Legal Question in Business Law in Virginia

Re: forming a llc

Choosing a business entity and setting up an Operating Agreement involves understanding the types of entities that are available as well as what is expected of members, officers, partners, or individuals that make up the business entity. VA SCC has a nice guide to understand the different entities that you can access at http://www.scc.virginia.gov/clk/files/brg.pdf.

VA LLC's follow Delaware's model and allow family LLC's so if you wanted to include your wife and daughters, then I recommend that you consider the family LLC structure.

Note that if you do not set up an Operating Agreement, then there are default statutes that will govern the business entity that you select.

This response does not constitute legal advice nor is a client-attorney relationship established. It is meant to provide general information in a limited public forum. Because formation of a business entity may involve complex legal considerations, you should consult with your attorney (e.g., to understand tax consequences, formalities of filing, registered agent, marital property issues, etc.).

Good luck,

Bambi

Re: forming a llc

There are very few reasons NOT to incorporate or form an LLC. Most of the reasons FOR doing it are hard to predict such as possibly getting sued or getting into debt you cannot handle. (Although being sued is a danger, it is actually fairly rare for the average business, except perhaps for an unpaid bill.)

The main reasons for not forming an LLC or corporation are that the business entity requires a lot of extra paperwork. You MUST treat the LLC or corporation as a separate entity. It is NOT you. It is a separate thing unto itself. People can lose the benefits by inter-mingling funds back and forth and treating it like it is not real. If you loan money to it or borrow money from it you must document it as a formal loan (not necessarily complicated, just a loan for real).

You must have annual meetings and document them.

In this respect, an LLC is supposed to be simpler than a corporation. But in my opinion, a corporation is easier in practice because everyone you deal with will completely understand it and know exactly what to do. Everything is standardized.

Technically, though, an LLC is unique, because it is defined by the partnershp agreement. So every bank and business you work with really should READ your partnership agreement to know what they are dealing with.

However a corporation requires an annual shareholder meeting at which the owners elect a Board of Directors. The Board of Directors then hires or re-hires the President and other officers. All of these people might be the same people wearing various "hats." All of these meetings should be documented, although it is fairly simple once you get the hang of it.

So some people don't like the complications with a corporation. But a corporation is easier for the people that you do business with to understand.

Also if you create either an LLC or corporation, you may have a harder time getting credit for the business (at first) because the business is not a real person and does not have a history or any assets. You will probably need to add your personal guarantee which often defeats much of the purpose of incorporating in the first place.