I want to start a business...now what?

Taking the leap to set up your own business can be exciting and nerve-wracking. And while you may be an expert in your field, you’re likely not an expert in forming businesses. So, let us help! Here are some things to consider when getting started.

Name Your Business

Using the Virginia State Corporation Commission website, you can search to ensure that the name you want is distinctive and available for use. Even if you do not want to form an LLC, Corporation, or Limited Partnership, initially, it is a good idea to reserve your business name so that if you decide to form a business entity later on, your name is still available.

Sole Proprietorship

Often entrepreneurs choose to act as sole proprietors, doing business under an individual or fictitious name. The guidelines for choosing a name as well as a database can be found on the Virginia SCC website here. 

A sole proprietorship offers the least amount of legal protection of any business formation. It does not distinguish business assets or liabilities as separate from its owner.

Limiting Personal Liability

Opting for a corporation or LLC will provide your business with the most legal protection and provides a separate entity and structure for your business. Formation documents do not have to be complicated, but they should spell out some essential initial terms, such as who owns what share of the business and who the initial managers will be. Your formation documents will help solidify those agreements you have already reached.

Generally for a first time business owner will benefit from an LLC so they can focus less on the formalities and corporate red tape and more on doing the work. However, as the business builds a larger customer base and income increases, it may be more beneficial to either convert to a corporation or to make an election to be treated as a corporation for tax purposes.  

Governing Document and Other Business Contracts

There are 2 types of contracts that are important for business owners: contracts with others (such as employees, contractors, or customers) and the governing documents.

Governing documents are those that outline how the business should be run and what should happen if the owner passes away or is incapacitated or if the multiple owners cannot agree on certain aspects of running the business.

Additionally, if you or another business owner is married or engaged, it  can be beneficial for that person to have a premarital or postmarital agreement stating that the business shall not be considered a marital asset.

Register Your Business 

Any type of business entity, even a sole proprietorship, needs to be registered. You must file with the State Corporation Commission, obtain a federal tax id number (EIN), and a state tax id number. Additionally, depending on the type of work you are doing, there may be additional filings, certifications, or professional licenses you must obtain.