When it comes to setting up a business, there are two main options: set it up as an incorporation or a limited liability company (LLC). In Chicago, the decision is especially important as it can determine the amount of tax owed. Understanding the differences between an incorporated business and an LLC should be a top priority for any business owners setting up shop in the city.

This article will discuss some frequently asked questions (FAQs) about Inc vs. LLC in Chicago, as well as what to look for in legal counsel if you're based in the city.

What Is the Difference Between Inc and LLC?

The primary difference between an incorporated business and an LLC is the amount of taxation. Incorporated businesses are taxed as separate entities, meaning that they must pay taxes on their profits. On the other hand, LLCs are not subject to taxation, as they are not considered separate entities under the law.

In addition, incorporated businesses generally have to be managed by shareholders, with the company appointing one or more managing directors. LLCs, on the other hand, can have a single manager or members who make decisions on behalf of the business.

What Are the Benefits of Inc vs. LLC in Chicago?

The primary benefit of an incorporated business is the protection from personal liability that it affords the shareholders. This means that shareholders are not personally liable for any business debts of the company, although this protection can be negated if the shareholders are found to be negligent in their management of the company.

LLCs offer the same protection from personal liability, plus several other benefits. For example, LLCs have fewer formalities compared to incorporated businesses. They also don't require separate shareholders meetings or the filing of annual reports. Finally, LLCs can be formed with only one person, meaning that single entrepreneurs don't have to worry about finding multiple members to join them in the business.

What Are the Risks of Inc vs. LLC in Chicago?

One of the key risks of forming an incorporated business in Chicago is the amount of taxation that it is subject to. As mentioned, incorporated businesses are taxed separately, which can lead to a much higher tax bill than an LLC.

Additionally, incorporated businesses must comply with various state regulations, such as reporting their profits to the state and filing annual reports. These requirements can be difficult to manage for small business owners, although they can be mitigated with the help of an experienced attorney.

LLCs can also be subject to taxation if they are classified as a "disregarded entity" by the Internal Revenue Service. This means that the LLC is not considered a separate entity for tax purposes, and the IRS will treat it as a sole proprietorship. In this case, the LLC would be subject to taxation regardless of the number of members.

What To Look For In Legal Counsel If I'm Based In Chicago?

If you plan to set up an incorporated business or an LLC in Chicago, it is important to seek the advice of a qualified business attorney. The city of Chicago has a large and diverse legal community, and most attorneys can provide helpful advice and guidance when it comes to understanding the nuances of the local regulations.

When looking for an attorney to help you establish your business, you should make sure that you find someone who is highly experienced in the area of business law. This way, you can be sure that you'll receive the best advice possible, and you can rest assured knowing that your attorney is extremely knowledgeable about the relevant laws and regulations.

Additionally, you should make sure that your attorney is based in Chicago so that they are familiar with the local laws and regulations. They should be able to provide you with helpful advice on compliance matters, as well as provide guidance on how to best structure your business in order to minimize your tax burden.

Where To Obtain Legal Counsel in Chicago?

If you're looking for qualified legal counsel in Chicago, one of the best options is UpCounsel. UpCounsel offers access to a range of experienced business attorneys in the city who can help you establish your business with minimal hassle.

UpCounsel provides a variety of services, from one-off consultations to setting up a full freelance legal department to assist you. Moreover, you can have peace of mind knowing that all of UpCounsel's attorneys have an average of 14 years of experience, and you can even check out their profiles to review client ratings and reviews.

Lastly

Setting up a business in Chicago can be a complex process, and it is important to be mindful of the different regulations that come with each option—incorporated businesses and LLCs. Being aware of these differences, as well as the benefits and risks of each, can be critical in making the right decision for your business.

For legal counsel, UpCounsel is a great option, providing experienced business attorneys in the Chicago area who can advise you on a range of matters, from law and taxation to compliance issues.

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