According to the U.S. Small Business Administration’s 2016 Illinois Small Business Profile, there are 1.2 million businesses in Illinois, employing over 2.4 million Illinoisans. Nationally, 73% of small businesses are unincorporated. Small business owners often remain sole proprietorships because they do not want to pay for the cost or deal with the paperwork required to incorporate or form an LLC. However, if done properly, changing from a sole proprietorship to a corporation or LLC can result in benefits that save the owner money and time in the long run.
Corporations and LLC’s Can Save You Tax Money
Taxes are a major concern for most small businesses. Forming a corporation or LLC can result in money savings through tax flexibility. LLCs and corporations offer deductibility of business expenses. They also offer choices regarding tax elections that can result in a lower tax bill. We recommend that small business owners consult with their certified public accountant, in addition to a competent attorney, when determining whether or not incorporation or forming an LLC will result in tax savings.
Forming an LLC or Corporation Can Limit Your Personal Liability
The other way incorporating or forming an LLC for your small business can save you money is through personal asset protection. The primary benefit a corporation or LLC provides to the owner is that it limits the owner’s exposure for business lawsuits. If the owner properly incorporates or forms an LLC for the business and the business is then subject to a lawsuit, Illinois law generally limits the owner’s legal exposure to the assets held by the corporation or LLC. A properly formed business can shield personal assets, like your house, car, and personal savings account, from the reach of creditors and judgments.
Forming an LLC or Corporation Can Save You Time Too
Small business owners realize time savings over the long run by assembling a team of professionals that know and care about their business. There is no doubt that forming a corporation or LLC can take some amount of time for the owner. Doing it yourself with an online program or paper form from an office store is daunting and cumbersome. The attorneys at Tapella & Eberspacher LLC do not advise our clients to try do-it-yourself solutions. The best practice for minimizing the amount of time you spend incorporating or forming an LLC is to seek the advice of a competent attorney and certified public accountant to guide you through the process. With the right professionals in place, incorporating or forming an LLC will be speedy and the owner will have the peace of mind knowing that the work was done correctly.
Now is the Best Time to Form a Corporation or LLC for Your Business
If your business is generating personal income, now is the time to incorporate or form an LLC. Corporations and LLCs provide an important shield for the personal wealth that small business owners accumulate and can sometimes result in tax savings. The downside is that there is some cost associated with forming a business entity and some output of time required to meet with professionals to help guide you through the process. If you have any questions about whether or not you should form an LLC or corporation for your small business, or if you have questions about what type of business form is best for your small business, the attorneys at Tapella & Eberspacher LLC would be happy to assist you and help guide you through the process. Please give our office a call and set up an appointment.