WHAT ARE DIFFERENT TYPES OF BUSINESS ENTITIES?
One aspect of starting your own business in Virginia is figuring out what type of legal entity you want to use. There are several different legal structures that the state allows, and each one has unique requirements. In Virginia, you may consider one of these legal structures for your business activities: limited partnership, general partnership, corporation and limited liability company.
In the Commonwealth of Virginia, the State Corporation Commission holds the records of all the registered business entities in the state. According to the SCC, the state recognizes two different types of partnerships: general and limited. You need at least two people to form a general partnership, and each co-owner contributes to the business and shares in the profits and losses. While the general partnership is a discrete entity, all of the partners share liability for its obligations. A limited partnership has at least one limited and one general partner. In this setup, the limited partner may contribute money to the business and share in the profits and losses, but the general partner manages the daily operations.
A limited liability company is another option. You may create an LLC on your own or with others. You and your members may determine a management structure. Generally, members of an LLC are not personally liable for the entity’s obligations.
If you choose to form a corporation, the overall direction of the business comes from the board of directors. The board may elect officers to manage daily operations. In Virginia, you may form a stock or nonstock corporation. Generally, a for-profit business may file as a stock corporation whereas the nonstock corporation setup is more common for nonprofits.
This general information on business entities is intended to educate and should not be taken as legal advice.