Many entrepreneurs consider or actually do go into business with friends, family members, or even people they don’t know so well.  Having multiple owners can be reassuring, can provide access to needed skills or finances, and can make running your own business more fun.  However, it is important to think through all of the potential issues you can have with “partners” so that there is less of a chance of a bad outcome or perhaps a ruined friendship.  Before going into business with anyone, consider these 5 questions:

1.  Do all of the potential owners have the same goals for the business and expectations?

2.  Do you have the same work ethic?

3. Do you have complementary skills and agree on what each person’s respective roles will be in the business?

4.  Do all of the potential owners agree on how business decisions will be made?  What will you do to settle any disagreements?

5.  Does everyone involve trust each other and is there mutual respect among everyone?

Of course, the five questions above are just a starting point for things to consider before going into business with someone else (or many someone else’s) but are a good start.

Remember, the more issues you can pre-decide in your Operating Agreement (for an LLC) or a stockholder’s agreement (for a corporation), the easier your life will be if issues between owners arise.

One of the major benefits of forming a Virginia LLC (or a corporation, for that matter) is the limited liability protection it provides for its owners (the Members).  However, it is important to note that the limited liability protection of an LLC is not absolute. There are situations where a Member may be personally liable even while being an LLC owner.  There is the potential for contractual or tort liability.  For example, a Member will have contractual personal liability if they personally guarantee a loan to the LLC or a lease for the LLC’s office space.  A Member may also be liable in tort for damages caused by that owner’s own negligence or wrongful act (for example, a car accident in which the owner was driving the vehicle on LLC business).

In addition, a Member can be held personally liable under certain laws.  Examples include if that Member is a “responsible person” under federal, state, and local tax laws (for example, for payroll withholdings), pursuant to certain securities laws (for example, for the sale of membership interests in the LLC), for the breach of the LLC’s Operating Agreement, and for wrongfully taking any distributions from the LLC (for example, when the LLC is not able to pay its current obligations) or for failing to make any contractually agreed-upon contributions to the LLC (for example, your initial capital contribution set forth in the Operating Agreement).

While there is the potential for personal liability, the benefits of a Virginia LLC (especially over time) still make it a good choice of entity.  But it’s important to know how personal liability may attach so you can take further steps to protect yourself.

For a very long time, the two choices that for-profit enterprises had when choosing an entity form in Virginia was the corporation and the limited liability company (LLC).  Starting July 1st, Virginia is adding a choice for those entrepreneurs that want to have a for-profit entity but also want to be able to support a social mission with some of their profits.  This new entity is a type of stock corporation called a “benefit corporation.”

On March 26, 2011, the Governor signed into law House Bill 2358, which added an article to the Virginia Code, title 13.1.  Under this new law, a corporation can elect to be a “benefit corporation” by so stating in its Articles of Incorporation (or amended Articles if transitioning from a stock corporation to a benefit corporation) and by stating the general public benefit that it will be providing.  Once complete, the benefit corporation can legally use part of its profits to support its stated general public benefit purpose.

This new form of entity is perfect for entrepreneurs that want to blend non-profit and for-profit activities and create a hybrid that allows them to make money and do good at the same time.  If you would like my help forming your benefit corporation correctly, just check the “benefit corporation” box on my corporation order form.

I have added a section to my web site regarding buying and selling Virginia businesses.  I have handled many transactions for clients on both sides and thought it would be helpful to lay out the process. 

There are five basic steps whether you are buying a Virginia business or selling one.  The steps are different, of course, depending on which side of the transaction you are on.  Check it out and, if I can be of assistance with your Virginia transaction, just let me know.