Howard & Hardyman LLP

When and how to form a corporation

It is the same in Illinois as it is anywhere; success in business has the potential to draw some unwanted attention. Businesses that risk lawsuits from competitors or losses from uncertain opportunities often incorporate to reduce this liability. However, there are many significant decisions associated with the process that could affect the future success of an organization.

The process of incorporation is probably unlike anything most small business owners have done before. The simpler types of companies — LLCs and sole proprietorships, for example — may be challenging to operate and organize. Their formation may even be somewhat difficult for those not acquainted with the required steps. Corporations pose all of these issues and more. 

The first step is often to examine accounts. There are various costs associated with operating an incorporated organization. Not the least of these is corporate business income tax, currently seven percent according to the official Illinois website. It is important to note that this amount is independent of federal tax. Even so, this is an acceptable rate to pay for most entrepreneurs considering the liability benefits of a corporation. 

Continuing with converting a business or establishing a new one requires articles of incorporation. According to FindLaw, this document should include detailed information about the people, rules and share structure of a new corporation. Properly prepared, articles of incorporation often provide a touchstone for company values as well as an entry into the corporate world. 

FindLaw also mentions that there are different types of corporations. This is simply one more of the multitude of choices that business owners make while developing their long-term strategies.

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