I'm starting a trucking business with a friend but want to make sure our personal assets are not at stake in any liability situation. Which is better, an LLC or and S Corporation?
2 Answers from Attorneys
I think you are equally protected under either an LLC or S corporation. There may be some tax benefit one way or the other, depending on the nature of your business. I suggest you ask your accountant for advice as to whether there would be a tax benefit choosing one form of entity over the other.
While it is true that insofar as liability protection is concerned, an Illinois LLC or a corporation should provide similar benefits, it should be noted that the law concerning limited liability companies is less developed in Illinois than that for corporations. (An "S" corporation is simply a federal tax designation, whereas the creation of a corporation is a matter of state law.) There is at least one provision of the Illinois Limited Liability Company Act that would seem to provide more protection than that afforded by a corporation, and since there is a dearth of case law interpreting this provision, one could argue that an LLC affords somewhat more protection than a corporation.
I typically recommend my clients engage in business as an LLC over a corporation, even though the Illinois Secretary of State charges a few hundred dollars more to create and maintain. Furthermore, if you're engaging in business with a friend, the most important item will be the Operating Agreement, which would spell out the rights/obligations of each of you.
-- Kenneth J. Ashman; Ashman Law Offices, LLC; KAshman@AshmanLawOffices.com
The information provided by Ashman Law Offices, LLC (“ALO”) is for general educational purposes only. No attorney-client relationship is established by this communication and no privilege attaches to such communication. ALO is not taking and will not take any action on your behalf and will not be considered your attorney until both you and ALO have signed a written retention agreement. There are strict deadlines, called statutes of limitation, within which claims or lawsuits must be filed. Therefore, if you desire the services of an attorney and decide not to retain ALO on terms acceptable to ALO, you should immediately seek the services of another attorney.
Related Questions & Answers
Can an independent sales rep be required to meet a sales quota as either a condition... Asked 4/26/10, 4:22 pm in United States Illinois Business Law
I am hoping to start an Internet business that will have games of skill for cash... Asked 4/26/10, 2:46 pm in United States Illinois Business Law
I'm a small office furniture dealer in Chicago. We represent many open, meaning that... Asked 4/21/10, 8:37 am in United States Illinois Business Law
A couple of years ago, my partner was doing some "pay for clicking" things... Asked 4/15/10, 5:49 am in United States Illinois Business Law
Can a former business "partner" hold personal property ransome? I verbally... Asked 4/07/10, 3:41 pm in United States Illinois Business Law