One of the first things to determine when you’re starting a new business is what type of legal entity to use.

Everyone always wants to know what’s better; a C-corporation, an S-corporation, or an LLC (limited liability company). But there are advantages and disadvantages to each form of entity.

The real answer is, the best vehicle for your business depends on many factors, including:

  • your vision for the business and how it will be initially funded and then generate its own revenue and assets;
  • the types of assets your business is likely to develop;
  • how much revenue your business is likely to generate now and in the future in light of your personal income and tax picture;
  • the number of owners and investors expected now and in the future and their relationship to the work and assets;
  • whether and how your business will work with others to produce its goods or services, and whether those others will be employees or contractors;
  • the relationship of this particular business to any others you envision or in your existing enterprise; and more.

Each of the relevant factors raises various tax and other issues that help to steer the final determination.

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If you don’t already know the right entity type for you or would like help sorting through the plethora of online and other data on this subject, for Illinois businesses, we provide a Choice of Entity Consult that may be helpful.

Choice of Entity Consult

This is a one-to-one meeting during which you share your vision and engage in guided discussion regarding a number of issues all tailored around your unique vision, and we make a recommendation (and you understand why). This meeting involves a private tutorial explaining how each of the entity types works, is structured and governed, the roles you (and any partners and expected future participants) would play in each, how the money moves through each, how taxation works in each, and benefits and disadvantages of each – all in light of your vision.

The general feedback after this consult is that it was essential for making sense of things and for bringing clarity and understanding. Let us know if a Choice of Entity Consult would be helpful for you.

Once you know the type of legal entity you will use for your business, it is important to form the business properly. In fact, proper formation and a good set of clear, complete, and required entity records are essential for preserving the owners’ limited personal liability for the business. Of course, limited personal liability is one of the most important reasons for forming a separate legal entity in the first place. Formation is the time to properly set this all up and start things off the right way.

Additionally, if your business intends to borrow, seek investors or has investors, apply for women-owned, minority-owned, or any other certification, the bank, investors, or certifying body will likely request to see your company records. And, if your business is ever legally scrutinized, your records will be necessary to support that your business is real and legitimate, and that you should not be personally liable for its obligations or costs.

Entity Formations

For Illinois businesses, we can help with an entity formation package. Our formation is a little different than some others. We do what we call a complete entity formation to set you up with an entity and an initial set of company records and organizational documents that we believe tick all the boxes for a proper formation.

Then, we meet with you for a formation meeting, during which we complete certain essential steps and go through everything together, explaining everything and answering your questions along the way, providing instructions, and advising regarding certain essential legal concepts we know you’ll need.

You should walk out of that meeting with a business tied up in a ribbon, ready-to-go (professionally registered entities will require the additional step of registration with the licensing agency – which is included in our entity formation package). Contact the office if our entity formation package is right for you (Illinois entities only, please).

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