There are four types of operating entities to choose from. The first step is to determine which one fits your business type.
- Sole proprietorship is a simple method of operation where the business owner is responsible for the business to include any liabilities incurred. The income goes to the owner and is taxed on an individual basis. Most of the time, an occupational license or permit is the only thing needed to operate.
- A general partnership is very much like the sole proprietorship only two or more partners are working together to run the business.
- A limited partnership deems one of the partners the general partner and the other partners limited. Limited meaning they have limited liability and income based on their initial investment in the business.
- A corporation is an operating entity with its own name and tax identification number, solely responsible for all taxes and income associated with it as opposed to on an individual basis. The business founders are named shareholders, not owners, which protects them from any liabilities. Income is given in dividends. A big disadvantage is that the income is taxed twice, once as corporate earnings and again as shareholder income.
What’s In A Name
Naming your business is another important step. You have to pick a name that is unique and available to use in Virginia. Choose a name that cannot be easily confused with another brand name or national brand. Check with the State Corporation Commission, 800-552-7945, or online, to see if the name you have chosen is available. You must also register your business with the SCC if you intend to do business, sell securities, use a trademark, or run a franchise.