Owning a small business is a dream come true for many people. If you are one of those people, you have a number of important decisions to make before your dream of owning a business can be realized. One of the most important of those decisions is which type of legal entity to choose for your business. There are three primary legal entities – sole proprietorship, partnership, and corporation – from which you may choose; however, there are also a number of hybrids as well. One of the more popular hybrids people choose for the legal structure of their company is a Limited Liability Company, or LLC.
LLC Basics
An LLC is a type of hybrid business entity that combines the pass-through taxations of a sole proprietorship or partnership with the protection from liability offered by a corporation. Although an LLC is not a corporation, is does require the completion of legal documents to form. Because the laws that govern LLCs are state-specific, the requirements for formation of an LLC may differ slightly from one state to the next. The same is true for the laws that govern LLCs – they can differ by state. While an LLC shares the protection from liability with corporations, an LLC is much less formal. Whereas a corporation has very specific requirements with regard to what documents must be prepared and filed each year in order to keep the corporation going, an LLC does not. The flexibility of an LLC makes it very popular with single owner businesses or with partnerships that do not have any immediate plans to expand.
Forming an LLC in Illinois
Forming an LLC is easier then forming a corporation but more difficult than forming a sole proprietorship. The first thing you will need to do is to choose a name for your business. If you are forming an LLC, the end of the business name must have the words “limited liability company” “L.L.C.,” or “LLC.” You will also need to check with the Illinois Secretary of State Business Services to make sure the name you choose is not already in use. Next, you must create and file “Articles of Organization” with the Illinois Secretary of State. The Articles of Organization will include the names of the business and an address along with the name of the Registered Agent and a statement of the purpose of the business. It must also include a statement regarding the LLC’s duration (perpetual or for a specified period), whether the LLC will be manager-managed or member-managed, and additional information about the members and managers of the company. An LLC is not required to create an Operating Agreement; however, it is a good idea to create and use one. Finally, there are a number of other basic business considerations you will need to address, such as obtaining an Employer Identification Number (EIN) from the Internal Revenue Service and obtaining a business license.
Consulting with an Attorney
One of the best things you can do for the success of your future business is to consult with an experienced business attorney early on during the planning stage. A seemingly small mistake during the formation of your LLC can end up costing you a considerable amount of time and money down the road. By working with an attorney from the beginning you will dramatically decrease the odds of making even a small mistake.
Contact Us
If you have additional questions or concerns regarding the formation of a Limited Liability Company (LLC) or starting up a small business in general, contact the experienced Illinois business planning attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.
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