Starting a business in Illinois can be an exciting and somewhat worrisome time for prospective business owners and investors. Even those who already have a successful business might think about certain legal issues that need to be addressed. One is understanding how to register as a corporation, what choices they have and which is preferable to achieve their goals.
Understanding corporate regulations, registration and options
It is imperative to have a grasp of the corporate regulations, how to register a corporation and picking the correct type of corporation. Those who are looking for simpler concepts should probably avoid a corporate structure as it is the most complex type of business formation.
With a corporation, stock in the business is sold. The amount of stock is determined by those who are running the business. After the shares have been sold, there will be a board of directors elected. It decides who runs the business. A primary benefit of a corporation is that it limits shareholder liability and transferring ownership is a smoother process. The Secretary of State (SOS) must receive the Articles of Incorporation.
There are two choices when starting a corporation: C Corporations or S Corporations. With a C Corporation, the business itself is taxed separately from the owners. Those who start a corporation are categorized as a C Corporation unless they specifically file to be an S Corporation. The company pays taxes and the shareholders pay taxes based on what they earn from the company.
By contrast, an S Corporation is somewhat more complicated. It must be done through the Internal Revenue Service (IRS). The income and expenses are passed through to shareholders. They subsequently report their income on their tax returns. There is also a limit of the number of shareholders with a maximum of 100. All must agree to be an S Corporation. S Corporations are generally scrutinized more closely by the IRS, so it is imperative to keep accurate records and pay all taxes. Mistakes could jeopardize the S Corporation.
Having experienced business legal advice can help with corporate formation
When dealing with these complex and often confusing matters related to business law, there are many factors that may come to the forefront. Businesses can fail not because the product or service was not viable, but because they made mistakes with the fundamentals. Corporate legal problems can be avoided and mitigated with experienced guidance.
