USA Best business entity for a sole owner website

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Hi All,

What business entity would be best for a business similar to the one described below? Will I need to register this entity with IL or can I register it in another state that has more attractive taxes.

I currently live in Chicago, IL and I'm developing a listing website similar to yelp.com that charges a monthly fee for local companies to host their business profile. I will also generate income from the membership fees, premium listings, and affiliate commissions. I'm the sole owner and I do not have or plan to have any employees for a while. I've been outsourcing all of my work. Let me know if you have any questions.

Thanks,

Brad
 

smallbushelp

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The decision regarding what type of entity to form is based on a number of criteria. For example, what will the ownership structure be, how much protection do you need for personal assets, and tax considerations. You may be ok staying as a sole proprietor, but that puts your personal assets fully at risk. Forming a corporation provides protection for your personal assets but opens the door for adverse tax situations and requires very formal filing and reporting requirements. A limited liability company can provide protection for your personal assets and can be easier to form. Perhaps an LLC would be optimal in your case. Deciding which state to register it in would be based on an analysis of a state's formation and tax filing requirements.

If you form an entity outside the state of IL, you may be required to register it in IL if that is where you're going to do business from. Also, you need to consider registration requirements for other states where you may do business. I suggest you do some research about state requirements for doing business. Or consult someone who can.
 
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If I do a sole proprietor can I switch to an LLC or corporation later if needed?
 

smallbushelp

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You're welcome. If I was helpful, I would appreciate a "Like."
 
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If you choose to be a sole proprietor you won't need to register your business with any state. You will only need to register a sole proprietorship EIN with the IRS. As you don't have a nexus (office, warehouse, or other physical presence in the state), you also won't need to pay any sales tax. You might be required to use your name as the official business name unless you register a DBA (Doing Business As) with your state. All income earned by the company will be your income for tax purposes.

If you choose to be a corporation you can protect yourself from liability as well as pay less taxes (depending on the type of corporation), but things will get more complicated. You will need to register with your state and provide them with the names of your officers, a physical address, and a few other things. I'm not sure about this, but this might be counted as a physical location and you might also need to register with your county and city. You might need to pay sales tax too. I would recommend consulting an expert if you take this route.
 

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