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Starting a Small Business/type of company, S-corp,LLc, etc.


I am thinking of starting a restaurant business and my questions are:   

•In forming a business plan what is the best way to structure the company (S-corporation, LLC, Corporation, etc.) so that my personal assets will be protected from any litigation or in the event of bankruptcy? Or are there other ways to accomplish this protection?
•Would it be prudent to hire independent contractors (1099) instead of full time employees?  



From a liability standpoint, there is no basic difference between the protection offered by a limited liability company or a corporation (an S corp is simply a tax election, not a separate type of entity under state law). Either type of entity, if operated in accordance with state law, protects the owner from obligations of the business. Neither type of entity is a perfect shield. See "How Limited Is Limited Liability?"

Of course, there are many other reasons besides protecting your personal assets why you might choose an LLC or a corporation, or might choose to have your entity make an S corp election. You can find detailed discussions of those reasons at various places on the web.

Your second question - would it be prudent to hire independent contractors instead of full-time employees - implies that the two are interchangeable. In most cases, they are not. You cannot simply call a person who is performing the functions and duties of an employee an independent contractor. The IRS provides guidelines to determine whether an individual is an employee or independent contractor. There are extremely dire consequences to the business if you improperly characterize an employee as an independent contractor.

There may be some functions, such as cleaning or equipment maintenance, that a restaurant might legitimately outsource to independent contractors. However, most personnel at a restaurant, including cooks, waitstaff and cashiers, are clearly going to be employees in 99.99% (or more) of all cases and cannot simply be called independent contractors.

I hope this helps

Starting a Small Business

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David K. Staub


I am a business and tax attorney and have spent more than 35 years assisting people in starting a wide variety of businesses. I can answer questions about the basic differences between the various entities available to new businesses, including limited liability companies, corporations, S corporations and partnerships. I can provide guidance in other areas facing start ups, such as hiring employees, signing contracts and obtaining necessary licenses. I can also direct people to sources for answers to specific legal questions which cannot be answered in a forum of this nature.


I have an extensive practice in the mergers and acquisitions area and have been involved in the tax and legal issues on hundreds of business transactions.

Staub Anderson LLC
Illinois business attorneys

Practice Areas
Business Organizations


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Mergers & Acquisitions
-Buying/selling business
Securities Law
Tax Law
Technology Law
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Illinois State Bar Association; Chicago Bar Association (former Chairman of the Corporation & Business Law Committee and former Chairman of the Mergers and Acquisitions Subcommittee; former Executive Committee member, Federal Tax Committee and Chairman of subcommittee on general tax issues); Keystone Foundation (Trustee); Association for Corporate Growth; Midwest Entrepreneur Forum; Midwest Association of Alpha Delta Phi

Commerce Magazine; YLS Journal; ISBA Section of Taxation Newsletter

Harvard Law School, J.D., 1977; University of Illinois, B.S. in Accounting, with highest honors, 1974

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