Should I Establish my Illinois Business as a Corporation or an LLC?
A major advantage to establishing your Illinois business as a Corporation or Limited Liability Company (“LLC”) is that you can protect your personal assets from the creditors of the business. There are also tax advantages to establishing a business entity like a Corporation or LLC. It may also be easier to raise capital from investors if your business entity is organized as a Corporation or an LLC. The question then arises – which is better? A Corporation? Or an LLC? The answer depends upon the circumstances of your business. The decision should be made in cooperation with your business Attorney, Certified Public Accountant and Financial advisors.
A properly formed and maintained Corporation provides personal liability protection to shareholders of the Corporation. The shareholder’s risk is limited to the amount of money invested in the company, and the corporate structure protects the shareholders from liability for the debts and obligations incurred by the business. Operating your business as a corporation may also provide substantial tax savings. Using the corporate structure can minimize self-employment taxes and provide opportunities to lower the taxes paid on the income of the business. There is also the opportunity structure retirement and tax-deferred savings plans for the shareholders, directors, officers and employees which can provide even greater tax savings. It is important to consult with an experienced Certified Public Accountant and your Financial advisor as well as your Attorney when developing the tax structure of a Corporation. The sale of stock and/or bonds for the purposes of raising capital is a well-known method of raising capital for the Corporation.
Limited Liability Companies (“LLCs”)
LLCs are not Corporations. However, the owners of the LLC, like the shareholders of a corporation, enjoy substantial protections from personal liability for the debts and obligations of the business. The owners of the LLC are referred to as “Members” as opposed to shareholders who are the owners of the corporation. The persons or entities that administer the LLC are referred to as the “Manager” or “Managers” as opposed to Officers or Directors as is the case with corporations. In small LLCs, the Members are usually the Managers. There are tax advantages to operating your Illinois business as an LLC. However, those tax advantages may differ if the LLC is owned by a single Member or if the LLC is owned by more than one Member. It is important to consult with an experienced Certified Public Accountant and your Financial advisor as well as your Attorney when developing the tax structure of an LLC. Like corporations, LLCs are permitted to raise capital from investors. However, capital may be raised by the sale of membership interests like the sale of stock and debt investments like bonds.
Establishing your Illinois business as a Corporation or LLC is usually inexpensive and easily accomplished within 24 to 48 hours. For further information on the establishment of your Illinois business as a Corporation or LLC, please click here.
Please contact the attorneys at Bruning & Associates, P.C. at 815-455-3000 to schedule your free consultation regarding the establishment of your business as a Corporation or LLC.
Click here to learn more about Attorney Kevin Bruning.