Starting a New BusinessForming a new business can be a major step forward. In order to maximize the chances of success, planning and preparation at the outset are essential. Retaining the help of an experienced Chicago business lawyer can help you to implement a long-range strategy and avoid pitfalls from the very outset. Not only can this save you time and money, but it can increase your chances of creating a successful and growing business.
There are a number of important factors that must be addressed in forming your new business, including ownership structure, where and how it will operate, the degree of control that you wish to have over its operations, how the management will be organized, and how much financial risk that you are willing to bear. These factors will help determine the most appropriate type of business entity for your venture.
Common choices for business entities include:
- Sole proprietorship – This is a business that is owned by an individual and not formed as another type of business entity. Management of a proprietorship is simpler than other types of entities, because the assets of the business are those of the individual. However, the individual also is responsible for any financial liabilities the business might incur.
- Partnership – This is a business owned by more than one person based upon a contractual arrangement known as a partnership agreement. Certain requirements may apply to form and register a partnership. They can be structured as general partnerships, limited partnerships, or limited liability partnerships, each of which has distinct characteristics. Partnerships do not necessarily offer limited liability protections to the partners, although in some cases they can do so.
- Corporation – A corporation can be owned by one or more stockholders, and are taxed separately from the owners. A primary advantage of a corporation, however, is that the liability of the owners in regards to the business' debt is limited to their financial investment. Certain options may be available for S-corporations, as well as Professional Corporations.
- Limited liability company (LLC) – An LLC combines certain tax and management features of a partnership with the limited liability protection of a corporation. In Illinois, it is often viewed as the most flexible type of limited liability business entity. Illinois also recognizes Series LLCs, which allows for the possibility of multiple sub-entities, each with its own management, ownership, and limitation of liability.
Doing Business in IllinoisDetermining the legal entity that is right for your business and filing the appropriate forms to create it really are only the beginning. Completing the formation may require that additional documents be drafted and adopted, such as bylaws for a corporation, an operating agreement for an LLC, or a partnership agreement for a partnership. Additionally, there may be licensing, tax, securities, or other regulatory requirements or registrations that need to be observed. Any documents related to financing arrangements and commercial leases should be reviewed. The time that you are forming a new business entity also may be an appropriate time to consider succession issues.
Foreign business entities, meaning those formed in a state other than Illinois, may face certain registration requirements for Illinois. There are also other ramifications of forming a business entity in other states to do business in Illinois. Contact us for assistance.