Business Lawyer for Limited Liability Companies in Virginia

Are you starting a limited liability company (LLC)? Do you need an operating agreement or articles of organization? Do you understand the benefits, liabilities, and responsibilities of starting and operating an LLC? Alternatively, is your company already formed as an LLC, but do you need help with things like complex assets, employment issues, taxes, bank financing, real estate, and commercial leases? 

LLCs offer real benefits, but many other factors exist that must be considered and addressed in an appropriate and strategic manner. At Eldredge Law Group, we will work with you on each and every aspect of starting and operating a successful limited liability company. Contact us today at (804) 986-8238 to schedule a free 15-minute consultation so we can learn more about your specific situation and discuss how we can help you meet your business goals.

What is a Limited Liability Company (LLC)?

A limited liability company is a business structure that combines features of a sole proprietorship or partnership and corporation. Like a company, the owner's personal liability in an LLC is limited. However, its tax situation is typically the same as a sole proprietorship or partnership. 

LLCs can have an unlimited number of owners, called members. Each member owns a percentage of the business that is typically proportionate to their investment. 

The specific regulations around forming and running an LLC vary between states but tend to have more similarities than not.

Differences between LLCs and Corporations

While both limit the personal liability of their members (in the case of an LLC) and shareholders (in the case of a corporation), there are some key differences between the two structures. 

Taxation

Corporations are separate tax entities, filing and paying taxes at a corporate level. In comparison, LLCs are pass-through entities. They can elect not to pay federal tax, in which case the profits and losses are passed to owners who then pay tax at the personal tax rate. 

Governance

LLCs can use an operating agreement to set out how it will be governed, including management structure, restrictions on buying or selling shares, profit sharing, and its dissolution. Operating agreements are flexible and can be designed according to the members' wishes. Corporations, on the other hand, are required to formally adopt bylaws according to the relevant state law. 

If your LLC does not have an operating agreement, the company's governance will be controlled, by default, to the rules of the state of formation's LLC laws. This is less of a concern in single member LLCs, but when you get to multi-member LLCs, the members may want to better define how they will manage the business, how profits and losses are accounted for, how membership interests can be transferred, etc. In other words, the default rules may not be sufficient for the proper governance of a multi-member LLC, and you should strongly consider using an operating agreement. 

Level of Administration

Corporations must comply with more rigid government rules and regulations that LLCs do not have to follow. These rules and regulations involve stricter reporting and administrative requirements. 

Advantages of an LLC

There are many advantages that flow from forming a business as an LLC. Below are descriptions of a few of them.

• Limited liability. One of the biggest advantages of an LLC is that it limits the liability of owners to their investment in the business. Owners normally can't be held personally liable for a company's debts and their personal assets are protected in the event an LLC can't pay a creditor, goes bankrupt, or is subject to a lawsuit. 
• Taxation. LLCs can be taxed as a sole proprietorship, partnership, or corporation. By default, an LLC is a pass-through entity. This means taxation is passed to the owners who pay taxes on the profits (or losses) via their personal tax return, avoiding double taxation. In some circumstances, an LLC can elect to be taxed as a corporation. This flexibility allows members to choose a taxation structure best suited to their situation. 
• Flexible management structure. When it comes to management, the members of an LLC can choose to either share management responsibilities or act like passive investors by nominating one or two managers to run the business (either members or non-members). 
• Less administration. It's typically easier to set up and run an LLC than a corporation. There's less paperwork involved, and, unlike a corporation, an LLC isn't required to hold board or shareholder meetings or appoint officers and directors. 

Whether one of the above or another advantage benefits your business depends on the business itself and what your goals are. That's why speaking to a business attorney can be critical to the success of your company. We will help you align your goals with the benefits associated with any and all business structures so you can be confident you form and operate your business under the most advantageous structure available to you.

Disadvantages of an LLC 

Some disadvantages exist with any given business structure. Here are a few that you should be aware of if you intend to form an LLC in Virginia or elsewhere.

• Set-up costs. Forming an LLC often involves filing fees. It can be more expensive to set up an LLC than other business entities, like a sole proprietorship or partnership. Many states also charge LLCs annual fees and taxes. 
• Forced dissolution. In some states, an LLC must be dissolved when a member leaves, dies, or goes bankrupt. In comparison, a corporation can exist in perpetuity. 
• Transfer of ownership. It can be more difficult to transfer the ownership of an LLC compared to a corporation or some other business entity. 
• Potential investment limits. External investors often prefer investing in a corporation rather than an LLC. This preference is because an LLC is often viewed as a more complicated structure in terms of taxation and managing outside investment. 

Do You Need a Business Lawyer for an LLC?

Many lawyers may disagree with this, but if you are going to be the only member of an LLC, you may not need to hire a lawyer to set up your company. In Virginia, and in most other states, it is very simple to use the State Corporation Commission's website (or the equivalent agency in other states) to establish your LLC and file the company's Articles of Organization. The Articles of Organization formally establishes the existence of the business in the state of organization. The process requires basic information about you (as the member), the business and a registered agent for the business (oftentimes a member of the LLC will serve as the registered agent). A lawyer can do this for you, you can do it yourself, or you can also use a company that specializes in business formations and serving as registered agents. 

That being said, there are times when hiring a lawyer makes sense. A good lawyer will tell you when you don't need a lawyer. Those include:

1. You're a person that just doesn't feel comfortable doing all this stuff yourself.
2. The LLC needs a strong operating agreement (the governing rules of the LLC).
3. The LLC will be a multi-member LLC, in which case it's critical that you have an operating agreement in place.
4. You just don't know what you want or need and require counsel and recommendations.   

If your business is complex or involves especially risky transactions, a business lawyer can work proactively to avoid legal mistakes on your behalf. If a legal issue arises, they will walk you through the process, representing your interests throughout it. 

Contact a Business Lawyer Today 

Make sure your company gets started on the right legal foot by making sure the business structure you choose, whether it's an LLC or another entity, is right for your business idea and goals. Get clarity and strong representation for a business already established as an LLC. Contact Alden Eldredge either by using our online form or calling us at (804) 986-8238. You can schedule a free 15-minute consultation to get the answers you need to some of your most pressing legal questions related to your business.