Illinois law allows a business to incorporate and be identified as its own legal entity. An incorporated business acts in its own name, whether buying and selling property, agreeing to contracts or exercising legal rights. The office of the Secretary of State is the agency that receives applications for incorporation in Illinois, and they must be completed in conformity with specific guidelines.
Benefits of Incorporation in Illinois
A corporation enjoys advantages that unincorporated companies do not. Primarily, it cannot be held accountable for an amount of debt greater than the value of the assets that the owners have invested in it. Without incorporation, the personal property of business owners is at stake should the company become unable to pay its debts. Furthermore, banks in the Evanston area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of getting corporate loans simpler. Lastly, the ownership of a corporation is divided into an abundance of equal portions or "shares" of stock. Without this mechanism, transferring ownership of a business would be impractical.
Costs of Incorporation
These benefits come at a price. First, incorporation in Illinois may require a filing fee. Second, a corporation pays taxes just like any other entity. In other words, the profits a corporation makes are now taxed separately, while any disbursements to shareholders are taxed as individual income. This is called double taxation. However, a business might avoid this disadvantage with proper planning and assistance from a local Evanston lawyer.