Which Business Formation Structure Will Suit Your New Company Best? 

 Posted on May 16, 2023 in Business Law

The process of registering a company with the state varies, depending upon the business formation structure chosen by the founders of each new enterprise. There are four primary company structures available to aspiring business owners. If you are hoping to launch a new business venture soon, it will be important for you to weigh the pros and cons of each opportunity before committing to one over the others.

Sole Proprietorships 

Sole proprietorships are owned by one individual, whereas partnerships involve multiple owners. These business formation opportunities offer particularly flexible managerial structures and do not require much work to set up. They are taxed on the individual returns of each owner and do not require much, if any, reporting to the state. They are often particularly appealing for low-risk, local business enterprises. Sole proprietorships do not offer any personal liability protection in the event that the company gets sued or falls behind on its financial obligations.

If you are the sole owner of your business and do not establish another business structure, your business is automatically considered a sole proprietorship. 

Corporations

Corporations are owned by shareholders and managed by each company’s board of directors. It takes a great deal of work to form a corporation, and corporate management is subject to significant reporting requirements for as long as a business remains operational. Yet, there are advantages to this structural option for enterprising individuals who hope to expand their new business rapidly and need access to sources of funding that are not available in alternative structure scenarios. Also, these companies are taxed as unique entities and offer maximum personal liability protection for shareholders.

Limited Liability Companies

Limited liability companies (LLCs) serve as middle-ground opportunity. Like sole proprietorships and partnerships, they are relatively flexible, relatively easy to form, and are not subject to overwhelming reporting requirements. Like corporations, they offer personal liability protection for their owners, who are referred to as members. They can also be taxed either individually or as distinct entities.

Schedule a Free Case Evaluation with a Wheaton, IL Business Lawyer for Personalized Feedback

Preparing to launch a new business is an exciting phase of life. Yet, there is no denying that it can also be stressful and generally overwhelming. Allow the experienced Wheaton, IL business formation lawyers at NN Legal Group to assist you with the legal side of this process so that you can focus your attention on other company-related tasks that need your attention.

To learn about how our firm manages the business formation process and about each option that is available to you, call 630-474-0925 or submit your basic contact information on our website to schedule a free case evaluation. Once you have made an informed decision about the business formation structure of your choice, our team can handle the “heavy lifting” of turning that legal opportunity into a reality. We look forward to hearing from you.

Source:

https://dceo.illinois.gov/smallbizassistance/beginhere/stepbystepguide.html?wcmmode=disabled