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