Top 5 Things to Consider When Choosing Between an Inc vs LLC in Chicago
Making the Decision to Incorporate: LLC or Inc?2 min read
When you're first starting a business, deciding whether to register it as an Inc or an LLC (limited liability company) can be one of the most difficult and important decisions you'll make. While there are a myriad of factors to consider, such as the size and structure of your business and the goals you are hoping to achieve, it's essential to be familiar with the key differences between the two entities. This article will provide an overview of the top five factors to consider when trying to choose between an Inc and an LLC in Chicago.
To begin, an Inc is a corporation. This means that the business is treated as its own separate legal entity, and the owners of the business, known as shareholders, are protected from liabilities or debts that the business may incur. Moreover, corporations tend to be more adaptive to changing business needs, enabling them to better serve their customers and expand operations quickly.
On the other hand, LLCs are entities designed for small businesses that are owned by either one person or a few partners. An LLC is also regarded as a separate legal entity, however, the liabilities of the LLC do not necessarily extend to its owners; instead, they are limited to the assets of the business itself. This makes them more desirable when it comes to protection from individual liability.
When making the decision as to which business entity to form in Chicago, here are the top five things to consider:
1. Taxes: When forming an Inc/corporation, double taxation may occur, meaning that business profits are taxed once at the corporate level (for the business entity) and then again at the individual level when the earnings are distributed to the owners. On the other hand, LLCs are not subjected to double taxation.
2. Personal Liability: Incorporations offer more protection against personal liability, as the owners are not held responsible for business expenses, debts, or obligations. On the flip side, LLCs offer more limited protection in this area.
3. Flexibility: An LLC is more flexible, as owners can more easily make decisions and changes to the business. With an Inc, owners may have to go through numerous steps and get approval from shareholders before making any changes.
4. Cost: Establishing an LLC is usually less expensive and requires fewer start-up costs than an Inc.
5. Set-Up: Incorporations require more paperwork and steps in order to set up. An LLC, on the other hand, is simpler to establish and requires less paperwork.
Choosing between an Inc and an LLC can be a complicated decision, and there are a variety of factors to consider. It is important to look at the pros and cons of both options and weigh them against the specific needs of your business. Getting advise on the process from an experienced lawyer could make the process a lot easier. Consult UpCounsel to find your ideal business attorney. With UpCounsel’s attorneys having an average of 14 years of experience, you can confidently rely on quality legal services. Our online attorneys have profiles that display ratings and client reviews of their recent work.
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