The Illinois Limited Liability Act ("LLC") allows for single-member LLCs, as do many states. This is often-times a better option than the unincorporated business model that was often the only option for this type of business formation. The biggest difference between the two is that a single-member LLC is a recognized legal entity for the purposes of Illinois law. Under a single-member LLC, there is no requirement that a Board of Directors or Corporate Officers be elected. In addition, a single-member LLC provides a liability shield like a corporation, but as mentioned above, many of the corporate formalities are not required, such as no annual meetings and/or corporate meeting minutes are required.
In terms of the IRS, a single-member LLC is treated as a "disregarded entity." However, that sad sounding name is actually a very wonderful thing in terms of business formation and business entity choice. What this means is that the single-member LLC does not pay tax or file an income return. Single-member LLCs are totally transparent and report profit or loss on the single member's own tax return in Schedule C, just like a sole proprietorship would do. Lucky for Illinois residents (no that is not a joke), the State of Illinois Department of Revenue followed suit from the IRS and they also do not require a corporate or partnership tax return for single-member LLCs.
One last benefit to mention for the single-member LLC: the ownership of a single-member LLC can be placed in a living trust and avoid probate altogether, which allows for a trustee (chosen by the single-member) to continue or wind down the business after the owner's death, without any involvement from the probate courts. This is beneficial as the norm for a sole proprietorship is that upon the sole owner's death, a probate court proceeding would need to be initiated and supervised to wind up the business, pay bills, close bank accounts, and the like. This can be avoided as mentioned above through the single-member LLC living trust method, but another option is that the membership of a single-member LLC can be "t.o.d." to someone else under Illinois' Uniform Transfer on Death Act, which would also avoid probate.
Although the single-member LLC has a slew of benefits, you should make sure it is the right business entity for your particular business. The initial costs of setting up a single-member LLC may be slightly more than a corporation at the onset, but the costs it will save your business, in the long run, can often be substantial.
If you want an experienced attorney to assist you in setting up your business or to discuss business entity formation options, we have 20+ years of experience in business law. In fact, we even offer a simple membership plan to have the equivalent of an in-house counsel on call and we have a variety of plans to fit your business needs and you don't have to worry about the hourly billing, all costs are determined prior to the representation depending on the number of hours you would need an attorney for your small business. Contact IllinoisAttorney.com for more information and we can assure you, with our extensive experience and level of professionalism, your business will be on the right path toward success with us in your corner. Contact Us Here!