Archive for the ‘Virginia LLC’s’
The only thing worse than running your business as a sole proprietor (because of the unlimited personal liability and lousy tax treatment) is having an LLC but not running it in a way that maximizes your personal protection and all of the benefits provided by law. For that reason, we provide our expertly written eBook – “I Have an LLC – Now What? Your Complete Guide to your New Virginia LLC” – with every new LLC formation order. And even better, it’s free with your order.
This 12 page e-book is jam-packed with all of the information you need to be sure you’re moving forward with your new LLC properly and are taking advantage of the maximum legal protections available to you. Topics covered include:
1. The very first thing you should do once your LLC is approved and why it must be done first!
2. A checklist of the 11 other items you should have completed as you start your new business.
3. The do’s and don’ts of property and asset ownership as an LLC.
4. How to sign on behalf of your LLC in a way that ensures you will not take on personal responsibility or liability for the obligations of your new LLC. And more.
With the free Guide to Obtaining an EIN from the IRS, which is also included, you will have all of the information and advice you need to be sure your business gets off to a great start and that you are personally protected to the maximum extent allowed by law. Why wonder whether you have everything complete and correct when you can be sure? To get started, simply fill in our quick, secure one-page LLC order form. Your e-books will be on their way to you shortly.
In almost every situation where you need to file something with the Virginia State Corporation Commission, a filing fee must be submitted, too. The filing fees will vary based on what type of entity you have (LLC versus corporation) and the type of filing you're making. For Virginia LLC's the most common filing fee is the $100 fee to form a new Virginia LLC or register a foreign (out of state) LLC. LLC's, whether formed in Virginia our out of state, also pay an annual renewal fee of $50 per year to maintain good standing in Virginia.
Corporation filing fees in Virginia are more complicated because many, including the filing fee for forming a new Virginia corporation or registering a foreign-formed corporation, depend on the number of authorized shares of stock in the corporation. The fee schedule for corporation's that are registering in Virginia for authority to transact business can be found on our site. You will need to know how many shares of stock your corporation is authorized to issue (which is different than how many shares have actually been issued). That information will be in your Articles of Incorporation (aka Certificate of Incorporation in some states, such as Delaware).
Although it may feel like it sometimes, the Virginia State Corporation Commission doesn't charge you for everything that you submit to them. You can change your registered agent or your principal office address at no cost, for example.
Before filing anything with Virginia, be sure you have the correct filing fee so that your paperwork does not get returned to you.
Following up on our discussion of what a PLLC and a PC are, the next logical question is: “when do I have to form as a PLLC or a PC?”
Certain professions, when they choose to form as a separate entity, are required by their regulatory Boards to form as a PLLC or PC. Examples include medical doctors, lawyers, and certified public accountants.
Other professions have the option to either form as a PLLC/PC or as an LLC/corporation based on the wishes of the owners. Examples include professional engineers, occupational therapists, audiologists, and nurses.
You can see a list of all of the different professions that potentially can be a "professional" entity in the Virginia Code.
So if your business involves providing a heavily regulated service (hint: likely if you need a license to practice your profession) then the first thing you should do is to check with your profession’s regulatory Board to see if they require you to operate as a “professional” version of an LLC or corporation or give you the choice to do so.
You may have heard of a PLLC, PLC, or a PC or seen them appended to the end of a company name and wondered what they are. If so, this is the article is for you. PLLC (or PLC) stands for "professional limited liability company" while PC refers to a "professional corporation." Both are separate legal entities, separate from their owners (members for a PLLC/PLC and shareholders for a PC). In Virginia, they are the form of entity required for certain heavily state regulated professions where either state law or the regulatory bodies of the specific profession require their practitioners to form as a PLLC or PC. Examples of such professions are medical doctors, lawyers, certified public accountants, professional engineers, architects, and certain other health care providers and practitioners of the healing arts.
The key difference between PLLC’s/PC’s and a normal LLC/corporation is that the PLLC and PC do not provide the owners with limited liability protection for their own acts of professional malpractice related to the services they provide. This means that if your doctor commits an act of medical malpractice while treating you, they cannot hide behind the veil of limited liability protection when you make a claim against them. This is for public policy reasons to protect the general public from harm.
So you may be asking yourself, why would a doctor, lawyer or CPA form an entity at all if they are not able to get limited liability protection like other businesses? For two reasons: (1) the prohibition on limited liability protection only applies to acts of professional malpractice. If you slip and fall in your doctor’s waiting room that is not medical malpractice – that’s just negligence and your doctor would be personally protected from that claim. And (2) for the tax benefits that operating as an entity allows (namely, the S corp. election).
The laws and rules regarding PLLC’s and PC’s are extremely state-specific so be sure to check your particular state’s laws, especially if you’re outside of Virginia. And if you would like to create a PLLC or a PC correctly, we can help (just use our LLC order form or corporation order form).
If you are (or have) formed a Virginia limited liability company then you may be wondering what an Operating Agreement is and whether you need one. An Operating Agreement is simply a contract between the owners of a limited liability company and the LLC itself. It is the one LLC document that:
- Identifies the owners of the Virginia LLC
- States how much of the limited liability company each owner owns
- Describes how the LLC will be managed and how decisions will be made
- Discusses how new owners may be admitted to the LLC, and most importantly…
- Describes the process for how an LLC owner may leave the LLC, ideally without causing the dissolution of the LLC.
One of the nice things about starting your business in Virginia is that a Virginia Operating Agreement can be customized to fit your exact situation and tailored to how you want to run your new business.
While the law does not require you to have an Operating Agreement, be aware that if your Virginia LLC does not have an Operating Agreement then the Virginia Code (specifically the Virginia Limited Liability Act) will make all of those decisions for you. And you may not like the result, especially in the situation where an owner wants to leave. So you should consider having an Operating Agreement that puts you in control of what happens with your company.
If you're starting a new Virginia business then the two basic forms of business entity available to you are the corporation and the limited liability company (LLC). A common question is "what are the differences?" In Virginia, there are actually important similarities between a corporation and an LLC so it's useful to discuss those similarities first.
Virginia LLC's and Virginia corporations share three important attributes:
- The owners of a Virginia corporation (shareholders) and a Virginia LLC (Members) are not liable for the debts and obligations of the business. In other words, the owners have limited liability protection and, with a few exceptions, their assets are not at risk if there is a problem with the business.
- Better tax treatment is available for a Virginia corporation and a Virginia LLC through the small business tax election, better known as the "S corp." election. This election, which is available to LLC's, too, despite the shorthand name, allows for the legal avoidance of some of the self-employment taxes assessed against business profits.
- Portions of a Virginia corporation (shares) or a Virginia LLC (membership interest) are freely transferable, either in part or in whole. This means you can sell part of the business while retaining an interest for yourself or you can transfer 100% control to pass on the business seamlessly (aka as a going concern).
So how do Virginia corporations and Virginia LLC's differ? In a few different ways:
- The filing fees are different. All Virginia LLC's pay a flat fee of $100 upon formation and $50 per year regardless of how they are structured or how many owners there may be in the LLC. A corporation, on the other hand, pays a filing fee and renewal fee that depends on the number of authorized shares of stock of that corporation, starting at a minimum filing fee of $75 and a minimum annual renewal fee of $100. In the long run, an LLC is cheaper to keep in good standing.
- There can be less formality with an LLC compared to a corporation. An LLC can waive annual meetings in its Operating Agreement while a corporation is required by law to have annual shareholder meetings and board of directors meetings and keep meeting minutes of those meetings (even when there is only one owner).
- There is more privacy with a Virginia LLC compared to a Virginia corporation. There is no public listing of the members (owners) of a Virginia LLC and assuming you appoint a third party as your registered agent, your personal name and address may not be available publicly. A Virginia corporation must disclose the names and addresses of their directors and officers and update those names and addresses every year on an annual report form.
It’s important to look at your business plan and weigh the pro’s and con’s of these differences to make the right choice for you.
If you're thinking of starting a new Virginia limited liability company for your business, there are several steps involved. The order of completing them is important so the following list is both what you should do and when you should do it:
- Clear your desired name (meaning make sure it's available and not an infringement of someone else's name)
- Prepare and file Articles of Organization with the Virginia State Corporation Commission
- Prepare and sign an Operating Agreement
- Get an EIN (Employer Identification Number) from the IRS for your new LLC (don't use your social security number for business purposes, even if allowed)
- Obtain any required County or City business licenses (check with the local government office where you're located)
- Start doing business!
Doing these things in the correct order means you won't have to redo them.
We can help you with as little or as much of the process as you like. All of our options for helping you start your new Virginia LLC can be found here.