Starting your own business can be a nerve-wracking process. You are trying to do something big and important for your life, but you are also anxious about whether it will work out. Significantly, you want to make good decisions from the beginning so that you can carry positive momentum into the future. One of these decisions is choosing the right legal structure for your business.
There are numerous business structures, and each has unique advantages and disadvantages, which generally revolve around control of the business, how profit is distributed, taxation, legal liability, and the legal costs associated with starting the business structure. One popular structure that I will focus on is the Limited Liability Company, which is commonly referred to as an LLC.
What are Characteristics of an LLC?
- As indicated by its name, the primary advantage of an LLC is that it provides you and other members with limited liability. In other words, if there is a lawsuit, judgment, or debt against the LLC, the personal assets of the members are protected. In contrast, a sole proprietorship may expose you to personal liability.
- You have options in how you are taxed. You can choose to be taxed like a sole proprietor and pay self-employment taxes. Or, if you have multiple members, you have a choice to be taxed as a corporation, but face double taxation. A tax attorney can guide you through your options.
- An LLC is relatively easy to set up. In Illinois, the Office of the Secretary of State of Business Services requires the filing of your LLC’s Articles of Organization, which must contain specific, required information. In addition, there is a $600 filing fee.
- You have great flexibility to create whatever organizational structure you want. If you are a single-person LLC, you are completely in charge. If your LLC has multiple members, it is prudent to create an LLC Operating Agreement, which can define the purpose of your LLC and define the roles of the members in the LLC. However, failure to clearly define these roles in the operating agreement may lead to confusion within and outside the LLC.
Contact an experienced tax attorney to see if an LLC is right for you. The most important impression your business can make is its first impression. That means properly setting up your business from the start. That is something that the team at the Law Offices of Robert S. Thomas understands. You need a knowledgeable, thorough attorney who can help you establish your business with your goals in mind. I have been a tax attorney for more than twenty years and have a Master of Law Degree (LLM) in Taxation. Contact The Law Offices of Robert S. Thomas at 847-392-5893 to schedule an initial consultation or visit our website today.