Forming a business is an important step in anyone’s life and is often entered into after extensive planning and organization. If you are considering forming your own business, you should contact an experienced business law attorney for assistance in navigating state and federal business formation laws.
As a new business owner, you have the option to set up your company in a number of different ways. The most common types of entities include:
- Limited liability companies
- “S” Corporations
Each entity comes with its own organizational structure and state and federal requirements. Limited liability companies have become a popular entity because the entity is easy to maintain and offers better protection to members than a partnership offers. However, each entity is unique and certain entities may work best for certain types of businesses or have different tax consequences.
After deciding on the choice of entity, you must then select a name and then file any required organizational documents with the Virginia State Corporation Commission. Once the business is formed under state law, other documents must be prepared in order to complete the organization or entity. Depending on the type of entity, those additional documents may include bylaws, shareholder agreements, organizational consents or minutes, stock certificates, operating agreements or partnership agreements.
One of the purposes of forming a new business is providing protection from liability to yourself and any future members, managers, officers or directors. Corporations offer a high level of protection to shareholders, officers and directors. Partnerships provide the most fluidity because they do not need state filing and can simply be formed by something as simple as a handshake. However, partnerships do not offer any protection to partners. As a result, if any lawsuit arises which is brought against a partnership, the claim can seek damages from all partners if the partnership does not have enough assets to cover the liability.
A corporation, on the other hand, protects officers, directors and shareholders from this type of liability, and only the corporation itself will be responsible in the event of a claim.
Limited liability companies emerged as a happy medium between corporations and partnerships. These limited liability entities provide liability protection to members and a more flexible tax structure than corporations. An experienced business law attorney will be able to advise you on which entity works best for your unique situation.
MichieHamlett | Charlottesville, Virginia Business Law Attorneys
If you are in the process of forming your own business, contact the experienced attorneys of MichieHamlett for assistance in setting up your entity. Our attorneys can walk you through the steps required to form a company that protects all owners and remains flexible for the future. Our attorneys have decades of experience in handling new business formation and other business transactions.