Comparing an Inc vs LLC in Chicago: The Legal Benefits of Each Structure
The popularity of both Incorporations and Limited Liability Corporations (LLCs) is on the rise3 min read
The popularity of both Incorporations and Limited Liability Corporations (LLCs) is on the rise. This is especially true in the business community of Chicago. In this article, you’ll get an in-depth overview of both types of business structures, and how they differ and offer legal benefits unique to each one. Of course, one size does not fit all when it comes to business structures, so understanding the differences between Inc and LLC will help you make an informed decision when deciding on the optimal structure for you and your business.
Without the support of a specialized corporate attorney, deciding on the best way to proceed with your business can be time-consuming and overwhelming. Luckily, UpCounsel has a network of experienced legal experts and highly rated business lawyers who can consult on the pros and cons of Incs and LLCs and help you make the right decision for your new business venture.
What Is an Inc?
An Incorporation (or Inc) is a business structure approved by the state, and it offers the company’s owners protection from personal liability, which is similar to the protection that an LLC offers. It is distinct from a partnership or sole proprietorship because it is considered a separate legal entity and has certain legal and tax advantages. Establishing this type of corporate structure is also relatively easy, as investors can purchase stock in the company.
The major distinction with this type of business structure is that the company’s stock can be offered publicly as well. The benefit of this is that it allows the company to raise funds quickly as well as attract new clients or investors. Publicly traded companies are subject to extra regulations from both the state and the federal government, such as reporting financial information to potential investors.
What Is an LLC?
A Limited Liability Corporation (LLC) is a business structure that combines the tax advantages of both a Sole Proprietorship and a Corporation. It is the most flexible type of business structure as well as one of the fastest to establish. It requires fewer paperwork than a Corporation and is the ideal form of organization for many small businesses.
The major benefit of setting up an LLC is that it can save business owners from personal liability if a lawsuit is brought against them. It also allows small businesses to limit their paperwork for taxes and eliminates double taxation, which results in lower business taxes.
The Differences Between Inc and LLC
The main difference between an Inc and an LLC is liability protection. An Inc offers more protections to shareholders than an LLC, as shareholders have limited personal liability. However, LLCs still provide this protection to owner-members, and they also benefit from the flexibility of a Sole Proprietorship.
Another major difference is the type of taxes each entity needs to file. Incs are subject to double taxation, meaning their taxable profits are taxed at both a corporate level and then again at the personal level when it is distributed to owners. LLCs, on the other hand, don’t have to deal with double taxation as they file their taxes as if it were a sole proprietorship and the profits are passed on to the owners.
The Benefits of Choosing an Inc or LLC in Chicago
When selecting an Inc or an LLC for your business, it’s important to take into consideration the legal implications of your decision. A lawyer who specializes in corporate business law will be able to provide the best counsel for your specific situation, as the laws for setting up and running a business in Chicago will vary from other states.
Incorporating your business in the state of Illinois will provide you with the protection of limited liability, as well as the ability to expand and have multiple owners in the business. An LLC, on the other hand, while still offering liability protection, will also allow you to pass through losses and profits without paying taxes at the entity level.
Ultimately, it’s important to remember that the right decision for your business will depend on your goals and the specific complexities of your organization.No matter which business structure you choose, it’s essential to consult with a trusted lawyer before making any finial decisions. The team of qualified legal experts at UpCounsel has experience working with businesses in the Chicago area, and they are standing by to help you make the right decisions for your organizational needs.
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