Business Services FAQs

Question 1

What is the difference between a 401(k) and a SEP-IRA for small businesses?

Accepted Answer

A SEP-IRA is simpler to set up and allows contributions of up to 25% of net self-employment income (max $69,000 in 2024). A 401(k) allows higher employee contributions ($23,500 in 2026 plus catch-up) and includes a Roth option, but requires more administration. For owner-only businesses, a Solo 401(k) often allows higher total contributions than a SEP-IRA. A local advisor can model both for your income level.

Question 2

When does a small business need to offer employee benefits?

Accepted Answer

There's no federal requirement to offer benefits for businesses with fewer than 50 employees (except ACA requirements at 50+). However, benefits are a critical tool for attracting and retaining talent. Even small businesses can offer competitive health insurance, a 401(k), and supplemental benefits at reasonable cost — especially with a local advisor who knows the market.

Question 3

What payroll taxes does an Illinois employer need to pay?

Accepted Answer

Illinois employers must withhold and remit federal income tax, Social Security (6.2%), Medicare (1.45%), Illinois state income tax (4.95%), and Illinois unemployment insurance. Employers also pay matching Social Security and Medicare taxes, plus federal and state unemployment taxes. Payroll compliance is complex — most small businesses benefit from professional payroll services.

Question 4

What HR documents does every small business need?

Accepted Answer

At minimum, every small business should have an employee handbook, offer letters, I-9 forms for employment eligibility verification, W-4 forms for tax withholding, and written policies for key areas like harassment, PTO, and remote work. Illinois has specific requirements around pay transparency and other employment matters that a local HR consultant can help you navigate.

Question 5

How can a small business compete with large employers on benefits?

Accepted Answer

Small businesses can compete by offering flexibility (remote work, flexible hours), a 401(k) with employer match, health insurance (even a high-deductible plan with HSA), and supplemental benefits like dental and vision. A local benefits advisor can help you design a package that's competitive in your market without breaking your budget.

Question 6

What is the difference between an employee and an independent contractor?

Accepted Answer

The IRS uses a multi-factor test to determine worker classification, focusing on behavioral control, financial control, and the type of relationship. Misclassifying employees as contractors can result in significant tax penalties and back payments. If you're unsure about a worker's classification, consult with a local business advisor or employment attorney before making a decision.

Question 7

When should a small business owner think about exit planning?

Accepted Answer

Exit planning should start 5–10 years before you intend to sell or transition your business. Key elements include building a business that can operate without you, maximizing profitability, understanding your business's value, and structuring the transition for tax efficiency. A local business advisor can help you build a roadmap toward a successful exit.

Question 8

What business insurance does a small business in Illinois need?

Accepted Answer

Most Illinois small businesses need general liability insurance (required by many clients and landlords), workers' compensation (required if you have employees), commercial auto (if you use vehicles for business), and professional liability (for service businesses). A local insurance advisor can help you identify the right coverage for your specific business type and risk profile.

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Business Services Frequently Asked Questions

Business Services FAQs

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