It’s not always easy to determine which legal entity option is best for your startup when you’re first registering as a small business. The best fit for a legal entity in Virginia depends on what your goals are within the scope of this business. One key consideration is the tax options that each entity is given.
With each entity type, there are various liability protections offered as well, so it’s to your benefit as a business owner to accurately assess which category of legal entity your business falls under. This element of business formation serves to keep your personal and business assets protected. Some common legal entity examples are:
- Sole proprietorship
- Limited liability company
The right benefits for the right business
Sole proprietorships are businesses that have only one individual in charge of them. With these single-entity operations, a sole proprietor is fully liable for the finances and legality of their business and takes on all of its debt. They are, however, eligible for some deductions in taxes and health care.
With a limited liability company, or LLC, the partners, owners and shareholders have limited liability and a flexible tax situation. Cooperatives or co-ops are entities in which the people it serves are the ones who own it, which comes with similarly limited liability. This type of organization is taxed as a whole rather than the members’ individual incomes.
It may seem challenging to find the right legal entity choice for your company, but it helps to have side-by-side comparisons of the options that are available to you. Making the decision early on in the startup process is often highly beneficial because it heavily influences the future success of the business.