Operating as an LLC in Virginia is similar to operating as an S-Corporation in some ways. Most importantly, there are tax benefits to filing an LLC rather than a corporation. The most significant difference between an LLC and a corporation in terms of tax status occurs if the partners elect to be treated as a single entity. In this instance, both the partners and the state will treat the LLC as if it were an S-Corporation.
This means that all of the income and expenses of the LLC are passed through one central account and are reported on the income statement for that company. As with corporation filings, however, an LLC cannot carry forward profits into subsequent years. In addition, the IRS treats all payments made to LLCs as having been made to the partners individually. This includes dividends paid by the LLC to other investors. Because of these differences between what an individual must pay in taxes and what an LLC must report, many small businesses choose to file both types of filings.
There are two ways to structure an LLC. One way is a pass-through entity. This type of structure permits the members of the LLC to be taxed only on the income from the personal assets of the LLC. The other way is a C-Corporation, also referred to as a "C" corporation. This form of entity passes through the individual tax returns of its owners and is therefore subjected to UBIT, or income tax.
How To Start An LLC In Virginia
The good thing about filing as an LLC in Virginia is that you do not have to pay a state filing fee. Most small business entities do not have to pay anything until they get a license to operate. In some cases, however, an additional license may be required, depending on the type of entity created and whether or not the business is open for business. To learn more about the different types of filing for LLCs in Virginia, including fees, see the link below.
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Aside from filing an actual LLC in Virginia, there are also eight steps necessary for starting an LLC in Virginia. The first step in the process is choosing the name of the LLC. For most types of small business entities, the name of the LLC should be related to the nature of the products or services the LLC offers. Names such as "Lodging Company," "Commerce Lending Company," "Home-based Business Lending Company," "Internet Lending Company," and "Personal Lending Company" are some common choices.
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The second step is determining the structure of the LLC. There are two types of LLCs: corporations and limited liability companies. In general, corporations are designed for protection from personal assets being distributed without the permission of the LLC owners. A limited liability company, on the other hand, is designed for sharing property and debts between the business owners.
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Once the business structure is decided on and the names are selected, it's time to register the LLC. One of the key takeaway points in how to setup an llc in Virginia is to ensure that all the necessary paperwork is filed appropriately. Many times, it is easiest to fill out the paperwork after the fact because filing electronically with the state can save time and paper. This is also a good time to review the filings to make sure that everything is filed correctly, including personal assets that might be transferred to the LLC.
One important thing to remember about how to start an llc in Virginia is that the LLCs must be registered under its own name. Filing under a different name may result in double taxation, which could put the business owners at legal risk. Because of this, many prefer to choose the same name for their LLCs that they use for their business bank account, vehicles, and home. Once the formation has been completed, it's time to select a payment system for their LLC. Most commonly, payments are made by check or through direct deposit into their business bank account.
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