Limited liability companies (LLCs) are an incredibly popular entity choice when organizing a company. Because the LLC structure combines flexibility with liability protections, LLCs have become the default choice for most business owners starting a new entity. However, there are a host of legal and tax factors that one still must consider when organizing an LLC under state law.
Engaging the seasoned business lawyers at Earley Business Legal when beginning the process of registering an LLC in Virginia could help you avoid costly mistakes.
When deciding which entity choice is most appropriate for a business in Virginia, the first and most important consideration is whether the structure protects the owner’s personal assets from liability.
This issue is especially important when the nature of a company’s business exposes it to a higher risk of lawsuits. In the event of a lawsuit where damages must be paid, compensation is paid using the company’s assets. However, company assets are often insufficient to cover all of the liabilities. In this case, a plaintiff could potentially come after the business owner’s personal assets to satisfy a judgement.
The great advantage of an LLC is explained in the name: the liability is limited. In other words, the plaintiff’s recovery is limited to the assets of the company. For a Virginia business owner, this makes forming an LLC a particularly advantageous entity choice. Unlike sole proprietorships or general partnerships, an LLC protects the owner’s property—such as their home, car, or bank accounts—from being targeted by those seeking damages against the company.
A second benefit of LLCs is the tax efficiency. Specifically, the LLC structure allows for pass-through tax treatment. Corporations are subject to what is known as double taxation. Double taxation occurs when company income is taxed first at the business level and then taxed a second time at the personal level. LLCs use pass-through taxation to avoid this problem by passing income directly to the owners’ personal tax returns. This method can potentially reduce overall tax rates. For many small business owners, the LLC structure is often paired with a tax filing as an “S-corporation,” which often leads to the most tax-efficient structure.
A third major benefit to the LLC format is the simplicity and flexibility of the management documentation. Where a corporation often has articles, bylaws, and other various shareholder agreements, the LLC simply files articles of organization and then mainly relies on an operating agreement.
For business owners in Virginia forming an LLC, it is important to take care of all necessary paperwork and filing requirements. The business owner must select a company name that is available, file the articles of organization with the state, and pay the Virginia filing fee. The company will also have to obtain relevant licenses and permits applicable to the specific type of business it plans to operate.
Another important step in registering an LLC is drafting an agreement between the owners, usually referred to as an operating agreement. This document serves as the foundational governing document for how the company will operate and clearly defines the structure when a company has multiple owners.
The operating agreement sets forth the key issues about how the company will run its operations, such as voting power for each owner over important business decisions. In a single-member LLC, we at Earley Business Legal still recommend having a single-member operating agreement for banking and tax purposes, so we include it in our quick and easy LLC organization package.
However, if you have business partners in your LLC, a well-drafted operating agreement is not just recommended, it is essential. The right operating agreement can help avoid extremely costly disputes between owners down the line and provide for smooth transitions in later events such as sales, transfers of interests, or estate changes. Our Handshake Portal makes the operating agreement process as simple as possible and guides you through drafting all the necessary documents.
The costs associated with forming an LLC will vary by the type of business. The required filing fees when registering an LLC in Virginia is $100 but can range from $50 to $300, based on the jurisdiction.
Legal fees associated with starting a business can get quite costly. This is why our Handshake Portal can serve as a vital tool to ensure a company has well-drafted legal documents without incurring exorbitant costs. Our firm offers the services involved with the LLC registration process at a simple fixed fee of $500 (plus state registration fees). This will cover:
The only remaining step to form an LLC in Virginia is for the company to open a bank account.
LLCs are a popular entity choice due to the liability protections, flexible management options, and tax benefits. Reach out to the skilled legal counsel at Earley Business Legal before undertaking the process of registering an LLC in Virginia.
The business formation attorneys at our firm can help streamline the documentation needed for the registration process using our Handshake Portal.
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.
