The Law Office of Tonya N. Gibbs, PLC
705 Westwood Office Park
Fredericksburg, VA 22401
(540)479-1966

Characteristics of Business Entities


Selecting the right structure for your business is one of the most important decisions you will make.  Here is a list of some of the characteristics of the main business entities.

Sole proprietorship

  • A sole proprietorship is a business made up of one individual, the sole proprietor
  • No formal filing requirements in Virginia
  • Sole proprietor is personally liable for all businesses debts, obligations, and liabilities
  • Business income is filed on sole proprietor’s personal tax return on form Schedule C

General Partnership

  • A business or association that consists of two or more individuals
  • Partners share in the profit and losses of the business
  • Partners have equal rights in the management of the business
  • The general partnership is a distinct entity from its partners
  • All of the partners are liable for the obligations of the general partnership, unless the general partnership registers for limited liability partnership status with the state

Limited Partnership (LP)

  • A partnership that consists of two or more individuals where there is at least one general partner and one limited partner
  • General partner(s) manage the operations of the business
  • Limited partners contribute financially, in property or in services for an interest in the partnership
  • The limited partner shares in the profits and losses of the partnership
  • Limited partners are generally not liable for the obligations of the partnership and are not liable beyond their investment
  • The general partner(s) is liable for the obligations of the limited partnership unless the limited partnership registers with the state for Limited Liability Partnership status
  • The limited partnership is a distinct entity from its partners

Limited Liability Company (LLC)

  • Formal filing requirements under Virginia Law to create
  • Can have one member or consist of more than one member
  • Members share in the profits and losses of the LLC as defined in the Operating Agreement or if there is no Operating Agreement in accordance with the Virginia Limited Liability Company Act
  • Can be Member-Managed or Manager-Managed
  • The Limited Liability Company is an entity separate from its Members
  • Can make an election for tax treatment
  • Generally, the Members and Managers are not liable for the debts and obligations of the Limited Liability Company

Corporation

  • Formal filing requirements to create
  • Generally, owners are not liable for the liabilities of the business
  • Corporation as an entity pays its own taxes
  • Annual reporting requirements
  • Required to hold annual meetings and maintain records of meetings

Benefit Corporations

  • Formal filing requirements to create
  • Hybrid of a non-profit and a for profit organization
  • One of its purposes must be to create a general public benefit on society and/or the environment
  • Annual reporting requirements made publicly available
  • Not available in all states

DISCLAIMER: The information contained on the pages of this website is for informational and advertisement purposes only and does not nor is it intended to constitute legal advice. Use of the information on this site and its contents does not establish an attorney-client relationship. If you are seeking legal advice, you should consult an attorney. You are welcome to contact the office by email or phone. Please be advised that contacting this firm does not establish an attorney-client relationship.

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