Virginia is considered a “business friendly” state, but running a business or opening a new business can be complex. Liability protection and tax planning should be primary considerations. Whether you have a small home-based business or a multi-million dollar enterprise, for the relatively small cost of setting up a corporation or limited liability company you can gain protection from personal liability beyond what liability insurance can provide. Incorporating or forming an LLC also may provide a variety of tax benefits for you and your business. Operating your business through a corporation or LLC may provide privacy and a degree of separation from your personal affairs, and it may also be an important component of your estate plan.
Business Formation and Choice of Business Entities
For businesses that actively provide goods or services and businesses that pay owner salaries and other employee benefits a corporation is often the preferred form of entity. For real estate investors and other businesses that produce passive income a limited liability company is usually the best choice. Entities such as partnerships and business trusts may be appropriate for other circumstances. Choosing the appropriate entity can be a complex decision involving tax, liability, estate planning and operational considerations. I take a comprehensive approach to advising my clients on the right choice of entity for their particular business.
There are specific requirements under Virginia law for properly forming each type of entity. Even single-member and family-owned entities should have a formal set of organizational documents. Entities that have multiple owners or participants should have organizational documents that define relationships between the shareholders, members or partners. Furthermore, every entity should maintain a separate set of books and records that are separate from the finances of the owner(s). I help my clients get their businesses started on the right foot. I can set up most business entities on-line to obtain immediate approval. I normally do so on a flat fee basis depending on the entity form and number of owners. My flat fee includes the initial filing, organizational documents and obtaining your federal tax identification number from the IRS. See Fees – Business Services for entity organization fees.