Starting a business can be an incredibly exciting venture, filled with possibilities and opportunities. The path to officially launching a business, however, involves more than simply crafting a “lifestyle brand” or beautiful website. Serious entrepreneurs often face a steep learning curve when it comes to the nuts and bolts, one of the most important of which is choosing the best legal entity for their business.

For many companies, setting up a corporation is the best option for its stability and tax benefits. A corporation is more complex than some other forms of business such as sole proprietorships, and there are several regulations that must be followed in order to be compliant. In this article, we’ll cover commonly asked questions about corporation definition and provide insight to Chicago executives on what they need to know when setting up their business.

First of all, what is a corporation? This business structure is a separate legal entity that has been created by filing articles of incorporation and taking certain steps including creating by-laws for the company. Unlike a sole proprietorship or partnership, a corporation will exist as its own legal entity regardless of the people who started the company or who is currently working there.

Who should set up a corporation? The decision to set up a corporation is ultimately one to make with a qualified attorney. Depending on your goals as an entrepreneur, you may find that a corporation is a better fit for your business than another structure such as a limited liability company. Generally, corporations offer a few key advantages:

1. Liability Protection - One of the main advantages of setting up a corporation is to minimize risk. The corporate structure provides liability protection against certain claims as well as legal separation between the company and its owners or shareholders.

2. Tax Savings - Corporations can also offer tax savings, as a C-corporation can split income between shareholders and the corporation itself, reducing the overall amount of taxes that must be paid.

3. Strategic Investment Opportunities - Lastly, a corporation can be ideal for raising capital by issuing shares to investors.

Are there disadvantages to incorporating? Yes, there can be a few drawbacks to setting up a corporation, including:

1. Double-Taxation - Depending on the type of corporation, income for the business may be taxed both at the corporate and personal level.

2. Cost and Complexity - Setting up a corporation can be a complex and costly process involving filing fees and other startup costs, including for filing state paperwork.

3. On-Going Paperwork - Corporations also require more paperwork such as annual reports and shareholder meeting minutes than other types of businesses.

As with any business decision, the path forward may depend on your specific goals. It’s important to weigh both the advantages and disadvantages of incorporating your business to decide whether a corporate structure is right for you. When you’re ready, you’ll need to follow certain steps for setting up a corporation. This can include filing articles of incorporation, signing bylaws, and taking any additional steps to ensure that the company is compliant with state and federal laws.

Legal counsel can be an invaluable partner during this process. If you’re looking for attorneys who understand local regulations, UpCounsel is a great resource. Whether you need a one-time consult or an entire freelance legal department, UpCounsel’s network of experienced lawyers has you covered. From small businesses to the Fortune 1000, companies of all sizes trust UpCounsel and its attorney community to provide high quality, cost-effective legal services.

UpCounsel offers a few key advantages for those choosing legal counsel:

1. Access to high quality attorneys on demand - When you search for a lawyer on UpCounsel, you get access to more than 10,000 experienced attorneys.

2. Business attorneys have an average of 14 years of experience - While the experience level can vary, most of the lawyers who work with UpCounsel are experienced business attorneys.

3. Profiles of our online attorneys display client ratings and reviews - Reviewing past client ratings and reviews can help you choose the lawyer who is best for your business.

If you’re starting a business you’ll want to consider all of your options for setting up a legal entity that works best for you. Understanding the advantages and disadvantages of a corporate structure can help you make informed decisions during this important part of building a business.

Topics:

Corporation Definition,

Setting up a Corporation,

Tax Benefits of a Corporation