Setting Up an LLC in Chicago – FAQ
Frequently Asked Questions about setting up an LLC in Chicago can be complex and overwhelming4 min read
Frequently Asked Questions about setting up an LLC in Chicago can be complex and overwhelming. Fortunately, with the help of the experienced attorneys with UpCounsel, the process of forming and registering a Limited Liability Company (LLC) does not have to be daunting. With local expertise and an extensive network of attorneys with an average of 14 years of experience, UpCounsel can assist your business in registering a new LLC in Chicago, Illinois that complies with all the state regulations.
Starting an LLC in Chicago comprises of multiple steps, including understanding the rules, processes, and fees associated with forming a limited liability company in the city or in the state. With the help of this article, you should have a clear understanding of the process to register an LLC, what the benefits of forming an LLC are, how to identify the different types of business entities, and the key documents required to establish a successful business in Chicago.
What is an LLC and Why should I form one?
An LLC is a type of business entity which is suitable for small and medium businesses. In essence, an LLC is a hybrid of a corporation, a partnership, and a sole proprietorship. For instance, it features the limited personal liability characteristic of a corporation and provides the pass-through taxation of a sole proprietorship or a partnership. This means that just like in a partnership, the profit of the company passes onto members of the LLC who would then pay taxes based on their personal income taxes. Moreover, the LLC provides protection for its members if the company were to be sued.
When forming an LLC, each member’s personal assets are kept separate from the company, meaning creditors of the LLC cannot take away any of the member’s personal assets. Not only this, but the company would still exist even if one or more members were to leave, unlike a partnership where one of the partners leaving the company could mean that the company itself would be dissolved. Unbeknownst to some, the pre-existing LLCs have the ability to sever some of the tax responsibilities that one might subject themselves to when forming a corporation.
What kinds of business structures are there?
One of the most important decisions a business owner must make is selecting the right business entity. Depending on what type of business or project the owner has in mind, the attorney network with UpCounsel recommends taking the time to first find out the different types of business entities and structures are available. The different types of business entities are:
• Sole Proprietorship: A sole proprietorship is a business entity owned by one person and doesn’t have a legal distinction from the person that owns it.
• Partnership: A partnership is a business entity with more than one owner and runs on a contractual basis.
• Corporation: A corporation is an artificial entity that is separate from its owners. It is owned by shareholders and the board of directors are usually elected by the shareholders.
• Limited Liability Company: An LLC is a hybrid of a partnership, sole proprietorship, and a corporation. LLCs are treated as their own legal entity and provides its members with limited liability.
What are the documents required to form an LLC?
In order to form an LLC in Chicago there are certain documents that must be submitted to the Secretary of State’s office. These documents include the Articles of Organization, the Operating Agreements, and the Assumed Name Certificate.
• Articles of Organization: The Articles of Organization, also referred to as Form GAM 1, is a document that is filed with the Secretary of State and contains information about the LLC, including names and addresses of the managers, the business address, and name of the LLC.
• Operating Agreement: An Operating Agreement outlines how the LLC will be governed. The Operating Agreement must include the LLC's name and address, the names of the members and managers, the terms and conditions for governing the LLC, and the rights and obligations of the members.
• Assumed Name Certificate: This document is also referred to as an "Fictitious Business Name" and is also filed with the Secretary of State. The Fictitious Business Name certificate states the name of the LLC and the address of the LLC. It also lists the name under which the business will operate, which is sometimes different from the name of the LLC.
It is important to note that in addition to the documents mentioned above, certain legal documents like a trademark registration, a business license, and a tax certificate may also need to be obtained.
What are the benefits of forming an LLC in Chicago?
Forming an LLC in Chicago provides numerous advantages, including protection of the members' personal assets, pass-through taxation, limited liability, and the ability to transfer ownership of the LLC.
• Protection of Personal Assets: The primary benefit of forming an LLC is that of liability protection. This means that if the LLC were to be sued, the members’ personal assets cannot be seized by creditors.
• Pass-Through Taxation: The profits of the LLC are passed onto the members and taxed based on their personal income taxes, rather than the LLC itself being taxed directly. This helps to save owners money in terms of taxes and also helps to prevent double taxation.
• Limited Liability: Another advantage of forming an LLC is the fact that the business liability is limited. This means that the members are not held personally liable for any debts or financial obligations of the LLC.
• Ease of Ownership Transfer: The LLC also allows for ownership transfer as the property of the LLC can be sold without the LLC being dissolved.
Understanding the process to form an LLC and the documents needed is necessary if looking to start an LLC in Chicago. With more than 14 years of experience attorneys from UpCounsel can help guide you through the entire LLC formation process, ensuring compliance with state regulations and providing legal advice every step of the way. Finding a great attorney is the key to setting up a successful LLC which is why UpCounsel’s extensive network of experienced attorneys is the perfect choice to register a new LLC in Chicago.