Business owners who have operations at separate locations often set up separate corporations for each location. There are many good reasons to do this including limiting liability at one location from effecting the other locations. The separate corporations should have their own bank accounts, bookkeeping, business licenses, corporate records, employees, tax identification numbers. But apparently, this is not enough for the City of Chicago. A recent Illinois Appellate court decision DTCT v. The City of Chicago upheld the City of Chicago’s position. In this case a husband and wife owned several separate corporations. Each of those corporations owned a different McDonald’s restaurant location. The City of Chicago said that because each of the corporations had the same shareholders then all the corporations would be counted as one business entity for the purpose of calculating the employer’s expense tax (a.k.a. the “head tax”). This tax applies to employers who have 50 or more employees working in Chicago. The tax rate is $4 per employee per month. The individual restaurants had less than 50 employees, but all of them together had more than 50 employees.The separate corporations had followed all the corporate formalities. They had separate bank accounts, separate books and records, each had their own City of Chicago business license, they had separate tax identification numbers and filed separate tax returns. But this was not enough for the City of Chicago in determining the “head tax.”
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