The Virginia Limited Liability Company Surpasses The Corporation As The Preferred Structure For Business

In 1991, the Virginia legislature passed the Virginia Limited Liability Company Act which provided a new legal entity alternative for business owners in Virginia. Accordingly, most small business operated without the use of a legal entity and this created an unlimited personal liability situation for its owners. While there has always been the alternative of incorporating a corporation for business, the complication and compliance requirements of a corporation dissuaded many small business entrepreneurs.

The LLC offers the same limited liability protection as a corporation but happens to be a much simpler entity to form and manage. For one thing, the limited liability company does not require centralized management or a Board and has no meeting mandates.

While more business owners started forming an LLC in Virginia for the protection, some still ignored this new option because they did not know exactly what this legal creature was and did not really appreciate its many benefits. At the time, there was also a lot of confusion about how a Virginia LLC would be taxed and this caused businesses not to pursue the limited liability company as an option.

The confusion about taxation was put to rest in 1997 when the government passed the rules that basically allowed an LLC to choice it tax structure including the automatic right to pass through taxation. A corporation by default is subject to double taxation so now the LLC seemed to be the preferred entity from a tax perspective. If an LLC is single owned, there is no additional tax complexity so sole proprietors started forming limited liability companies to get the protection. Yet, the owners could now get liability protection which was becoming more of a concern as lawsuits have become such an epidemic in this country.

So now, for minimal fees, a Virginia business owner can get liability protection, an easy and easy to vehicle and have more tax benefits. Based on statistics of the past few years,, the Virginia limited liability company has greatly surpassed the Virginia corporation as the entity of choice for small businesses in the Commonwealth.

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