3 Common Business Legal Structures
If you are starting a small business, you might be wondering if you need a business formation lawyer in Virginia such as the ones available Dale Jansen PLC to help you form your business. And really the answer to this question is that it’s going to depend on you and the type of business that you are forming. You might not know the advantages of incorporating a small business, or what is a partnership agreement or how proprietors are taxed. All of these things are very important when you are running your own business, and so is choosing the right business organization form or getting assistance in creating the business you are trying to create.
A business formation lawyer in Virginia such as the ones available Dale Jansen PLC are the perfect people to help you do this. They have an experience that you need, they are going to have the necessary experience to write and draft contracts and ensure they are legally binding and much more.
A big part of running a business is knowing the different business structures, which are listed below:
A sole proprietorship is a type of business that is owned and ran by one person. This leaves this person with no legal distinction between owner and business, and is one of the most common forms of structure for small businesses. This business is taxed via pass-through taxation, which means the business does not file a tax return but owner reports are on their personal taxes via a form 1040. All liabilities falls upon the owner, an individual running a sole proprietorship, however you can mitigate the risk by purchasing insurance and creating contracts to ensure liability is stated in said contract.
A general partnership is considered being the association between two or more people that are in a business seeking a profit from that business. Partnerships are created with very little formality, oftentimes with a partnership agreement. This agreement typically stipulates the terms of the partnership and formalizes the rules for profit and loss and how the ownership percentages are divided. Owners have unlimited personal liability if each person involved in the business is jointly liable for partnership obligations. A partnership is again not a taxpaying entity, which means a partnership must file an annual information return from form 1065 report income and losses of operation but they do not pay federal income tax. This means that profits and losses are passed through to the owners based on the profit sharing percentages in the partnership agreement and each partner pays taxes on the share of the profit and loss.
Limited Liability Company
This is a hybrid between corporation and general partnership and considered to be a hybrid between sole proprietorship as well. Owners of an LLC are called members and members can include individual corporations, individual people, other LLCs and foreign entities. LLCs can even be consisting of one person. An LLC is considered to be a pass-through entity for all tax purposes which means business income passes through the LOC members who report their share of profits and losses on their individual tax return. LLC members are protected from personal liability for business debts and claims, due to having a future known as limited liability. This means if somebody is in a business with limited liability and they owe money or face lawsuit, only the assets of the business are at risk.
Reach out to a business formation lawyer in Virginia today for all of your business needs.