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Business law is a very exciting area of law for most clients. Generally, the
formation of a business is the first step most clients meet with me for.
Many people who start a new business contemplate how to legally form their
business. Generally speaking, business are formed one of three ways:
Sole-proprietorship, partnership or incorporation.
A sole-proprietor is generally an individual doing business on his own
without any partners. Generally someone who is "self-employed" is usually
considered a sole-proprietor. The only limitation to be a sole-proprietor is
that you have to be on your own without partners. A sole-proprietor may have
employees, but essentially, there is no corporate protection or other entity
to share risk. All of the business income and expenses are reported directly
on the taxpayers Schedule C on their annual 1040 tax return.
A partnership can be set up as a General Partnership or a Limited
Partnership. Partnerships must have at least two principle owners to be
considered a partnership. Partnerships are separate entities in Virginia and
file their own tax returns. General partners usually share the risk and
rewards of the business equally. Although it is possible to have more than
two general partners in a partnership and it is also permissible to
apportion ownership unequally. However, in a limited partnership, investors
who only invest assets or money into the business are generally immune from
liability in excess of their initial investment. Also, partnerships can have
the fancy initials after the name, like "Allen & Johnson, G.P. " or "Allen &
Johnson, L.P." Partnerships file their own separate tax returns, but the
gains or losses are carried directly to the partners individual tax returns.
Corporations are separate entities in Virginia that require at least one
charter owner. Corporations can be set up as an Incorporation, Limited
Liability Corporations, Limited Corporation, Professional Corporations or
Professional Limited Liability Corporations. There are a host of other
specialized corporations that Virginia recognizes but are difficult to
discuss in a broad format. Generally, if you have ever seen a business that
says "Allen & Johnson, Inc." or "Allen & Johnson, LLC" or "Allen & Johnson,
PC" or "Allen & Johnson, P.L.L.C" such letters signify that the business is
a corporation authorized to do business in Virginia. The Virginia State
Corporation Commission is in charge or registering and chartering Virginia
corporations and also determines which foreign corporations can do business
in Virginia.
Every corporation type is very specific, and some are limited
to specific occupational businesses. Over the years that I have formed
corporations, the client usually wants to set up a LLC or Limited Liability
Corporation. However, in most cases, a LLC is not necessary or does not
achieve the goals of the owners. The hype to set up LLC's is generally
overrated and hyper-inflated by late night television infomercials. All
corporations are essentially the same. They are individual entities that
attempt to shield the owners from broad liability. However, the specific
type of protection a particular corporation provides must be analyzed by a
skilled attorney familiar with Virginia business law and applied to the
individual facts of the owners.
All corporations must have a "registered agent' to accept service of
process. Most business elect to have their corporate attorney serve as the
registered agent, but any officer of the corporation can elect to be the
registered agent. A registered agent is responsible for accepting service of
process in civil matters on behalf of the corporation and also is the point
of contact for communication between the corporation and the State
Corporation Commission.
Most corporations are elect to be stock corporations. Stock can be issued
initially at 100 shares or can be issued with millions of shares. The filing
fees for the initial charter are based on the number of shares issued, so
most people start with 100 shares. However, the bi-laws of the corporation
will determine how many "common" and "preferred" shares may be issued at any
one time.
Once we discuss your goals, I can direct you on the right type of
corporation to form that will maximize your goals and minimize your risk.
Many foreign business incorporate in Virginia because of the pro-business
attitude of Virginia. We have caps on punitive damages and medical
malpractice and our jury awards are much more conservative then other states
in the United States. Many business who are not doing business at all in
Virginia charter their corporation in Virginia and do business in their home
state. This strategy could help get a lawsuit transferred to Virginia if
other venues are less appropriate.
Finally, corporations are individual entities that file their own tax
returns. The IRS treats corporations as either "C" corporations or "S"
corporations. Your corporate designation will be discussed and if necessary
a CPA should be consulted to determine the maximum tax advantages of either
designation.
If you would like to discuss forming a business in Virginia, please feel
free to contact me by filling out the general information form below.
Click
HERE to fill out the "General Response Form" and
I will contact you about your case.
You will have
the opportunity to schedule an appointment with me for a real-time
Internet chat or phone call to discuss your case after you have
completed the form.
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