Incorporation can be a tricky and time-consuming process, which is why many business owners in the Chicago area choose to bring on outside counsel to ensure everything is done properly and that any future legal disputes are avoided. Knowing which questions to ask while shopping for a business attorney can help you find the right person for the job. In this article, we provide an overview of the most commonly asked questions related to the process of incorporation in the Chicago area.

What is the Difference Between Incorporation and Sole Proprietorship in Chicago?

Incorporation is a legal process that involves the formation of a company with limited liability. When forming a corporation, the business owners need to register their company with the Secretary of State in the state or jurisdiction in which the company will do business. Once the registration process is completed and the business is officially incorporated, the corporation assumes full legal responsibility for any debts the company incurs and is responsible for the tax and contributions the company makes.

On the other hand, sole proprietorships are businesses that are owned and operated by one or more natural persons. Such businesses are subject to fewer regulations, as owners will need to report their earnings to the IRS and make contributions to Social Security and Medicare, but are not liable for any debts of the business.

What are the Pros and Cons of Incorporation in Chicago?

The primary benefit of incorporation is the limited liability protection it offers. Unlike with sole proprietorships, the owners of corporations are not liable for the company’s liabilities and debts. This means that if the business fails or is sued, the owner’s personal assets are not at risk. Incorporating also helps to establish a formal business structure which can attract investors and other business partners.

However, incorporation can be costly and time-consuming, not only in terms of filing the registration paperwork, but also implementing corporate governance such as holding periodic board meetings and appointing a board of directors. Finally, as a separate legal entity, a corporation is subject to the payment of certain taxes and the filing of required documents with the IRS.

What are the Steps to Incorporating a Company in Chicago?

Depending on which type of business you want to form (LLC, S-corporation, etc.) the steps to incorporating a business in the Chicago area may vary slightly. Generally, the steps for forming a corporation include selecting and reserving a name for the business, filing articles of incorporation and appointing the board of directors, as well as forming any necessary LLC agreements. Depending on the type of entity, additional paperwork may need to be filed with the State. After forming the company, business owners will need to obtain any necessary local licenses and permits, and obtain a federal employer identification number (EIN).

Is It Better to Incorporate My Company in Chicago or in Another State?

When considering which jurisdiction to incorporate in, it is generally best for the business to incorporate in the state that it will do most of its operations in. This is because different states may have different laws, regulations, and tax requirements regarding corporations. Moreover, if the company has employees or customers in multiple states, additional matters such as workers compensation and employment taxes may need to be considered.

What type of Lawyer Should I Hire for Incorporation in Chicago?

When looking for counsel to support your incorporation matters, it can be helpful to hire an attorney who has experience in the area of corporate law and is familiar with the laws governing incorporation specific to Chicago. UpCounsel’s network of experienced business lawyers can help you identify the best legal counsel to support your business’s legal needs.



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