why LLC

Recently a friend asked why someone would setup an LLC and what are some benefits. The short answer is to mitigate risk. There are many other benefits and not all small businesses need to setup a legal structure. As a rule of thumb don't add complexity unnecessarily. How do you know when it's necessary? That depends on your exposure. For many public facing small businesses it makes sense for them to setup an LLC. If you are entering into contracts or owning property or signing leases for a business it probably makes sense. Businesses with more than one person typically make sense to operate under an LLC. As assets increase, so does the probability an LLC makes sense.

Here are the key steps involved in setting up an LLC in Illinois:

• Choose a name: The first step in setting up an LLC in Illinois is to choose a name for the company. The name must be unique and must include the term "LLC" or "limited liability company." The name cannot be the same as, or deceptively similar to, an existing business or trademark. Search for existing names in Illinois here: https://apps.ilsos.gov/corporatellc

• Find a registered agent: This is optional but recommended and can not only streamline this process, for a nominal fee, but can also make renewals easier. It also adds a layer of anonymity. This can be an attorney that is familiar with this process.

• File articles of organization: The next step is to file articles of organization with the Illinois Secretary of State. This document must include the name and purpose of the LLC, the names and addresses of the members and registered agent, and any other information required by the state.

• Create an operating agreement: An operating agreement is a document that outlines the rules and regulations for the LLC, including how it will be managed, how profits and losses will be distributed, and how decisions will be made. It's important to create an operating agreement that reflects the needs and goals of the LLC.

• Obtain any necessary licenses and permits: Depending on the nature of the business, the LLC may need to obtain certain licenses and permits to operate legally in Illinois. This can involve obtaining a business license, a sales tax license, and any other permits that may be required by the state or local government.

There are several advantages to forming an LLC in Illinois, including:

• Limited liability protection: One of the main advantages of an LLC is that it provides limited liability protection to the members of the company. This means that the personal assets of the members, such as their homes and savings, are protected from the debts and liabilities of the LLC.

• Flexibility: LLCs offer flexibility in terms of management and ownership structures. Members can choose to manage the LLC themselves or appoint a manager to handle day-to-day operations.

• Pass-through taxation: LLCs are taxed as "pass-through" entities, meaning that the profits and losses of the LLC are passed through to the individual members and taxed at the individual tax rate. This can be beneficial for businesses with owners who are in a lower tax bracket.

Overall, setting up an LLC in Illinois can provide numerous benefits to businesses, including limited liability protection, flexibility, and pass-through taxation. By following the fundamentals of filing articles of organization, creating an operating agreement, and obtaining necessary licenses and permits, businesses can successfully set up an LLC in Illinois and realize the full advantages of this business structure.