Corporate Formation & Maintenance
Chicago Corporate Setup Attorney
Corporate Formation & Maintenance
For tax, creditor protection and other reasons, you may wish to establish an entity to own your business or real estate. The first decision you have to make is selecting the type of entity that best suits your needs. Partnerships, corporations and LLCs (limited liability companies) have various advantages and disadvantages best discussed with your attorney and CPA.
If an Illinois corporation is your choice, go to the Illinois Secretary of State website to see if the name you want to use is available. If it is, then you fill out the appropriate form, usually one of the BCA-2.10 varieties and pay the appropriate fee, $200 or more.
There is no legal requirement that a corporation has a physical corporate book, but usually they are ordered from a private company for about $75, including a seal. Bylaws are also included, along with share certificates. On a yearly basis, you will file an annual report with the Illinois Secretary of State.
You must maintain shareholders and officers’ minutes. Some small corporations dispense with this formality at their own risk. The less distinct the line is between the business owner operating as a sole proprietor and that same person acting as an officer or director of a corporation, the easier it is for an outsider to “pierce the corporate veil,” that is to ignore the corporate entity in the event of a lawsuit.
You must obtain a tax identification number for any corporation, even if it is an S Corporation that pays out all of its income and incurs no separate corporate tax. If you are forming an S Corporation, an appropriate form must be filed with the IRS.
C Corporation vs. S Corporation
Both C and S Corporations, properly maintained, give liability protection to small business persons. The liability protection may be limited, however, if you are the sole shareholder and have personally committed an action for which you would be personally liable.
Only a U.S. citizen or qualifying trust can own S Corporation shares and the number of shareholders is limited to 100. Also, more than 25% of its income cannot come from passive investments (such as rent or investments).
A C Corporation is more flexible than an S Corporation in that there can be different classes (voting v. non-voting, preferred shares v. common shares), but it is taxed twice, first at the corporate level, then again when dividends are paid to the shareholders.
Corporate and partnership laws vary from state to state, so your advisor may elect to form your entity in a state that is more favorable to your needs.
Partnerships and LLCs
An LLC (limited liability company) or partnership may be more appropriate for your needs than a corporation.
There are various types of partnerships, some of which consist of little more than a handshake. Family limited partnerships and LLCs are often used to make leveraged gifts to descendants, reducing future estate taxes. They also may block creditor claims, but once again, in those situations where a single member effectively owns the entire entity, creditors have a better chance of persuading a court to disregard any artificial structure.
Corporate, LLC and partnership laws vary from state to state, so your advisor may select a state to form your entity that is more favorable to your needs.
If you live in the Chicago or Lake County area, and need an experienced corporated setup attorney, please contact Matlin and Associates.
- Estate Planning
- Probate & Trust Administration