Do you have dreams of starting a business? If so, then you may not realize how important it is that you choose the right business structure.
With the advice of a Champaign business law attorney, you can ensure that you choose the structure that gives you just the right balance of control and protection.
For instance, if you prefer to maintain total control over your business, then you may want to form a sole proprietorship. This structure gives you the power to oversee all operations and management. Alternatively, choosing a corporate structure means that your business is controlled by one or more directors who are elected by the company’s shareholders.
Other possibilities include a partnership in which each partner equally shares power or an LLC that’s run according to an operating agreement.
Liability is another critical consideration when choosing an entity structure. Any business that participates in risky activities will want to take steps to minimize personal liability should problems arise. Sole proprietorships offer little personal protection while corporations and LLCs give their owners limited liability to protect their personal assets.
Entrepreneurs similarly will want to consider the tax consequences of the business structure they select. All types of businesses are required to file annual tax returns. Considered pass-through tax entities, sole proprietorships, partnerships, and LLCs are required to pay taxes on net profits each year. Owners of corporations are only required to pay taxes on income that they earn from the corporation. This includes dividends, salaries, and bonuses. It’s crucial to remember that a corporation is considered a separate entity for tax purposes, so it is required to pay additional taxes that may be due on any profits that remain at year’s end.
It can be valuable to entrepreneurs to understand how complex each business structure is before making a selection. Sole proprietorships are the simplest and most straightforward. They are easy to establish, and no paperwork needs to be filed with the state. Similarly, no fees are required to start your business.
The story is different for LLCs and corporations. Several documents must be filed with the state, and the fees can be expensive. Other requirements include electing officers, holding regular meetings, and maintaining required records.
Are you interested in starting a business in Illinois? If so, then it’s wise to consult with a Champaign business law attorney.
Call Rincker Law today at (217) 531-2179 to schedule a consultation.