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Botto Gilbert Lancaster, PC

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McHenry County Business Start Up Lawyers

Crystal Lake business formation attorney

Corporation Formation Attorneys Representing Clients In Northern Illinois

You have the power to form and run many types of businesses at any time. As a sole proprietor, you can run your business without creating a unique legal entity. You simply need to make sure to keep your business and personal finances separate and pay taxes properly. However, there may come a time when it is better or necessary for you to create a formal business entity. To learn more about whether forming a business is right for you and the types of business entities available, contact our experienced business law attorneys at Botto Gilbert Lancaster, PC.

When to Form a Business Entity

There are certain signs that it is time to form a business entity separate from yourself. If your small business is now making thousands of dollars in sales, forming a separate entity can help you keep better track of your finances and growth. It may also enable you to obtain business loans. Depending on the services or products you offer, you may want reduced liability. One of the risks of being a business owner is getting sued for a person's financial loss or bodily injury related to your product or service. By forming a separate business entity, you can shield yourself from the financial and personal consequences of liability. Additionally, forming a business could reduce your tax obligation.

If you are curious as to whether you need to form a business entity to start offering a product or service for sale or whether it is finally time to take this step, contact our business formation attorneys at Botto Gilbert Lancaster, PC.

Types of Business Entities

There are a number of types of business entities you could form. They come with their own formation requirements, ongoing conditions, and advantages and disadvantages.

  • Corporation (C-Corp): Corporations are legally entirely separate from their creators, owners, and officers, who obtain limited liability. A corporations has stockholders, who are the owners, a board of directors, officers, and employees. It files and pays its own taxes. However, since it pays taxes on its income and then the shareholders pay taxes on the dividends, it is subject to "double taxation." There are many annual formalities corporations to follow, including corporate records maintenance.
  • S-Corp: An S-Corp is a corporation with a "Subchapter S" tax election. With this election, the IRS taxes your corporation as a partnership to avoid double taxation. However, it still get all of the benefits of limited liability.
  • Partnership: A partnership is when two or more people form a business. They usually negotiate and formalize a partnership agreement. The profits of the business go directly to the owners in the agreed upon proportions and are taxed as personal income.
  • Limited Liability Company: LLCs combine the benefits of corporations and partnerships, and have similar benefits of an S-corp. They offer limited liability yet their governance structure can be much more flexible than a traditional corporation. Instead of shareholders, LLCs have members. An LLC may be managed by its members or by a separately designated manager.

Let us Guide Your Business Formation

Each type of business has specific formation requirements, including paperwork and fees. Without proper formation, you could fail to create a unique business, leaving yourself open to civil liability. You may also end up without the tax benefits you desired. Our corporate law attorneys can help you with business entity selection, formation, and business contracts, including operating and employment agreements. Contact us today at 815-338-3838 to schedule a consultation.
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