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Understanding the different types of the start up model

On Behalf of | Jan 31, 2022 | Business Formation & Planning

Business entrepreneurs in Virginia almost always start with an idea for a viable company and product or service line that can be set up for long-term success. The concept of ongoing growth is indeed a driving force for many with a specific vision. However, what many prospective business owners do not understand is the legal formation that will work best for their operation. Those who have ample financial resources to start their product line often see more success with a sole-proprietorship while others with a business idea that requires multiple primary actors will need a legal formation that works best for the partnership.


Liability limitation is often a primary focus for businesses with multiple primary parties, and especially those where profitability and individual income is not shared equally. A limited liability company, or LLC as it is commonly known, is a tax-based business formation that allows members to pay tax obligations based on their personal activity within the company. These are generally understood as pass-through tax obligation businesses. LLP formation, or a limited liability partnership, works best for those with equal ownership shares.


There are multiple types of corporate business formats for any new startup to consider. The amount of financial seed capital can be an important part of this decision, as organizations needing significant capital flows often want to “go public” as soon as possible. Businesses are much like plants in the aspect that most start small and build over the long haul. Big operations are more the exception than the rule, and especially in the current digital economy, as many small operations still want to utilize the “S” corporation designation while still being a micro-operation.

The nuances of legal business structure is always best handled by consulting with a business professional who can see potential problems before they occur. And those who fail to plan are planning to fail from the beginning.