Legal Question in Business Law in Illinois

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?

Asked on 5/03/10, 2:16 pm

2 Answers from Attorneys

David Labovitz Labovitz Law Firm, P.A.

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.

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Answered on 5/08/10, 7:25 pm

Kenneth J. Ashman Ashman Law Offices, LLC

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; [email protected]

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Answered on 5/08/10, 9:43 pm

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