, directly on the partnership. The regular income tax does not apply to partnerships, but a 1.5% Personal Property Replacement Tax (which is actually an income tax) does apply to partnership income. However, certain professional service partnerships are not subject to this tax. Partnerships are required to file an annual tax return with the state. For details on Illinois partnership tax return filing requirements, see Section IV(c). (d) Corporations. To form a corporation in Illinois, you must file articles of incorporation with the Illinois Secretary of State and pay a fee of $75. A foreign corporation (one formed under the laws of another state or a foreign country), must obtain a certificate of authority before it may legally conduct business in Illinois, by filing an application for a certificate of authority and paying a filing fee of $75. In addition, as discussed below, a corporation must pay a franchise tax on the amount of its paid in capital at the time it first issues stock or, in the case of a foreign corporation, first obtains a certificate of authority to do business in the state. For more information on filing articles of incorporation or applying for a certificate of authority to do business in Illinois, and on the corporation franchise tax, see the contact information for the offices of the secretary of state, listed in Section VI(a). Once your corporation is formed or obtains a certificate of authority to business in Illinois, it will be required to file annual reports and a filing fee of $25 with the secretary of state each year. Failure to file this report on a timely basis could result in suspension or revocation of your corporation's charter. Your corporation must also pay an annual franchise tax, generally equal to 0.1% of your paid in capital, each year, payable to the Illinois Secretary of State. This tax can range from a minimum of $25 to a maximum of $1 million each year, depending on the amount of paid-in capital of your corporation. In addition to paying federal income taxes on its income, a corporation that does business in Illinois must also file corporate income tax returns with the state. See Section IV(c) for a discussion of state corporate income tax rates and tax return filing requirements. For tax forms and more information on corporate income taxes in Illinois, see the contact information for the Springfield and Chicago offices of the Illinois Department of Revenue, listed in Section VI(a). (e) S Corporations. An S corporation is simply a regular corporation that has elected, for federal or state income tax purposes, or for both, to be taxed somewhat like a partnership, with its income, losses and tax credits flowing through to its owners, who report such income, losses, or credits on their individual tax returns. Illinois recognizes S corporations for income tax purposes, and treats them in a manner similar to the federal tax treatment. That is, the Illinois corporate income tax does not generally apply to S corporations. However, the state does impose another tax on income, the 1.5% Personal Property Replacement Tax, on the income of S corporations. (f) Limited Liability Companies. Illinois, like all other states, has now adopted a limited liability company (LLC) law. Thus, in addition to the traditional choices of a sole proprietorship, partnership, or corporation, a business that operates in Illinois may also choose to operate in the form of an LLC. In most states, LLCs are very attractive entities for many small businesses, in that they offer the same protection as a corporation from creditors for debts of the business, while offering much of the flexibility plus the flow-through tax treatment of a partnership for federal tax purposes. See Section IV(c) for a discussion of the income tax treatment of LLCs under Illinois tax laws. To form an LLC under the laws of Illinois, one or more persons must file articles of organization with the Illinois Secretary of State, which must be accompanied by filing fees of $400 (formerly $500). Note that the Illinois LLC law was amended in 1997 to permit an LLC to be formed with only one member. Foreign LLCs, those formed under the laws of another state, must obtain a certificate of authority to do business in Illinois, by filing an application for a certificate of authority with the secretary of state and also paying a filing fee of $400. In addition to initial filing fees, an LLC formed in Illinois or a foreign LLC must subsequently file annual reports and pay an annual report filing fee of $200 with each such annual report. For more information on filing articles of organization for an LLC, see the contact information for the offices of the secretary of state, listed in Section VI(a). III. BUSINESS ACQUISITIONS (a) In General. When acquiring an existing business, there are a number of state legal and tax issues you or, preferably, your business attorney, should attend to before closing the purchase. These include matters such as doing a title search for any real property that is being acquired, checking for any recorded security interests on personal property items, and thoroughly researching county, state, and federal records for any judgment liens, tax liens, or other liens, before property is acquired. You will also benefit from consulting a tax advisor before the agreement of sale is negotiated, in order to seek a structuring of the agreement so that the purchase price is allocated among the assets in a way that favors you. You may be able to obtain considerable tax savings if the purchase price is allocated in a way that gives you the best possible tax results under federal and state income tax laws, and other state tax laws, such as sales/use tax or property tax laws. Depending upon the state (or states) in which the seller's assets are located, you may also have to comply with state bulk sale or bulk transfer laws. You should also obtain tax releases from various state taxing agencies, as discussed below. (b) Bulk Sale Laws. Typical bulk sale laws require either publication of legal notices to all creditors in advance of the sale and recording of such notices in some cases, or maintenance of detailed lists of the property to be transferred, for inspection by the public. Illinois is one of the states that has repealed its bulk sale laws, so you no longer have to be concerned with this requirement when buying a business in Illinois. However, the city Chicago Municipal Code imposed bulk sale obligations on persons who pay city taxes or who are required to hold city licenses. (c) Tax Releases. When you acquire an existing business, you will want to make sure that you do not unwittingly become liable for any unpaid taxes owed by the seller. Typically, to protect yourself, you will need to receive a tax release or releases from various state taxing agencies, for such taxes as sales and use tax, income tax withholding, and state unemployment taxes, in each state in which the seller does business. If you fail to obtain such a release or written statement from the tax agency that the seller is not delinquent on any tax payments, you will be held responsible for such tax if it is not withheld from the purchase price proceeds and paid to the state at the time the sale of the business transpires. In Illinois, you should require that the seller obtain an unemployment tax release from the Illinois Department of Employment Security. With regard to sales tax liability, you should require that the seller provide you with a sales tax release. Either you or the seller may request an audit at least 10 days before the sale, and the Department of Revenue will notify you if you need to withhold part of the purchase price for unpaid taxes. Also, be aware that you must file a report of the sale within 10 days of the sale to the Department of Revenue, on Form NUC-542-A, Notice of Sale/Purchase of Business Assets. (d) Unemployment Tax Rating of Seller. In addition to obtaining tax releases, you may find it advantageous to succeed to the seller's unemployment tax experience rating, if the seller has a tax rate lower than you would otherwise obtain as a new business. To obtain the seller's favorable experience rating as a successor employer, you will need to apply on a timely basis to the Illinois Department of Employment Security, requesting that you be treated as a successor employer. IV. ILLINOIS TAXES AND OTHER GENERAL REQUIREMENTS. (b) State and Local Licensing. Nearly any business, operated anywhere in the United States, will have to have at least one government license of some kind. In most cases, this will be a local license, issued by your city or county. Before you open your business, contact your local city or county clerk and find out if your particular business needs one or more local licenses. Most kinds of local business licenses are granted upon payment of a fee, with no further requirements, except possibly for annual or other periodic renewal fees. However, if you are engaging in any kind of food business, you will usually need to also obtain a health department permit and show that you are in compliance with health department food-handling requirements. In addition, be sure to check with an attorney or local government zoning or planning department officials to determine if your business will be in compliance with all local zoning and planning restrictions. If you own or rent any type of facility, you will generally need fire department permits, showing that you meet fire safety codes and any construction or improvements to an existing structure will require a building permit. If you intend to simply operate your business from your home, you may be in violation of local zoning requirements, but this is less likely to be a concern if you don't have clients, customers, suppliers, or employees coming to your house on business, on a regular basis. State governments have also traditionally required special licenses for many kinds of professionals, such as physicians, dentists, lawyers, and accountants. To further protect consumers, Illinois has expanded the list of occupations that must be licensed by the state to include many other occupations. Most state licenses not only require payment of fees, but are only issued for a given profession or occupation upon showing that you have completed certain educational or experience requirements, or passed certain tests, or some combination of the foregoing. One of the first things you should do when starting business in Illinois is obtain a Business Registration Kit from the Department of Revenue. If you are unsure whether your type of occupation or profession requires a state license, you should also contact the Illinois Department of Professional Regulation. For information on state licensing and business registration requirements in Illinois, see the contact information for the offices of two above agencies, listed in Section VI(a). Some Illinois municipalities and counties impose their own taxes in addition to the state and federal taxes that most businesses are responsible for. Contact your local city or county revenue department to determine if additional taxes apply to your business. (c) Income and Franchise Taxes. Illinois has both an individual income tax and a corporate income tax, as well as a franchise tax on corporations. A Personal Property Replacement Tax, which is also an income tax, applies to C corporations at a 2.5% rate, and to S corporations, LLCs, and most partnerships at a 1.5% rate. It does not apply to the income of individual sole proprietors, however. The Illinois individual income tax is imposed at a maximum tax rate of only 3%. Individual taxpayers generally pay state income tax on their business earnings from a sole proprietorship, or on their share of the earnings of a pass-through entity, such as a partnership, S corporation or LLC. An Illinois personal income tax return must be filed each year by April 15 with the Illinois Department of Revenue. Partnerships, or entities taxable as partnerships, such as LLCs, are not subject to state income taxation in Illinois. However, they are generally subject to the Personal Property Replacement (income) tax, at a rate of 1.5% of taxable income, with certain exceptions, such as for professional service partnerships. Partnerships must file annual tax returns, Form IL-1065, with the Department of Revenue, by the 15th day of the fourth month after the end of the tax year, showing each partner's share of taxable income, losses, and credits, and paying any applicable Personal Property Replacement Tax owed. However, partnerships are not required to make estimated tax payments. In a private letter ruling (Illinois Department of Revenue, Private Letter Ruling IT 01-0001-PLC, 1-3-2001), the Illinois Department of Revenue has ruled that a partnership with nonresident individual and trust partners may file composite tax returns on behalf of all the nonresident partners. Individual taxpayers doing business as sole proprietors, or who are partners in partnerships, or members of LLCs, are required to make payments of estimated Illinois individual income taxes, on Form IL-1040-ES, if their net tax liability (not covered by withholding) exceeds $250. Estimated tax payments are due in four installments, on the 15th day of the 4th, 6th, and 9th months of the taxable year, and the 15th day of the first month of the following year. To avoid penalties for underpayment of estimated tax, you must either pay in 90% of the current year's tax, or 100% of the previous year's tax. The Illinois corporate income tax rate, on corporations other than S corporations, is imposed at a flat rate of 4.8% of income. In addition, C corporations must pay the Personal Property Replacement Tax, which is a tax of 2.5% of income. Thus, in effect, the overall income tax rate on a C corporation is 7.3%. S corporations are not subject to the 4.8% corporation income tax, but are subject to the Personal Property Replacement Tax, at a reduced rate of 1.5%. Shareholders of an S corporation are also subject to personal income tax on the S corporation's income, as under the federal tax law. A state corporation income tax return must be filed with the Department of Revenue by the 15th day of the third month following the end of the taxable year, or by March 15th in the case of a corporation whose taxable year is the calendar year. C corporations, but not S corporations, are required to make estimated tax payments of their state corporate income tax in advance, if their tax liability for the year equals or exceeds $400. Estimated tax payments are due in advance, in four equal installments, on the 15th day of the 4th, 6th, 9th, and 12th months of the taxable year. The total estimated tax that must be paid in is usually equal to 90% of the actual tax liability for the year. However, if the preceding year was a full year of 12 months, the current year payments need only be equal to 100% of the prior year's tax liability, if less. Penalties will be imposed for failure to make the required estimated tax payments on a timely basis. In Illinois, a limited liability company (LLC) is taxed in the same manner as a partnership, thus partially avoiding the possible double taxation of income that can occur with a corporation. However, like a partnership, an LLC does not entirely escape state income taxes in Illinois. While an LLC is not subject to the regular income tax, it, like partnerships and S corporations, is subject to the 1.5% Personal Property Replacement Tax on its income, at the entity level. In addition, the LLC members each pay state income tax on their respective shares of the LLC's taxable income. Formerly, state law required that an LLC have at least two members, but the Illinois LLC law now permits an LLC to be formed with only one member. (d) Sales and Use Tax. Illinois imposes a general sales tax on retail sales of tangible personal property and certain service businesses at the statewide rate of 6.25%. In addition, local governments are allowed to adopt local sales taxes, at varying tax rates. Sellers are required to obtain a seller's permit and to collect and pay over the state and local sales and use taxes to the Illinois Department of Revenue. There are numerous exemptions from the sales tax, the most important of which is the resale exemption. If you are a wholesaler or retailer who purchases goods that you will resell, your purchase of such goods may qualify as an exempt sale for resale. Similarly, if you sell goods to wholesalers or retailers for resale by them, your sale may also qualify as an exempt sale for resale. In any such transaction, the exemption is ordinarily available only if the purchaser gives the seller a valid resale certificate, certifying that the items are being purchased for resale, and not for use or consumption by the buyer. A shadow tax, the use tax, is also imposed at the same rate as the sales tax. It is primarily intended to tax property that is acquired from sources outside of the state, in transactions not subject to sales tax, when such property is used or consumed within Illinois. Use tax may also apply to items purchased on an exempt basis, such as for resale, if such items end up being used or consumed, instead of being resold. Before making any taxable sales, you will need to register with the Illinois Department of Revenue. For more information on Illinois sales and use tax registration and compliance, see contact information for the offices of the Department of Revenue in Section VI(a). (e) Real and Personal Property Taxes. In Illinois, as in every other state, any business real estate you own will be subject to real property taxes. In general, there is little that you must do, unless you wish to challenge your assessed valuation, since the assessor will bill you for each year's property taxes as they come due. Illinois, unlike most other states, does not impose any property taxes on personal property of any kind. (f) Other Business Taxes. Illinois imposes a number of other taxes on businesses, including:
(g) Trade Names. A trade name, also known as a fictitious or assumed name, is any name used in the course of business that does not include the actual legal names of all the owners of the business. Thus, if your business goes by any name other than your own real name, it is operating under a trade name. The same is true of a corporation, if it operates under a name other than its legal name. A trade name might also be one that suggests the existence of additional owners, by using such words as "company," "associates," or "group." In most states where you do business, it will be necessary to register a trade, fictitious, or assumed name, so that people who do business with you can find out who the actual owners of your business are. You may also want to register any such trade name, as a means of protecting against other companies usurping that particular trade name. Under the Illinois Assumed Business Name Act, if you do business as a sole proprietorship or general partnership under an assumed name, you must do the following:
Corporations, LLCs, limited partnerships and LLPs are not subject to the above requirements. Both foreign and domestic corporations are subject to similar requirements if they wish to transact business in Indiana under an assumed business name, rather than their true corporate name. Such corporations must file an application to register the assumed name with the Illinois Secretary of State. The registration will need to be renewed periodically. Similar provisions apply to LLCs or limited partnerships that wish to use an assumed name in Illinois. V. EMPLOYER REQUIREMENTS IF YOU HAVE EMPLOYEES (a) Employer Registration and Withholding. If you have any employees, you will already be withholding federal income tax and FICA taxes from their wages. In addition, since Illinois imposes a state income tax on the income of individuals, you will need to also withhold Illinois income tax from the wages of your employees. Before you begin to pay wages, you must register as an employer with the Illinois Department of Revenue on Form NUC-1, Illinois Business Registration, which can also serve as registration for your sales tax seller's permit and, unless you are a sole proprietor, for business income and personal property replacement tax. Once you register, you will receive the Department of Revenue's IL-700, booklet, Illinois Withholding Tax Guide and Tables and necessary payroll tax return forms. Note that before you register as an employer for state withholding tax, you will first need to register with the Department of Employment Security (see Section V(a)) for unemployment tax purposes and obtain your state employer identification number. For more information on Illinois income tax withholding and registration requirements for employers, see the contact information for the offices of the Illinois Department of Revenue, listed in Section VI(a). (b) Unemployment and Other State Payroll Taxes. If your business employs one or more individuals in each of 20 weeks during any calendar year or if your payroll amounts to $1,500 in any calendar quarter, you, as an employer, will be required to pay state unemployment tax based on the amount of such wages paid. Employers subject to the Illinois unemployment tax are required to register with the Illinois Department of Employment Security to obtain an employer identification number for unemployment tax purposes. New employers, other than in the construction, agriculture, and mining industries, are generally required to pay tax at a rate that varies by industry (generally 3.1%) in 2000, on the first $9,000 of wages paid to each employee. After you have had employees for a while, you will develop an unemployment tax experience rating. This rating is based on the number of employees you terminate who then claim unemployment benefits and the amount of such benefits paid to those former employees, under complex formulas. The state will inform you when they have assigned you an individual tax rate based on your firm's experience rating. That rate may be higher or, if you have had relatively few benefit claims charged to your account, lower than the standard new employer tax rate you initially were paying. All state unemployment taxes are imposed upon you as the employer, and, under Illinois law, cannot be charged to your employees or withheld from their wages. For more information on your Illinois unemployment tax obligations as an employer, see the contact information for the offices of Department of Employment Security, listed in Section VI(a). (c) Workers' Compensation. Workers' compensation insurance is a state-mandated insurance requirement for most employers, in almost every state. In Illinois, virtually all businesses with one or more employees are required by law to have workers' compensation insurance, except those able to self-insure. Note, however, that a sole proprietor or a partner in a partnership is generally not considered an employee. Workers' compensation provides wage loss and medical benefits to employees injured on the job and it protects you, as an employer, from legal action for damages for injuries or job-related illnesses suffered by your employees. In effect, it is a "no-fault" insurance system for work-related injuries or illnesses. Thus, if you fail to obtain required workers' compensation insurance, and an employee is injured on the job, you will have opened yourself to unlimited liability and severe legal consequences, so it is very important to obtain workers' compensation insurance for your employees. Be aware that neither general liability nor health and accident insurance can properly substitute for workers' compensation insurance. As an employer, you must notify injured employees of their benefits and post a notice in the workplace informing your employees of their workers' compensation coverage. For more detailed information regarding your obligations as an employer under the Illinois workers' compensation laws, contact your insurance carrier or see the contact information for the offices of the Illinois Industrial Commission, listed in Section VI(a). (d) State Wage and Hour Laws. Some employees of certain small firms not engaged in interstate commerce are not covered by the federal minimum wage and overtime laws. However, even if few or none of your employees are covered by the federal wage-hour laws, because your firm does less than $500,000 a year in gross sales and the employees in question are not deemed to "...engage in (interstate) commerce...," they will still generally be subject to the Illinois wage-hour laws, which provide for a state minimum hourly wage that is the same as the federal minimum, $5.15 at present. Certain employees, such as persons who work for an employer employing fewer than 4 employees (exclusive of members of the employer's immediate family), and outside salespersons, are exempt from Illinois minimum wage coverage. Besides the federal wage-hour posters that you must display in the workplace, you must also display a state wage-hour poster, which you can obtain from the Illinois Department of Labor. In addition to wage-hour laws, most businesses are subject to federal child labor laws, which put numerous restrictions on the working hours and kinds of work in which minors under the age of 18 may engage. Your business must also be cognizant of similar state child labor laws, in Illinois, such as the state requirement that an employment certificate be obtained before hiring any child under the age of 16. (e) State Occupational Safety and Health Laws. Employers in Illinois must comply with state and federal job safety laws designed to prevent injuries resulting from unsafe or unhealthy conditions in the workplace. The Illinois Department of Labor enforces health and safety standards issued under the Illinois Health and Safety Act. However, Illinois is one of the majority of states that does not have its own federally-approved OSHA program, so that the federal OSHA agency is primarily responsible for enforcing health and safety laws in the workplace in the state of Illinois. Note that while you may obtain a free safety consultation from federal OSHA experts, they must and will cite you for any violations they discover at your workplace. This is not the case with state safety inspections. If you request a safety consultation from the state, they will not cite you if you promptly correct the unsafe conditions. For information on your job safety and health obligations as an employer, required posters, and possible on-site safety consultations, see the contact information for the Chicago offices of the Illinois Department of Labor, listed in Section VI(a). For information about state consultation services, contact the Industrial Services Office of the Illinois Department of Commerce and Community Affairs. (f) Other Miscellaneous State Labor Laws. Other Illinois labor laws you need to be aware of as an employer, include the following: (1) Wage payments to employees. Under Illinois labor laws, an employer must generally pay wages at least semimonthly (or monthly, for exempt employees such as executives). The law also requires that you pay an employee who is terminated immediately or, if that is not possible, no later than the next regular payday. If the terminated employee requests that the final paycheck to mailed to him or her, you must do so. (2) Right-to-work laws. About half the states have enacted "right-to-work" laws, which guarantee that no person may be denied employment for refusing to join a union or for not paying union dues, thus banning either "union shop" or "agency shop" agreements, or both. In a union shop, an employee not belonging to a union may be hired but then must join the union, usually within 30 days. In an agency shop, an employee need not join the union but, to remain employed, must pay union dues. Illinois does not have such a right-to-work law and allows union shop or agency shop contracts between an employer and a union. (3) State anti-discrimination laws. In addition to complying with federal anti-discrimination laws, employers must also be aware of and comply with state civil rights laws in Illinois, and display a poster informing employees of their rights. Illinois human rights laws apply to any employer that employs 15 or more employees within Illinois during the calendar year of or the year preceding an alleged violation; they also apply to any employer of one or more employees in the case of a violation based on physical or mental handicap or sexual harassment. State law also forbids discrimination in employment based on an applicant's citizenship; or discrimination based upon an employee's arrest record, where the record of such arrest has been ordered expunged under the Illinois Criminal Identification Act. Contact the Illinois Department of Labor for more information on your obligations under Illinois civil rights laws, at the address listed in Section VI(a), or contact the Illinois Human Rights Department. (4) Reporting new hires. Under new federal welfare
reform laws, employers in all states are now required to
report newly-hired (or rehired) employees to a designated
state agency (the Illinois New Hire Directory for Illinois
employers) within 20 days after the date of hire. See
Section VI(a) for contact
information for the Illinois New Hire Directory. (5) Toxic Substances Disclosure. The state of Illinois has adopted a Toxic Substances Disclosure Act that may apply to you if your firm has five or more full-time employees, or a total of 20 or more employees in the state (except retail firms, in most cases). This law requires covered employers to:
VI. STATE SOURCES OF HELP AND INFORMATION (a) Key State Agencies Contact Information. Illinois, as many states have done in recent years, has set up a "one-stop" office to help your new or existing businesses to obtain all necessary state licenses and permits, the 1st Stop Business Information Center. Contact this agency, part of the Department of Commerce and Community Affairs, at:
Addresses and other contact information for other key Illinois state government agencies mentioned in this book are listed below for your convenience. SECRETARY OF STATE. Contact this office for information on:
EMPLOYER WITHHOLDING. Contact the Illinois Department of Revenue, at the address listed above for that agency, for information on employer tax withholding and to obtain an Illinois Business Registration form, Form NUC-1. STATE UNEMPLOYMENT TAX. Contact the following state agency to determine whether you are an employer subject to payment of state unemployment taxes, and to register for your state employer identification number.
STATE ANTI-DISCRIMINATION AGENCY. For information on Illinois civil rights laws, contact:
(b) Small Business Development Centers. A number of Small Business Development Centers (SBDCs) are located throughout Illinois to assist you. These centers, usually located on college campuses, provide a wealth of start-up information and sponsor frequent business-oriented seminars. Contact the office below for information, or for the location of other SBDCs nearer to you.
(c) Internet Sites. If you have access to the Internet, there is a wealth of state and even local business information provided by state and local governments. All states now have a state government Web page, and most major state agencies also have sites on the Internet where you can obtain useful small business information on matters such as state taxes, financing sources, or the addresses and phone numbers (or e-mail addresses) of various state and federal agencies' offices in Illinois. Since new sites are appearing constantly, you might also want to search for other Illinois government Web sites by using one of the popular Internet search engines, such as Excite! or Yahoo. To start your Internet search for Illinois government information, you may want to begin with the following Internet sites: State of Illinois Home Page: Illinois "First Stop" Business Information Center: Illinois Department of Revenue: New Hire Reporting: Illinois state regulatory agencies:(d) Financing Sources. For information and help on locating financing for your small business, contact the nearest U.S. Small Business Administration office in Illinois, or contact the Illinois Department of Commerce and Community Affairs for information on state programs, at the address given for the Department above in Section VI(a). The address of the Chicago District Office of the U.S. Small Business Administration is:
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Copyright © 2000 Michael D. Jenkins
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