- Major life changes
Have you had any life changes since you last updated your estate plan? Have you gotten married? Have you had a child? Have you recently moved from another state? All of these life changes may impact you estate planning which require your will or trust to be updated.
- Consider your executor and/or trustee designations
- Grandma’s wedding ring
- Financial power of attorney
- Your health
- Life insurance and retirement funds
A previous post looked at some of the most common business entities that a Cook County business planning lawyer will recommend for clients. From the simplicity of a sole proprietorship to the complexity of a C corporation, that piece shared some advantages and disadvantages of each entity when it comes to implementation, accountability, and taxation.
With so much at stake, it’s a good idea to familiarize yourself with all of the choices for setting up your business the right way. Most of the information in these two articles applies to Federal aspects of business ownership, as states have their own requirements. That’s just another reason to work with a qualified Cook County business planning lawyer, as he or she will be able to outline specific state laws and regulations that apply to your situation. This is a very limited view into the different business entities, so consider it a jumping-off point for more research.
Today’s post introduces a few more options that an individual might want to discuss with a business planning lawyer in Cook County before making a decision.
- Single Member Limited Liability Company: Sometimes a single business person prefers for their business to be treated like an LLC. Of course, the difference is that there is only one member. Like a sole proprietorship, the member may file taxes using his or her individual taxpayer form 1040. However, the member may also choose ‘S’ or ‘C’ corporation taxation.
- Limited Liability Limited Partnership: Because it is only an option in some states, the input of an Illinois business planning lawyer is particularly helpful when considering this entity. Just as a limited liability partnership works similarly to a general partnership but with limited liability, a LLLP works similarly to a limited partnership with the addition of limited liability. Tax-wise, it works much like a general partnership, too.
- Professional Corporation: This type of entity is only available to specific types of businesses and limits the business to providing only those services. There are also stringent regulations on who may or may not hold shares in the company. A doctor, attorney, or other professional would likely want to discuss this type of entity with a business planning lawyer when starting their own practice.
- Corporation Sole: With some rising popularity, this type of entity is generally reserved for religious purposes. The temptation to use this business entity is huge because it can circumvent Federal taxes. That said, the IRS recognizes that businesses are attempting to get out of their legal tax obligations in this way, and they are not pleased. It is highly recommended to consult with an experienced Cook County business planning lawyer before even considering corporate sole.
Whether this list has made your head swim or has cleared your thinking on the subject, choosing a business entity is something that should be done carefully. Working with a Cook County business planning lawyer is a great way to make sure you’re seeing all of the implications before making a legal commitment.
With so much information to share on the types of business entities to consider, this post will appear in two parts. The first will look at some of the more commonly recognized entities that business planning lawyers in Cook County help set up, and the second will delve a bit deeper.
Without the help of a Cook County business planning lawyer’s input, would you be able to list all of the business entity options available for entrepreneurs? Once you’ve considered that question, ask yourself if you really know which one is right for your business. Chances are pretty good that you answered “no” to one or both of these questions. Choosing the best entity may not be the most glamorous aspect of going into business, but it’s one that can have a significant impact on your success, as well as your stress level. By working with a business planning lawyer, you can affect the taxes you pay, the amount of personal liability you take on, and even the way your business is operated on a daily basis.
Cook County business planning lawyers will be well-versed on all of the different business entities, and by learning more about your business, they can assist in understanding the advantages and drawbacks of each.
- Sole Proprietorship: The simplest business entity, there is little documentation needed, and the individual can easily transfer business and personal assets back and forth. However, this also means that the individual can be liable for the business’ obligations and debts. Taxes are filed on the individual’s tax 1040 tax form.
- General Partnership: Also very simple to form, this is when two or more individuals conduct business together for profit. Even if specific documentation isn’t needed to form a partnership, any good business planning lawyer will urge partners to create legal agreements among one another. General partners share liability for business debts and obligations. Taxes are completed on a separate form, but profits and losses are reported by each individual according to the partnership agreement.
- Limited Partnerships and Limited Liability Partnership: Unlike a general partnership, a LP or LLP must register with the state. This provides legal documentation that limits each partners’ liability for the behavior of the others. Taxes are completed in a manner similar to that of a general partnership.
- Limited Liability Company: One of the most common forms of business entity, the LLC is a company that is made of members rather than shareholders. The members are protected from liability, although there are specific laws and regulations that must be followed that are more cumbersome than for a partnership. On the other hand, the regulations are fewer and simpler than for corporations. When it comes to taxes, the LLC offers a variety of options that allow members to file in the same manner as a partnership, as a corporation, or as an S corporation.
- C Corporation: This entity is used when the business is owned by shareholders and guided by a Board of Directors whom they elect. Shareholders can vote on policy issues while the Directors have the final say. Individual shareholders generally have no liability, and the actual business operations are directed by the corporation’s CEO and other officers. The corporation files its own taxes, although shareholders are also taxed on their dividends and distributions.
- S Corporation: Cook County business planning lawyers will tell you that this is a fairly simple business entity to choose. While an S corporation is a corporation at the Illinois state level (like a C corporation), it is taxed differently than a C corporation for Federal tax purposes. Taxes are completed on a separate form, but profits and losses “flow through” to each individual’s personal return through the issuance of a K-1.
For more information on legal entities and how to choose the right structure for your business, we invite you to call our Cook County law firm at 630-908-2752 to schedule a consultation.