Choosing the right type of Illinois business entity or business structure is essential for a start-up business. Selecting the appropriate business entity often involves tax considerations and allows a business to maximize its finances and operations.

Illinois Business Entities Include:

C Corporations:

  • Corporation provide for independent legal and tax structures separate from their owners
  • Allow owners to separate personal assets and businesses’ asset and debts
  • Unlimited number of shareholders
  • Taxed based on corporate profits and shareholder dividends – double taxation
  • Corporate formalities like annual meetings and recording of meeting minutes required

S Corporations

  • Independent legal and tax structures separate from their owners
  • Allow owners to separate personal assets and businesses’ debts
  • Owners required to report their share of profit and loss on personal tax returns
  • Limit on number of shareholders and all shareholders must be U.S. citizens or residents
  • Formalities like annual meetings and recording of meeting minutes required

Choosing the right type of Illinois business entity is a crucial determination for any start-up business owner. The wrong business entity selection could place unnecessary limitations on the operations of the company. The business entity should be based on a number of factors regarding the owners, potential capital investment, operations and tax advantages.

Limited Liability Companies (LLCs):

  • Independent legal and tax structures separate from their owners
  • Allow owners to separate personal assets and businesses’ assets and debts
  • Taxed similarly to sole proprietorships and partnerships but can also be taxed as a corporation
  • Unlimited number of owners allowed
  • No formalities unless provisioned by agreement such as annual meetings or recording of meeting minutes required
  • Limited liability companies are governed by operating agreements which takes principles from both partnership and corporations
  • Series limited liability companies are attractive for real estate investments and real property ownership.

Partnerships

  • Partners in a partnership business structure are personally liable for lawsuits filed against their business
  • Formation does not require state filings
  • Easily formed and operated
  • Owners required to report their share of profit and loss on personal tax returns

Sole Proprietorships

  • Owner is personally liable for lawsuits filed against his or her businesses
  • Formation does not require state filings
  • Easily formed and operated
  • Owner required to report his or her share of profit and loss on personal tax return