LIMITED LIABILITY COMPANY PRIMER

There are plenty of ways to form an organization for the ongoing conduct of business in Illinois (more than twenty at last count). One of the newest and most flexible means of setting up a business is as a Limited Liability Company under the Illinois Limited Liability Company Act.  

So why is there so much excitement over the LLC?  Primarily because of its mixture of the tax advantages of a partnership and the liability protection of a corporation.  

All LLCs, even those with only a single member, should be governed by the terms of an operating agreement.  An operating agreement is similar to a partnership agreement in that it embodies all of the terms relating to ownership and control of the company.  If a company fails to execute an operating agreement, the a number of terms are implied by the Illinois Limited Liability Company Act.

Like a partnership, the LLC need not allocate management control, profits or losses in accordance with an owner's percentage ownership in the company.  Instead, the co-owners can agree amongst themselves how profits and losses are split and how the entity will be managed and controlled. 

An LLC can be managed by its members (owners) or a manager (who could also be a member) can be elected.  The LLC makes this election from the outset and the duties and obligations of the members and managers are spelled out in the operating agreement.

Like a corporation, the LLC provides a shield from personal liability for acts undertaken by the company.  

The LLC is flexible for tax purposes.  A multi-member LLC may elect to be treated as a partnership (the default), an S corporation or a C corporation.  A single member LLC may elect to be treated as a disregarded entity (ie. the owner will still fill out a Schedule C on the owner's 1040 return) or as an S corporation or a C corporation.  This tax election must be made shortly after the entity is organized.

For some entites, the LLC flexibility may not be necessary and a corporation may serve all of the owner's purposes.  However, sometimes the flexibility of the LLC can be exactly what a single owner or a group of owners require to provide adequate legal protection and provide the flexibility necessary to allow a project to proceed.

SERVICES AND FEES

HOW TO GET STARTED

The first step to organization of your LLC is to contact us. We can discuss the various issues involved in the organization process and determine the best entity and structure for your new business. To get this process started, please feel free to contact Richard Magnone or any of our other attorneys at 773-399-1122.

Return to top