Coates & Davenport, P.C.

Virginia companies have options to structure their businesses

When a person in Virginia is forming a business, they have a number of choices as to how to structure their company. Of course, they could simply head out on their own as a sole proprietorship, but other options include a limited liability company or a corporation.

Some small business owners feel that an LLC is a good fit for them. It offers flexibility and simplicity when compared to a corporation. An LLC also shields the company from the issue of double taxation, which could crop up if a company is a corporation that owns assets that appreciate in value. If that is the case, then the corporation is taxed on the basis of its increased value if the corporation liquidates, but so too are the shareholders of the corporation. When a person owns an LLC, the LLC's taxes "pass through" to those who own the LLC, so the LLC itself is not taxed on its appreciation in value.

That being said, LLCs often are most successful if there aren't that many owners controlling the operations of the company. Should a company get enough investors, those investors will inevitably desire some modicum of ownership in the company -- that is, stocks. However, stocks can only be issued by corporations. If a shareholder is also employed by the corporation, then that person can be paid a salary and enjoy other fringe benefits that come with employment. Also, depending on the circumstances, corporations may be able to deduct health insurance costs from its total profits, and the health insurance will not be counted as income paid to the corporation's employees. This can help with employee retention.

As this shows, there are pluses and minuses to both LLCs and corporations. In the end, it is important for those who are forming a business to do their homework and research their various options. If they have any questions about this or other business law issues, they may want to seek the advice of an attorney.

Source: FindLaw, "Corporation versus LLC," accessed Nov. 6, 2017

No Comments

Leave a comment
Comment Information
Email Us For A Response

Consult With Us Today

Call 804-206-8538 to schedule a confidential consultation or fill out the form below to send us an email:

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Coates & Davenport, P.C.
5206 Markel Road Suite 200
Richmond, VA 23230

Phone: 804-729-5537
Fax: 804-285-2849
Fax: 804-285-3426
Richmond Law Office Map