When deciding whether to create an LLC or Inc., there are many factors to consider. Which structure is best for you depends largely on your business purpose, size, and risk tolerance. In this article, we’ll provide an overview of the most important things to think about when deciding between LLC and Inc. for a business based in Chicago.

Lawyers based in Chicago who understand local regulation can help you make an informed decision and ensure that you properly comply with all applicable laws. At UpCounsel, you can access experienced lawyers with an average of 14 years of experience, giving you the best chance of making the right decision.

An LLC or Inc. is a business structure that dictates how you should operate your business and provide legal protection to owners, partners, and shareholders. A business can be structured as either an LLC, C corporation, S corporation, Limited Partnership, Limited Liability Partnership, or even as a sole proprietorship. Choosing the right structure is critical as selecting the right business structure can help protect you and maximize the profitability and longevity of your business.

To make sure you make the right decision for your Chicago business, here are the top 5 things you should consider when it comes to LLC vs Inc.:

1. Tax Implications

The primary differentiating factor between LLC and Inc. is how they are taxed. A C-corporation (Inc.) is taxed as a separate entity from the shareholders, meaning that the profits are subject to double taxation. An LLC, on the other hand, is a pass-through entity that is not taxed at the corporate level.

2. Organizational Structure

The organizational structure of a business is also another important factor to consider. An LLC is a simpler entity with fewer formalities, such as no required annual meetings or requirements to issue meeting minutes. An Inc. usually comes with more organizational formalities such as issuing stock certificates and requiring corporate bylaws and resolutions.

3. Registration Process

LLCs and Incs. also have different registration processes. An LLC requires filing a certificate of organization and Articles of Organization. A C corporation requires filing the Articles of Incorporation and filing with the Secretary of State.

4. Liability Protection

This is a key point to consider when choosing between LLC and Inc. Limited liability company members are protected from personal liability for the debts and obligations of the LLC. Incorporation limits personal liability for shareholders from corporate obligations, reducing their risk of personal liability.

5. Management

Finally, the management structure of LLCs and Incs. differs. LLCs have members that manage the company. Incs. have officers that are elected by the shareholders. It is important to have a clear understanding of the management structure and roles to make sure conflicts of interest are avoided.

Ultimately, the decision to form an LLC or Inc. will depend on your specific business needs, and consulting with a qualified business attorney is the best way to ensure you make the right decision. With UpCounsel, you can access a network of experienced lawyers to provide you with high quality, cost-effective legal services every step of the way.

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