In Virginia, there are many individuals interested in forming their own business, but who are not quite sure where to start. There are four major types of business entity to consider, and each one has its own pros and cons.
The first two kinds of business entity are the simplest: the sole proprietorship and the partnership. In these cases, the business owner has total control over the business and the accounting and paperwork requirements are minimal. However, the owner is liable for any debts or legal cases that the business experiences, so their personal assets are at risk if the business does not do well. A partnership works the same way, but it has multiple partners, and it needs to be reformed if a partner dies or leaves.
The next two types of business are kinds of corporations. An S corporation is a small and flexible type of corporation ideal for small businesses that provides protection for the owner’s personal assets as well as some potential tax benefits. A C corporation is a larger and more complex organization that is suitable for a medium or larger business. It requires a more formal structure with accountancy and legal services as well as more clearly documented articles of incorporation. An S corp is easier to adopt for a company with large needs, like a set of C-suite executives and a board of directors.
There are several ways to form a business and each one is designed for a different kind of owner or founder, but they all have important advantages that make them appealing for their unique audience.