Business Formation and Entity Selection
Acquire provides comprehensive business formation services. Our goal is to insure that your new business has a firm legal foundation.
Sole Proprietor
What Is a Sole Proprietor
The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts and liabilities. A sole proprietorship can operate under the name of its owner or it can do business under a fictitious name.
A distinct disadvantage, of being a sole proprietor, is that the owner is personally liable for all the business’s debts and liabilities. If the sole proprietor encounters financial trouble, or there is an injury on the premises, a creditors or injured party can bring lawsuits against the owner personally.
Because there is no distinction be a sole proprietorship and the owner, taxation is simple. Income earned by a sole proprietorship is considered personal income.
Disadvantages of a sole proprietorship:
- Owners are subject to unlimited personal liability for the debts, losses and liabilities of the business.
- Owners cannot raise capital by selling an interest in the business.
- Sole proprietorships rarely survive the death or incapacity of their owners and so do not retain value.
Advantages of a sole proprietorship:
- Owners can establish a sole proprietorship instantly, easily and inexpensively.
- Sole proprietorships carry little, if any, ongoing formalities.
- A sole proprietor need not pay unemployment tax on himself or herself.
- Owners may freely mix business or personal assets.
LLC
What Is a Limited Liability Company (LLC)?
A limited liability company (LLC) is a business structure whereby the owner(s) are not personally liable for the company’s debts or liabilities. Limited liability companies combine the characteristics of a corporation with those of a partnership or sole proprietorship. Limited liability companies share similar to a corporation, but are simpler to manage and have the advantage of pass-through taxation to its members, as is similar to partnerships.
Forming an LLC
The requirements for LLCs vary by state, but they are generally the same across the board. The first thing owners or members must do is to choose a name.
Once that’s done, articles of organization must be filed with the Virginia State Corporation Commission. The articles of organization establish the rights, powers, duties, liabilities, and obligations of the member of the LLC. The Articles also include the name and addresses of the LLC’s members, the name of the LLC’s registered agent, and the business’ statement of purpose.
Corporation
What Is a Corporation
A corporation is a formal type of business entity, which protects its shareholders from the liability of business debts other liabilities. Corporations are subject to some unfavorable tax treatment for real estate investors. Additionally, Corporations require more time and expense maintaining the corporate structure., which do not exist with some other business entities like and LLC.