Should I Structure My Illinois Business as an LLC?

 Posted on June 11, 2024 in Business Law

As a business owner, choosing the right business structure is a critical decision that can have long-term implications for your company's success and your personal financial health. Whether you are starting a new business or thinking about a new structure that will allow for better operation and growth, it is important to understand your options.

Structuring your business as a Limited Liability Company (LLC) can offer significant benefits. An attorney with experience in business law can help you determine if an LLC is the best choice for your situation.

Benefits of Structuring Your Business as an LLC

An LLC combines the advantages of a corporation with those of a partnership or sole proprietorship, providing flexibility and protection. Here are some key benefits of forming an LLC:

• Pass-through taxation: The tax structure is one of the most attractive features of an LLC. Unlike corporations, which may be subject to double taxation (with the business being required to pay corporate taxes and the shareholders being taxed on the profits they earn), an LLC’s profits and losses “pass through” to the owners' personal tax returns. This allows for simplified tax reporting in which members will report their share of profits and losses on their individual tax returns. Pass-through deductions may also be available, resulting in lower tax liability.

• Flexibility in management: LLCs offer considerable flexibility in how they may be managed. With a member-managed structure, you and any partners will participate in the day-to-day operations and decision-making processes. With a manager-managed structure, one or more managers will be appointed to handle daily operations, which can be beneficial if you or your partners prefer a more hands-off role. This flexibility allows you to tailor the management structure to fit your business’s unique needs and goals.

• Liability protections: Members who have an ownership stake in an LLC are not personally liable for the company’s debts or other financial obligations. Your personal assets will be protected from legal judgments or attempts by creditors to collect debts. By separating personal and business liabilities, you reduce your personal financial risk in case the business encounters financial difficulties or legal issues.

• Ability to bring on new members: An LLC structure makes it easier for new partners to join the business. This can be beneficial for growing businesses, since new members can be added by amending the LLC’s operating agreement and filing the necessary paperwork with the state. LLCs can have an unlimited number of members, including individuals, corporations, and even other LLCs, providing flexibility in ownership and investment opportunities.

Contact Our DuPage County, IL Business Formation Attorneys

These advantages provided by LLCs make them an attractive option for many entrepreneurs. As you determine whether this structure is ideal for you, it is essential to understand your specific needs and consult with a knowledgeable attorney to make sure you fully understand your options. At Farooqi & Husain Law Office, our Oakbrook Terrace, IL business formation lawyers can help you ensure that your business will be set up for success. Call us at 630-909-9114 to arrange a consultation and learn how we can assist with your business law needs.