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Business owners will need to address a variety of legal issues when establishing and operating a business. One of the most important decisions that will need to be made involves how a business will be structured. During the business formation process, owners or partners will need to select the correct type of business entity, meet all legal requirements for registering the business, and ensure that the proper organizational structure, management practices, and reporting procedures are in place. In many cases, structuring a business as a limited liability company (LLC) can provide a number of benefits. By working with a business law attorney, owners and partners can make sure they follow the correct procedures to create and operate an LLC.
LLCs provide many of the benefits of corporations while providing owners with the ability to maintain control over business operations and make changes as needed. An LLC may have a single owner, or multiple partners (known as members) may share ownership. If necessary, new members can be added when a partner purchases an ownership share of the company or steps into a leadership role. Advantages of an LLC include:
Protection from liability - In most cases, members of an LLC will not be held personally liable for the business’s debts and financial obligations. This ensures that the personal assets owned by a member will not be at risk if the business experiences financial setbacks or is unable to pay its debts.
Pass-through taxation - An LLC will usually not be taxed at the corporate tax rate. Instead, the profits generated by the business will be “passed through” to the owners or partners and subject to individual income taxes. A pass-through deduction may be available to reduce the amount of a person’s taxable income, providing a significant financial incentive for structuring a business in this manner. However, members should be aware that they may be subject to self-employment taxes, and they will need to be sure to file the proper tax returns each year.
Flexibility - LLCs have fewer reporting requirements than corporations, and members are free to choose the organizational and management structure that will best meet the company’s needs. An LLC’s operating agreement will detail how members will make decisions about how the business will be managed, how profits and losses will be distributed among members, the procedures followed when adding new members, and how matters will be handled if a member chooses to leave the business. Owners and partners can create agreements that address the unique concerns that affect them and their business, ensuring that they will be able to operate the company successfully.
If you need to determine the best way to structure your business, NN Legal Group can advise you of your options and make sure you follow the correct steps to create an LLC or another type of business entity. Contact our Addison business formation lawyers at 630-474-0925 to schedule a free consultation.
Sources:
https://www.nerdwallet.com/article/small-business/llc-illinois
https://ilga.gov/legislation/ilcs/ilcs5.asp?ActID=2290&ChapterID=65
From our office in Glen Ellyn, Illinois we serve clients throughout the area including but not limited to Wheaton, Lombard, Villa Park, Carol Stream, Glendale Heights, Addison, Bloomingdale, Elmhurst, Winfield and DuPage County.
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