Structuring your New Business
Listed below are some common forms of business structure. Individuals should select a structure that best fits their needs. Legal and tax considerations enter into this decision.
A Sole Proprietorship is a business owned by an individual who is solely responsible for all aspects of the business. Under a sole proprietorship the owner is liable for the debts of the business.
A Partnership is a legal entity which two or more people jointly own. Each partner is jointly and severally liable for the debts of the partnership and for the business conduct of each partner. Formal partnership agreement is recommended.
A Limited Partnership is similar to a partnership, but some partners have limited liability. The business is operated by a general partner who is liable for all debt. The general partner can be an individual or other business such as a corporation. The limited partner is liable only for the amount the partner has agreed to invest. Formal written partnership agreement is required.
A Corporation is a legal entity formed for the purpose of engaging in business activities for the profit of the shareholders. A corporation functions as a person pursuant to Virginia law; therefore a corporation may own property, sue or be sued, and enter into other agreements like an individual. S-Corporations and C-Corporations have greatly differing tax structures.
A Limited Liability Company is an unincorporated association. An L.L.C. offers the advantages of limited personal liability and in some cases, taxing benefits similar to a partnership. Legal and accounting counsel is highly recommended in order to establish your company to meet the specific requirements to qualify for the special taxing benefits.
All have advantages and disadvantages and there are several variations of these forms. It is advisable to consult an attorney or a certified public accountant to assure that the form of organization you choose will best meet your needs.
If you decide to incorporate, create a limited liability company, or create a limited partnership, it is handled through the State Corporation Commission.
For more information on business organization, contact the State Corporation Commission, Clerk’s Office, Tyler Building, 1300 East Main Street, P.O. Box 1197, Richmond, VA, 23218, (800) 552-7945 (toll free from VA only), (804) 371-9967 or on the Internet: www.scc.state.va.us
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