There are various business structures which can be considered in a new business formation. Choosing the correct kind of business entity turns largely on how many individuals are involved, how the business intends to generate revenue, and how it will be financed. Recommendations on the most appropriate entity are given after exploration and careful consideration of the goals of the client. A primary consideration, of course, is the income tax result of any structure to be assembled. We assist clients in the formation of limited liability companies, Subchapter S corporations, Subchapter C corporations, and limited partnerships. Needless to say, the estate planning opportunities are considered as a part of the formation of new enterprises in order to facilitate a smooth transition under the business succession plan.
Formation of Business Entities
Business formation is the term used for the process of incorporation or organization of a business for one or more persons and registering that entity with the Commonwealth of Virginia. This newly formed entity has statutory rights and responsibilities separate from those of its individual owners. As business structures vary greatly, we advise clients as to which structure best suits their family, tax and future planning needs. We conduct the search to ensure availability of the desired entity name, after which the necessary legal documents are drafted and executed. These documents typically include articles of incorporation (Inc.) or organization (LLC), by-laws or operating agreements, stock subscription agreements and stock or membership certificates.
The success of any business requires the careful evaluation of the present and strategic preparation for the future. The primary focus of our business practice area is the formation and structuring of business entities, as well governance and management. We provide legal counsel to our business clients on matters including third-party contracts, shareholder agreements, and executive compensation agreements, as well as debt transactions, partnerships, and restructuring and recapitalization. We understand the importance of anticipating the need for these transactions, and we strive to collaborate with our clients to be in a position to make timely recommendations for action.
The formation of a business entity requires the nomination of a Registered Agent for the entity so that the Virginia State Corporation Commission, as well as other agencies and citizens, will have an official contact person. The Registered Agent receives official documents, reports and notices, including the Annual Report and Registration Fee notice, which enables us to maintain the entity in good standing. The Registered Agent also receives service of process for lawsuits and other legal matters, which facilitates the confidential handling of immediate notice to corporate officers to avoid default judgment.
When asked to serve as Registered Agent, we provide additional services, such as the preparation of minutes of annual meetings of shareholders and directors, or records of actions by written consent in lieu of annual meetings. It is often the case that we are the custodian of the original corporate minute book, holding stock certificates and stock ledger, related business documentation, and the corporate seal, providing confidentiality for company affairs.
Shareholder “Buy-Sell” Agreements
A successful business owner recognizes the importance to plan for the future of their business. Whether a sole proprietorship, or large corporation, it is essential to plan for succession, sale or death. A buy-sell agreement is a contract which discusses the disposition of owner’s interest. A skillfully drafted buy-sell agreement will achieve avoidance of litigation regarding sale price, new or unwanted partners. These agreements ensure a smooth transition of ownership, benefiting the organization’s clients, and surviving family. There are a number of strategies which can be used to create this agreement and our attorneys have experience in working with clients to protect their business interest.