Choosing a legal structure is one of the first things you have to do when starting a business in Illinois. You may need to change your structure when you expand your operations.
If you want to involve people besides yourself in running your business, you may choose to form a partnership or corporation.
The Illinois Department of Commerce and Economic Opportunity provides information about the state’s laws and requirements for starting a business. According to the DCEO, one option is to form a general partnership with one or more partners. You may register your chosen business name under the Assumed Name Act. In a general partnership, all partners share liability for the business and include business income in their personal taxes.
There are two other types of partnerships you may want to consider: limited partnership and limited liability partnership. In a limited partnership, you may form an agreement with one or more limited partners. In this arrangement, the general partner manages daily operations, and the limited partners provide funds but have little involvement in business functions. By creating a limited liability partnership, you may protect all partners from liabilities and debts related to business misconduct or malpractice.
A corporation is different from a partnership, and it functions as a legal entity that is separate from the people involved. You may form a C Corporation, which allows you to sell shares of stock. Shareholders may affect business operations through the board of directors that manages the company. If you want to form an S Corporation, where expenses and income pass through to the shareholders, you must meet several federal requirements and follow instructions from the IRS.