Don’t play Russian Roulette with your business! Having the right legalities in place can mean the difference between success and failure. Like it or not, the law is the framework within which business operates. It is a tool that when applied correctly and wisely, can protect you and your business. Let Attorney Gibbs help you navigate the legal system and put the proper legalities in place. Let Attorney Gibbs help you maintain operations that are in compliance with the law. I want to partner with you in achieving success. Let’s grow your business together. Schedule your initial consultation today!
Fredericksburg Business Law
Fredericksburg Business Law Attorney
Business Formation and Types of Business Structures
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.
- 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
- 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
- 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
- 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
Once you select the appropriate structure for your business then comes formation.
Select a Name for your Business
The first thing you need to do to start the process to formally set up your business is to pick a name. The name must be distinguishable from other business entity names, either active (excluding general partnerships), designated, registered, or reserved for use by another business entity in the Virginia State Corporation Commission’s records.
Name Availability – You can run a search on the Virginia State Corporation Commission website, using their business entity search option, to see if their records reflect something similar to the name you would like to use.
Name Reservation – You also have the option of reserving the name you selected if you are not prepared to form your business. To reserve your business name, complete the Application for Reservation or For Renewal of Reservation of a Limited Liability Company Name. The application must be filed with the Virginia State Corporation Commission along with a $10, filing fee. You can reserve a name for a period of 120 days. The reservation can be renewed for additional periods of 120 days, by filing the appropriate form and fee.
Prepare the formal filing documents (as applicable)
Now that you have a name, depending on the structure you selected, you will need to formally create your business by preparing and filing certain documents with the Virginia State Corporation Commission. Generally, the documents can be submitted online or via mail. You must select a registered agent to accept legal service of process for the business.
Registered Agent – Every Virginia and foreign business entity that is authorized to conduct business in Virginia is required to have a registered office and registered agent to accept service of process. The registered agent can be an individual or a business entity.
For an individual to serve as your registered agent he or she must meet the following criteria:
- Be a resident of Virginia;
- Be a member of the Virginia State Bar or is a part of the management of the business entity; and
- The individual must agree to serve as the registered agent.
For a business entity to serve as your registered agent it must be a Virginia business entity or a foreign business entity authorized to conduct business in Virginia and it must agree to serve in that capacity. A business entity may not serve as its own registered agent.
For additional information on registered agents and registered offices, click here.
Develop Governance Documents
An operating agreement is not required in Virginia, but it is strongly recommended. An operating agreement governs how the business’ day to day operations will be managed as well as the relationship of the members and officers to the LLC. An operating agreement is also used to detail, how to elect and remove officers, how profits and losses will be distributed, how membership interests can be transferred, and how to wind down the affairs of the LLC. This is not an exhaustive list of the things that can and should be addressed in the operating agreement. This office can assist you with making sure you have the right operating agreement for your business, schedule an appointment here.
Register with the Appropriate Taxing & Regulatory Authorities
Taxing Authorities – You can apply online with the Internal Revenue Service for a tax identification number (EIN) for your business. You must also register with the Virginia Department of Taxation.
Business License and Permits – Depending on the county or city your business is located in and the nature of your business activities, you may have to obtain a business license and permits. You will need to contact the proper authorities in the county or city where you intend to operate your business to verify the requirements.
Professional License – Depending on the type of business or profession you are in, you made need to be licensed through the Virginia Department of Professional and Occupational Regulation or other licensing entity before you can legally commence operations.
Annual Registration Fees and Filing
Depending on the structure and nature of your business or profession, you may have annual fees due to the Virginia State Corporation and Commission and/or other regulatory agencies. If you are unsure about whether or not you have all of the right licensing and agreements in place, this office is available to assist you!
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