Illinois Business Formation Attorneys
Lawyers for Entity Selection When Starting a Business in the Chicago Area
Business ownership provides numerous advantages and opportunities. Entrepreneurs can not only be their own boss, but they can plan for how to achieve a secure financial future while doing what they love. However, it is important to make the right choices when starting out, including determining which type of business entity will provide tax advantages and protection against liability. By working with a business law attorney who understands the legal and financial issues involved in starting and building a business, entrepreneurs can ensure that they are prepared for success.
At the Gierach Law Firm, we work closely with businesses of all types and sizes to help them build successful business strategies. Attorney Denice Gierach has more than 30 years of experience as a lawyer and business owner. She has served as the principal for multiple companies, including a startup manufacturing company and a real estate developer, and she is a certified CPA. With this experience, she and the team of attorneys at the Gierach Law Firm, LLC can not only help you approach the business formation process from a legal perspective, but she can offer invaluable insights on how to plan for the ongoing success of your business.
Selecting a Business Entity
The formal structure of a business will determine how the business will be owned and managed, how its income will be taxed, and whether owners or partners will be personally liable for the business’s debts or other liabilities. A business’s owners or partners will want to choose the type of business entity that best fits their situation. A business will typically use one of the following structures:
- Sole proprietorship – In this simplest type of business entity, one owner will personally own all of the business’s assets, and the business’s earnings will be taxed as part of the owner’s personal income taxes. Because the owner’s assets and the business assets are not separated, the owner will be responsible for the business’s debts and liabilities.
- Partnership – With a general partnership, business assets are treated similarly to those in a sole proprietorship, except that there will be more than one owner. “Joint and several liability” will typically apply to a business’s partners, meaning that all general partners will be liable for debts incurred by the business, or they may be held responsible for the actions of one partner. Partners may also choose to create a limited partnership, in which one or more partners will be general partners, and other partners will be limited partners who will not take an active role in management of the business and cannot be held personally liable for business debts.
- Limited liability partnership (LLP) – In this type of partnership, all of the partners will be limited partners who will be shielded from the other partners’ debts or legal obligations. LLPs are often formed by providers of professional services, such as doctors, accountants, or attorneys. In these cases, each partner may be responsible for their own obligations due to issues such as malpractice, but the other partners will not be personally responsible for these types of liabilities.
- Corporation – This type of business serves as a separate entity from its owner or partners. A variety of requirements must be met to register a business as a corporation, including maintaining proper records and filing annual reports. Ownership shares of a corporation may be sold to investors to raise capital to start or expand a business. Since it is a separate legal entity, a corporation’s owners, partners, or shareholders will not be personally liable for business debts or obligations. With a C-corporation, a corporate tax rate will apply to income earned by the business. Shareholders will also be required to pay personal income taxes on the profits earned by the business, and this can result in double taxation. A business that is structured as an S-corporation can avoid this double taxation, since this type of business functions as “pass-through entity” in which the business’s profits or losses are not taxed at the corporate level, but as part of the shareholders’ personal income taxes.
- Limited liability company (LLC) – This type of entity offers some of the benefits of a corporation, such as protection from liability, while providing owners with more flexibility and fewer requirements for reporting and record-keeping. LLCs function as pass-through entities, allowing owners and partners to avoid double taxation.
Contact Our Illinois Business Entity Selection Attorneys
Whether you are founding a new business or are looking to put a formal structure in place for your current company, the attorneys at the Gierach Law Firm, LLC can explain the available options and help you choose the type of entity that fits your business, and we will ensure that you meet all of your legal requirements for business formation. We will provide you with the advice and guidance you need to make sure your business is positioned for continued success in the years to come. To schedule a consultation, contact us today at either our Naperville office at 630-756-1160 or at our Hoffman Estates office at 847-519-0505.