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Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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How legal does a side job business need to be in Illinois? We

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How 'legal' does a side job business need to be in Illinois?

We live rurally in Illinois. My husband is a Plumber who experiences many layoffs in between jobs. We depend on his unemployment benefits in between jobs. He is also a talented welder and would like to start a side business fixing small parts for people. This business is likely to only bring in a couple hundred extra dollars a month.

We looked into being an S-Corp for the legal protection from our assets even though this type of business would have very little liability. During my research I learned that the unemployment office frowns upon small businesses as they assume you are spending your time growing your business not looking for work.

That said, all we'd like to do is legally be able to put a sign in the yard and an ad in the newspaper. We are more than willing to claim any income on our taxes and with unemployment (when he is on it). So what is legally required for that? Can we just go ahead and do it claiming the money at the end of the year or do we have to get an EIN, register with the state, etc.

I am looking for bare minimums for a bare minimum earning side business.
Submitted: 3 years ago.
Category: Tax
Expert:  Lev replied 3 years ago.

Lev :

Hi and welcome to our site!
In general - there is nothing specifically you need to do to start your own business - your spouse may just operate under his own name and his own SSN - and generally - so special registration required.

Lev :

For federal tax purposes - you will report all business income and expenses - on the schedule C -
The net income (after deductions)will be reported on the form 1040 line 12 -
If the business has net income over $400, it may be required to file Schedule SE, Self-Employment Tax and net income is likely self-employment income and 15.3% self-employment tax would be required.
Self-employment taxes from schedule SE will go to the form 1040 line 56 -
Also - you will deduct half of self-employment taxes on the line 27.
Generally - that all you needs for income tax purposes . Please review all possible deductions - that might help to reduce income tax liability.

Lev :

For unemployment purposes - if your spouse will earn income - means if his business will produce net income - his eligibility for unemployment benefits might be affected - and he is required to report that net income.

Customer: replied 3 years ago.
So as long as we are claiming the income at the end of the year, it's considered 'legal'?

Also, most of his customers would be farmers who would prefer to deduct the bill at the end of the year. Can we legally write them a bill and receive a check as payment?

I read online that all business owners are required to register in Illinois. So you're saying I wouldn't need to do that?
Expert:  Lev replied 3 years ago.

Registration might be required if you are selling goods and such sales are subject of sales tax - yes - in this case the business must be registered.

Services which do not involve sales of good are generally not subject of sales tax - and registration is not required.

Also - there are some specific types of activities which require license - for instance attorneys, doctors, sellers of firearms, and some others.

Most small businesses do not require any registration.

However - some local cities might require registration if you run the business out of your home - so you may verify with your local administration.

However - you are never required to register a separate business entity - such as LLC or corporation - that is your choice.

Lev and 3 other Tax Specialists are ready to help you
Customer: replied 3 years ago.
Great this is what I needed to know. THANK YOU!
Expert:  Lev replied 3 years ago.

You may review following publications related to sales taxes in Illinois -

Specifically - see page 4 - You must register with us as a retailer if you "do business" in Illinois and you sell "tangible personal property" at retail.

Under what circumstances would I be registered as a reseller?
You will be registered as a reseller - rather than a retailer - if all of your sales of tangible personal property are nontaxable(i.e., all sales are to exempt buyers or are for resale) and you wish to buy your merchandise tax-free from registered Illinois suppliers.

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