If you have a great idea for a new business, you likely have a plan in place for operating your business. However, many entrepreneurs lack a plan when it comes to legal structure. Our business attorneys can help!
A Richmond business formation lawyer is essential to helping you through the process and getting you to the right decision.
Here are the three typical entity choices, and the pros and cons of each.
If you do nothing, you end up with a sole proprietorship. This is when a single person owns and operates a business without creating an entity. We think this is always a bad decision because a sole proprietorship does not offer any liability protections. The owner is personally responsible for all debts incurred by the business. Because of this, there is a risk to the owner’s home, personal wealth, and family assets.
Simply put, don’t do it. Instead, get any business formation attorney in Richmond to help you think through the alternate options.
The LLC is the most likely option for most early-stage businesses.
A limited liability company (LLC) is an entity that exists separately from its owner. Unlike a sole proprietorship, the LLC owner is not personally liable for the debts of the business because it is a separate entity. LLCs offer a lot of the same benefits as a corporation, but LLCs are more flexible, less expensive to form, and have simpler documentation. For that reason, they are often the best choice for a single business owner to protect their family’s assets.
Like corporations, an LLC can be owned by two or more people, known as “members.” The members might contribute money, property, or services to operate the business. But if there are two or more people involved with different roles, it is essential to consider how all members will work together to operate the business. While an LLC technically can operate without a formal written agreement, it is very risky because things can get messy when there is a conflict between members.
For that reason, we strongly recommend contacting a knowledgeable legal professional in Richmond to help guide LLC members through the process of writing an Operating Agreement.
A corporation is the other common choice. If you are starting a tech company or other endeavor that you think may be suitable for venture capital investment, the corporation is a standard choice because, unlike the LLC, the corporation is not a pass-through entity for taxation purposes. For various tax and regulatory reasons, this makes it the popular choice for venture capital investments and going public.
There are also other reasons one might choose a corporation, but in any case, a business formation attorney in Richmond can help you think through the pros and cons. If you choose to form a corporation, you’ll need to file articles and draft bylaws (though we also recommend drafting a shareholder’s agreement).
A Richmond business formation lawyer could help you and your business make the best decision. Whether it’s an LLC or a corporation, a business attorney could get you through the pathway to making a choice.
In either case, our Handshake Portal makes legal documents easy. One of our trusted attorneys will review them and help you file the paperwork correctly so you can focus on growing your new business. Contact Earley Business Legal today to get started.
When setting up your company or preparing business agreements, a well-practiced Virginia business lawyer could help save you from future headaches and costly litigation.
The legal professionals at our firm use our Handshake Portal to help get you started in the right direction for your contractual needs without the complicated legal jargon. To help minimize your legal costs, we provide these services at a fixed fee rate. Contact us today to schedule a consultation and get started.
