Legislation could add new wrinkle to Illinois business formation

When deciding to start a new business in Illinois, numerous issues -- financial, business and legal -- all need careful consideration. New legislation could add another item to the business formation list: retirement accounts. Currently, most small businesses are not required to offer retirement accounts such as a 401K, but that could change.

The Illinois Senate recently passed a bill that would require small businesses of 25 employees or more to sponsor a retirement account for employees. The bill is now up for consideration by the House. If passed, qualifying small businesses would have the choice between setting up a 401K or allowing the state to choose an account into which employees will contribute. If a business owner chooses the state chosen account, three percent of employees' gross income will be deposited into the account. Of course, the option to opt out or increase the deduction would be available.

It remains to be seen if the House will pass the bill. However, the implications if the bill does pass will require additional planning on the part of current small business owners and those who are considering starting one. Of course, some owners will not be subject to this new law if it is passed since they will have fewer than 25 employees.

However, that does not mean that a business will not grow the point where it becomes subject to different rules and regulations regarding employee benefits, whether regarding retirement accounts or something else. Part of business formation and planning needs to include a look toward the future. Keeping track of pending legislation could help give entrepreneurs the best chance at success in their new endeavors.

Source: CBS Chicago, "Proposal Would Make Illinois Small Businesses Give Retirement Accounts To Employees", Jim Williams, April 30, 2014

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