Legal Question in Business Law in Illinois

LLCs vs. S-Corps

My friend and I are trying to decide between forming an LLC or an S Corporation for a new wedding videography company. First year revenues would not be more than $100,000 and $150,000 for year two. Two employees not including us work for the company. We know about SS and Medicare taxes facing LLCs, but are attracted to their simplicity and flexibility with distribution of income.

I'm having a hard time finding out what kinds of start up and yearly fees each of these entities face. I feel like I've seen different numbers about start up registration costs and yearly fees. For a company with this kind of revenue, what should we do? Everyone I talk to gives different advice.


Asked on 1/24/07, 5:40 pm

1 Answer from Attorneys
David K. Staub Staub Anderson LLC

Re: LLCs vs. S-Corps

In Illinois, the fee payable to the Secretary of State at the time you form a corporation is $150 plus your initial franchise tax (minimum $25). The fee for forming an LLC is $500.

Annual filing fees for corporations are $75 plus franchise taxes (min. $25). Annual filing fees for LLCs in Illinois are $300.

Because the LLC Act was drafted to allow considerable flexibility, drafting the operating agreement is generally more complex than preparing the corporation's bylaws, which tend to be very standardized. For that reason, setting up an LLC with more than one member generally requires much more discussion and drafting than a corporation would, so the legal fees tend to be more than they would in a corporation. However, if you factor in that a corporation with more than one shareholder should have some form of shareholder agreement covering issues like buy-sell provisions and management deadlocks, the differences are less striking.

In the end, I find that that an LLC generally is the answer for most businesses in your situation. There may be other facts that make an S corporation in your case and I certainly recommend that you contact an attorney to review your specific situation.

David K. Staub, an Illinois business and tax attorney

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Answered on 1/25/07, 1:27 am


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