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You have an idea for a business in Chicago, and you’re excited to get started. Perhaps you want to open a chic clothing boutique in Wicker Park or a restaurant in Logan Square, but whatever your plans, protecting your business from any legal risks involved in business formation should be a part of your overall business strategy.

“Making a business a success entails a lot of risks,” says John Wood, attorney with Grant Park Legal Advisors. From the city’s infamously competitive business landscape to entering the market with a keen understanding of its ups and downs, several mitigating factors go into business formation in the Windy City. 

The legal risks 

While starting a business can be fun and exciting, entrepreneurs can also get mired in paperwork and logistical matters. The legal risks associated with starting a business are just one of the serious factors that can greatly affect the business’s chances of success. 

“The legal considerations are probably one of the most important factors when starting your business,” says Wood. To ensure that you are staying legally compliant, enlisting the help of a legal advisor to guide you through business formation can be significantly helpful, especially when it comes to the legal considerations that come with starting a business. 

Accurate bookkeeping and tax filing 

If you mess up with filing and paying taxes, you could end up in big trouble with the law and carry loads of debt. Investing in a tax professional from the get-go and ensuring you file under the appropriate business structure is paramount. 

Contracts and agreements 

It helps to have a lawyer look over any contracts or agreements you are signing or entering into, or having clients sign. You want to be rest assured that your contracts are clear, ethical, and detailed. Solid contracts can help prevent future problems or disputes. 

Insurance 

Many businesses are required to carry insurance for their own protection and the protection of the public. Insurance can be your safety net should the unforeseen happen. 

Labor laws 

Labor laws are especially important if you plan on hiring a staff. Illinois has its own employment laws on the books that are important to consider when starting a business, such as the $13.00 minimum wage and overtime guidelines. 

Trademarks and IP protection 

If you have created new intellectual property (IP), you will want to have it trademarked and protected against theft. Trademarks can also be viewed as giving businesses a competitive advantage and contributing to brand identity — all critical factors for start-ups. 

Specific industry licensing 

Each industry could have its own licensing guidelines. It’s relatively easy to research business licensing within the city of Chicago — just hop on over to the Chicago government site and look up the licensing requirements for your specific business type. 

Protecting your business 

While attorneys can’t help with choosing your business name or guiding you on what products will sell best in the Second City, they can help protect your business from the legal risks involved in business formation. 

“Much of it begins with choosing the right legal structure for your specific situation,” advises Wood. “It helps your business get off on the right legal footing.” When discussing legal structure, Wood references a government classification that regulates certain aspects of one’s business, such as how they pay taxes or what personal financial risks they may carry.

Entrepreneurs have several choices for business structure, including: 

• S Corporations: With an S corporation, corporate income, losses, deductions, and credits are passed through the shareholders for federal tax purposes.
  
• C Corporations: In a C corporation, the owners (or shareholders) are taxed separately from the business.
  
• Limited Liability Companies (LLC): This structure protects owners from being personally liable for repayment of the business debts or other liabilities.
  
• Partnerships: This is a formal agreement between two or more people where the ownership of the business and its profits are shared.
  
• Joint Ventures: This is an agreement where the resources of two or more parties are pooled together toward a specific business goal or venture.

“When we advise business owners on their structure, we take into account relevant factors such as the nature of the business, how many parties are involved, and the tax treatment of the enterprise,” says Wood. “The ultimate goal is to choose a structure that will facilitate success.”

Attorneys can also guide people in drafting business agreements that will help protect all parties involved. These include shareholder agreements, partnership agreements, operating agreements, or NDAs (non-disclosure agreements). 

Starting a business in the bustling landscape of Chicago can be an undertaking fraught with questions, logistical challenges, and legal confusion. Embracing legal foresight and preemptive action is not only a wise strategy but a necessity for most entrepreneurs. With expert guidance, new business owners can fortify their ventures against legal storms and thrive in the heart of the Windy City!

Published by: Nelly Chavez