Formation – Choosing a Business Entity

Choosing A Business Entity

Are you launching a start-up, ready to begin a home-based business, or finally taking the steps to make your small business dream a reality?  As your excitement grows, it is important to understand the business options available in Virginia so you can select the correct legal structure to bring your product or service to the marketplace.  Here is a basic primer of the types of business forms that are available to you as the owner of a Virginia business.

Sole Proprietorships

A sole proprietorship is a simple business to form, as the owner essentially treats the business as an extension of themself.  While the simplicity of running an informal sole proprietorship has many benefits, the owner remains personally liable for debts and lawsuits filed against the business.  This reason alone is why is it usually best to have a more formal business structure to protect your personal assets.


In Virginia, anyone who operates a business, alone or with others, may incorporate.  This is true regardless of the size of your business and even if you engage in religious, civil, non-profit, or charitable endeavors.  Unlike a sole proprietorship, a corporation is a separate legal entity that is owned by the stockholders or shareholders.  As such, the owners are protected from the creditors of the business and their assets are protected from business debt and liability.  Other than the amount of investment in the company, an owner of a corporation is not at risk of losing personal assets due to any obligations by the corporation.

Virginia law recognizes two types of corporations:  stock corporations and non-stock corporations. Stock corporations are authorized to issue shares to people, called shareholders, who become the owners of the corporations.  A stock corporation exists to generate a profit for the shareholders.  In non-stock corporations, however, shares are not issued.  The owners of a non-stock corporation are referred to as members and are usually organized for other purposes such as charitable endeavors, tax-exempt organizations, or property owners’ associations.

There are also quite a few other benefits that come with the incorporation of a business.  Insurance, travel expenses, and retirement plan deductions may be considered tax free benefits.  In a stock corporation, it can provide an easier way to raise capital through the sale of stocks and bonds.  Additionally, under Virginia law, incorporation includes advantages in the management, duration, and ownership transfers that may occur during the lifespan of the business.

Limited Liability Companies

Virginia law also authorizes the formation of a limited liability company, or LLC.  A Virginia LLC is an unincorporated associated of one or more members who become the owners of the LLC.   They share in the profits and losses of the business.  A LLC will have an operating agreement that specifies its precise management details and operating arrangements.  Some LLCs are managed by one or more of the members and referred to as a member-managed LLC.  Others may rely on one or more managers and are referred to as a manager-managed LLC.  In both situations, an LLC is a separate legal entity, and the members or managers are not liable for the obligations of the LLC.


Virginia law authorizes the formation of other business entities including partnerships, limited partnerships, and limited liability partnerships.  A partnership, or general partnership, is simply the association of two or more persons to carry on, as co-owners, a business for profit.  Each partner contributes money, goods, property, or services in return for an interest in the business.  The partners share in the profits and losses of the business and have equal rights in the management and conduct of the business.   While the partnership is a separate and distinct legal entity, a general partnership does not protect the partner’s personal assets from the liabilities of the business.  If a partnership is registered as a Virginia limited liability partnership, however, the partners’ personal assets are protected from the liabilities of the business.

Other Business Entities

Although corporations and limited liability companies are the most common forms of entities in Virginia, there are a number of other entities that may be available, including a business trust, a general partnership, or a limited partnership.  There are also several subcategories of these general business forms, such as a benefit corporation, a cooperative, a professional corporation, a professional limited liability company, a public service company, a registered limited liability partnership, or a registered limited liability limited partnership.

Benefits of a Formal Entity

Regardless of size, there are great advantages to pursuing some type of formal entity protected by Virginia law, including limited liability and personal asset protection, tax benefits, and having a certain level of credibility that comes with an incorporated company.

If you are considering taking your business to the next step, please contact Gregory M. Johnson, a business formation attorney at MartinWren, P.C. at (434) 817-3100.  We will listen to your business objectives, explain the available business entity options, and help you navigate the proper course to making your business dreams a reality.  The early stages of business formation are critical to ensuring long term business and personal success.

Free Consultation

Contact Our Virginia Lawyers

Contact Us

or call us to speak with one of our attorneys TODAY

(434) 216-0100

Related News

view all news

Contact Our Virginia Lawyers

We serve clients throughout Virginia — from Charlottesville and Central Virginia to metropolitan Richmond; Harrisonburg and the Shenandoah Valley to Roanoke; and the cities of Hampton Roads to the Northern Virginia cities of  Fairfax, Alexandria and Arlington.

To speak with one of our attorneys, please call us at (434) 817-3100.

Our Virginia personal injury lawyers at MartinWren, P.C. have a statewide practice and offer free consultations at a time and location that is convenient for you.  We will gladly meet with you at your home or at the hospital, even on nights and weekends.


Disclaimer: Using this contact form or any page of MartinWren, P.C.’s website does not establish an attorney-client relationship.  Please do not submit any confidential, privileged, or other protected information until and unless you have completed a private consultation with a MartinWren, P.C. attorney, the attorney has informed you that no conflict of interest exists, and the attorney notifies you that the firm can take your case. By completing this form you agree that we can follow up with you by phone, email, or by text messaging.

    *Please enter your initials to acknowledge that you have read and understood the Disclaimer above:

    To schedule a free consultation with a personal injury lawyer, please call us at (434) 817-3100.