Reviewed and updated October 16, 2026

Do not confuse an LLC with a tax election

A single-owner LLC generally defaults to disregarded-entity treatment for federal income tax, while a multiowner LLC generally defaults to partnership treatment unless another classification is elected. Illinois filings depend on that treatment and other facts. Forming an LLC does not automatically eliminate self-employment tax or create an S corporation.

Keep the formation confirmation and any election acceptance with your permanent records. Ask which return the business must file before the first tax deadline approaches.

Separate money and registrations

Use separate banking and categorize owner contributions, draws and loans correctly. A transfer into the business is not necessarily revenue, and a withdrawal is not automatically deductible wages. Save receipts for startup costs and assets rather than expensing everything without review.

Check Illinois tax registration and Chicago licensing requirements for the actual activity. Selling taxable goods can create responsibilities different from consulting, and online sales require a transaction-specific review.

Plan for the owner’s total income

A side business can change estimated tax even if you already have a full-time job. Review combined wages, business profit, withholding and state payments. Keeping a reserve based on a current projection is more reliable than assuming the business owes nothing until it becomes large.

Provide your preparer with entity records, income summaries, receipts and a list of where work was performed. Illinois replacement tax can be relevant for certain classifications. Review the first year early so missing registrations, payroll obligations or an unexpected entity return do not become a last-minute surprise.

Official sources

This guide provides general information. The rules depend on the tax year, jurisdiction and your circumstances. Ask our team which filing or planning steps apply to you.