Forming a Business? Not sure which Entity to Form? Check out the different types.
There are many different types of business formations that are usually formed. With each formation, there are different tax implications and filing fees associated to them. Allow SLD to create, review and file your Articles of Incorporation or Organization for a small fee. It is imperative that you schedule a cosultation to discuss what formation is better for your circumstances. Below is a list of some of Illinois general business formations and the effect of liabilities.
Business Corporation
A Business Corporation may be formed in Illinois pursuant to the Business Corporation Act of 1983, 805 ILCS 5. Business Corporations do not enjoy the same protection as a limited liability company or limited liability partnership. If the shareholders are found to have committed "acts or omissions not in good faith or [acts] that involve intentional misconduct or a knowing violation of law," the corporate veil may be pierced to hold each shareholder personally and severally liable.
Limited Liability Company
In Illinois, individuals can form an LLC or Limited Liability Company under the Limited Liability Company Act, 805 ILCS 180. If you are a relatively small company/organization or new to the business world, this Business formation may fit your needs by shielding you from persoal liability in the event anything is to occur. Furthermore, your tax liability also remains limited by being a member of a LLC. (May also incorporate an LLC Series).
Non-Profit / Not-for-profit
Generally, individuals seeking to form a corporation for the public benefit which will not generate much revenue but will file under the Not For Profit Corporation Act of 1986, 805 ILCS 105. These corporations are used for religious, charitable or educational purposes. It is usually essential to receive donations and funding to maintain the operation of the business but reciveing a tax exemption is imperative to shield the corporation from tax (state and federal) liability.
Partnerships
Generally, partnerships are formed by medical practicioners, CPA's, attorneys, etc. When forming a partnership under the Illinois Uniform Partership Act, 805 ILCS 206, it is imperative to understand that "all partners are liable jointly and severally for all obligations of the partnership unless otherwise agreed by the claimant or provided by law." Unless otherwise refers to a "limited liability partnership" or any other agreement made by the Partners as outlined in the Act.
A Limited Liability Partnership may also be formed under the Partnerhip Act (805 ILCS 206), which means that the partnership will enjoy the same limited liability and other benefits like limited tax, just as the limited liability corporation.
Professional Association
Many people form Professional Associations under the 805 ILCS 305/) Professional Association Act, 805 ILCS 305. When you are offering a service to a client or customer, under the Professioal Association Act, the court will construe the law as it is written in regards to liability. Meaning, the law will not be altered based on the "relationshp between a person furnishing professional service and a person receiving such professional service including liability arising out of such professional service."
If you are unsure as to which entity will serve your needs, don't hesitate to call us to schedule your consultation today: 708.234.7298.
