5 Things to Consider When You Create an LLC in Chicago
Forming an LLC (Limited Liability Company) is a noteworthy and major step for business owners3 min read
Forming an LLC (Limited Liability Company) is a noteworthy and major step for business owners. While it is possible to form an LLC on your own, many business owners—especially those forming an LLC in Chicago—hire a lawyer to ensure that their LLC complies with all applicable laws. Since the legal requirements, regulations and paperwork needed to start an LLC differ from state to state, hiring an experienced local law firm is essential for new business owners. Before both forming your LLC and hiring counsel, here are 5 things you should consider.
1. Understand the Different Types of Entities
LLCs offer certain advantages, such as protecting the personal assets of business owners from the financial obligations of the company, but the LLC structure may not be right for everyone. Before you set up an LLC, make sure that you understand the advantages and limitations of this type of entity.
A sole proprietorship is the most common type of business entity, and it is the simplest to form. It requires no filing with the state and offers no asset protection. A corporation offers many of the same protections as an LLC, but, generally, corporations are more complex to maintain and they also entail more substantial formation costs.
2. Choose a Business Name
One of the first steps in forming an LLC is choosing a business name. You must choose a unique name that can be legally registered and is not already being used by another LLC in your state. You must also make sure that the name includes “LLC,” “L.L.C.,” “Limited Liability Company” or some other permutation of these terms.
3. File the Articles of Incorporation
In addition to choosing a business name, you must draft and file official documents to set up an LLC in Chicago. The articles of incorporation must include your LLC’s name, address, purpose, ownership structure (e.g., member-managed or manager-managed), and the services or activities you will offer, as well as other information. Depending on the state, some of these provisions may be optional.
4. Establish an Operating Agreement
An operating agreement is a legal agreement that sets out the rules and regulations for your LLC. This document establishes the rights and responsibilities of members of the LLC and the procedures for how the LLC will be managed. Operating agreements also specify how profits and losses will be shared, and they may address other important matters, including voting rights and specific procedures for amending the terms of the LLC.
5. Obtain an Employer Identification Number (EIN)
Once you have filed the articles of incorporation and established the operating agreement, you must obtain an employer identification number (EIN). An EIN is a unique nine-digit number issued by the Internal Revenue Service (IRS) to identify businesses for tax purposes. You will need an EIN to open a bank account for your LLC and also for filing taxes and other administrative, legal, and financial purposes.
When registering an LLC in Chicago, you must take several important steps to make sure that all required documents are properly filed and all applicable regulations are followed. It is helpful to have experienced legal counsel to guide you through the process. Many business owners hire an attorney to draft articles of incorporation, prepare an operating agreement, and provide other essential LLC formation services. Having an experienced lawyer to provide insight on local regulations, compliance, and other nuances of establishing an LLC in Chicago is advantageous.
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