Which is Best for the Small Simple Business?

If you are a self-employed individual in the State of Virginia or starting a Virginia business, you may be wondering whether it is better to form a Virginia LLC or go with a full corporate structure by forming a Virginia corporation. You may also be wondering what differences exist and which form will work in your best interests.

There is no one answer to this question but with most small businesses and single or family owned enterprises which do not have complex tax or governance requirements, a Virginia LLC provides a lot of advantages.

What follows is some facts to be aware of before you form a Virginia LLC or a Virginia corporation.

Filing Fees

The filing fee is what you pay for the protection of your assets when you form a business entity. It is part of the cost of doing business in such a way that shields you from personal liability.

When you form a Virginia LLC, you will pay a one-time filing fee of $100; annual renewal is currently $50 per year. These are "flat" fees; they are the same regardless of the size of your Virginia LLC, and can only be raised through legislative process.

These filing fees for a full Virginia corporation start at $75 initially; annual renewals start at $100. The full amount is dependent on the number of shares issued by the Virginia corporation, and can go up considerably as the corporation increases in size and value to as much as thousands of dollars per year.

Structural Flexibility

You have more options when you form a Virginia LLC. Corporations are notorious for policies that are "set in stone" and for their relative inflexibility; part of this is due to size and complexity, while part of it has to do with the laws that govern a Virginia corporation (which can be equally complex).

A limited liability company has a great deal more flexibility in how it can be structured; it is ideal for a single person business or small business owned by a few people, and can be easily be adapted to changing business conditions.

Paperwork, Paperwork and More Paperwork

If you are like most people, you detest endless paperwork and filling out forms. As a corporation, you will need to file annual reports . . . and that's just for starters.

When you form a Virginia LLC, you spare yourself a great deal of trouble in this respect, because you will not be required to file such annual reports. However, in addition to being required to form a Virginia LLC properly, you should also properly maintain the Virginia LLC with some minimal formalities.

A Virginia LLC is more Laid Back

Legally, a Virginia corporation must be run in a very specific way, and requires multiple persons in official and directorial positions to whom you are accountable, even if you are the owner. This is another reason to form a Virginia LLC for the small simple business; the Virginia LLC business can be run with almost as little complexity as a sole proprietorship, as a communal enterprise, or in whatever way works for you. Fewer administrative chores mean that you will have more time to make the business profitable.

Taxes, Taxes

As a Virginia LLC, your business will have more choices in this regard. While a corporation has only the option to be taxed as "C" or an "S" Corporation, an LLC has these choices plus the option of taxation as a sole proprietorship or a partnership depending on how many members the Virginia LLC will have.

So, while the choice of whether to form a Virginia LLC or a Virginia corporation really depends on your specific business decision, the above benefits show several reasons why many more businesses form a Virginia LLC each year for their small and simple businesses.
 

The more involved a business is going to be and the more investors and complex its governance, employee matters and ownership will be, the more of a chance a Virginia corporation may be the better structure.  If you are unsure, check with your attorney or accountant to see if you should form a Virginia LLC or a Virginia corporation for your specific business.