Illinois small business formation: what structure works best?

The answer to the question of what kind of business structure a new company should take on depends on what kind of business it is. There are two main types of entities that most Illinois small business formation takes: Limited liability company or corporation. Most everyone agrees that the limited liability company is the most popular small business structure, but there is a place for the corporation as well.

Both entities provide the principals with protection from personal liability should the business fail and creditors come calling. However, corporations are required to conduct their operations in very specific, time consuming and sometimes confusing ways. For that reason, most small businesses choose the limited liability company. There is more freedom in this type of structure.

One of the major advantages that a corporation has over a limited liability company is potential investors. If a business is going to cost a lot of money to get off the ground, a corporate structure may put investors more at east due to the stricter reporting requirements that would a limited liability company. Many investors may feel that this will "keep the corporate owners honest" with their money.

No matter what type of structure is chosen, there will be paperwork to fill out, fees to be paid and possibly even licenses to acquire. If these small business formation tasks are not correctly handled, the business could fail before it even has a chance to begin. Also, it is true that a business can change its entity type, but for many small Illinois businesses, having this decision out of the way can be appealing.

Source: Huffington Post, LLC or Corporation? How to Pick the Right Business Structure for Your Startup, Deborah Sweeney, Sept. 13, 2013

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