Which Business Structure is Right for Me? | IL

Becoming a new business owner can be exhilarating, exhausting, and full of stress and anxiety, all at the same time. Many new business owners fail to put in the necessary amount of thought and research into these early business decisions, only to be forced to make changes down the line. Business formation is a crucial aspect that can determine the success or failure of your business. 

Excitement about a new business is natural, but to ensure success, the decisions you make now must be just as valid years from now. One important decision is how you structure your business as far as ownership. The legal implications of business ownership structure are extensive. If you want to start your own business, take the time now to speak to a knowledgeable Naperville, IL business law attorney who can answer all your questions regarding your new business and how it should be structured. 

Are You Legally Protected with a Sole Proprietorship or Partnership Business Structure?

A sole proprietorship is the most common business structure. It is a one-person business that tends to be the easiest to form and has the least government regulation. Almost 86.4 percent of non-employer businesses are sole proprietorships. Partnerships are also simple to form, but both can have some hidden dangers. A sole proprietorship is legally inseparable from its owner.

The business owner reports business income and losses on his or her personal tax return and is personally liable for the debts and court judgments of the business. If personal liability is not an issue, then sole proprietorship could make sense. A partnership is very similar to a sole proprietorship, but it is operated by two or more people.  The partnership’s owners pay taxes on their share of the business income on their personal tax returns and are personally liable for business debts. Unless you know your partners well, you might not want to assume liability for their actions. 

What Are the Benefits and Downsides of a Limited Liability Company (LLC)?

An LLC is a bit more complex to form and operate and will cost more initially, but it can be worth it for some small businesses. The biggest benefit of an LLC is that it limits the liability of the owner as far as business debts or court judgments. Regarding taxes, an LLC is more like a partnership in that the owners of the business pay taxes on their share of the business income. An LLC is best for businesses that are at risk of having significant business debt or being sued by a customer. An LLC is also one of the best ways to protect personal assets. 

Why Choose a Corporation as Your Business Structure?

A business structure known as a corporation is like an LLC in that the initial setup can be more complicated and costly. Also, like an LLC, a corporation limits the personal liability of the owner or owners regarding business debts and court judgments. A corporation, however, is an independent tax and legal entity.

A corporation is completely separate from those who control and manage the business. A corporation has its own tax returns and pays its own taxes. A corporation is an ideal business structure for investors, and ownership can be easily transferred, but there are many corporate formalities, including extensive record-keeping and board meetings, that are necessary for a corporation.

Contact a Naperville, IL Business Law Attorney

Attorney Denice Gierach combines her education as an attorney and CPA with a master’s degree in management. Her extensive experience as a lawyer and business owner results in a unique, client-centered approach. Having a Naperville, IL business law attorney from Gierach Law Firm by your side can make all the difference in the success of your business. Contact Gierach Law Firm at 630-228-9413 to schedule a meeting to discuss your business.