There are numerous ways that you can choose to organize a business.
One option is to operate without a business entity – You can act as a Sole Proprietor and choose to do business as yourself. Under this situation you may not need to register as a company with your state and you traditionally use your own tax identification number to do business. If you and a Partner(s) want to go into business together and never form a business entity, you could operate as a Partnership.
Another option is to incorporate your business into some sort of business entity. You do so by filing documentation with the state in which you do business. This business entity becomes its own being. It has its own bank accounts, its own books, its own tax identification and its own liability.
There are numerous examples of business entities, but the most common are the Limited Liability Corporation (“LLC”), the S corporation (“S Corp”) and the C corporation (“C-Corp”). Each type has its pros and cons – and which is better for your business depends on a number of factual matters.
Regardless of the type of business entity, there are numerous reasons incorporating your business into some sort of business entity is not only preferable – it is frankly, necessary.
First and foremost is for liability protection. If you do not have the “umbrella” of a business entity over your business operations – any liability, whether intentional or unintentional – is your own personal liability. To put it simply, if something happens, and you are sued – you as the sole proprietor (or partner) would be personally liable for the loss – and as such, your personal assets including personal and real property are at risk.
While some individuals may be concerned regarding the formation and incorporation of a business – be rest assured that Virginia is a great place to be a business. In fact, Virginia has consistently been ranked in the top 10 of “best states for small business” by national organizations – including Forbes. (See: http://www.forbes.com/sites/kurtbadenhausen/2013/09/25/virginia-tops-2013-list-of-the-best-states-for-business/ , http://www.wmmlegal.com/virginia-gets-an-a-for-small-business)
May 12th through May 16th is Small Business week with the Small Business Association. To celebrate the ingenuity and hard work of small businesses, Winslow & McCurry will be posting each day this week regarding a different topic that has affected its small business clients.
If you have a question regarding business law, or are a small business and would like to seek legal advice from our small business attorneys, please contact our firm, Winslow & McCurry at 804.423.1382.