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    Archive for the 'Virginia corporations' Category

    I have discussed how to form a Virginia LLC and Virginia corporation before, which is definitely a hot topic.  But I also get questions from company owners regarding how to properly "shut down" or dissolve their limited liability company or corporation. The process is similar for both types of entities but has some differences worth noting.

    If you would like to shut down your Virginia LLC, the first step is to wind up the affairs of the LLC.  This involves collecting all of your outstanding accounts receivables (money that is owed to you), paying all of the LLC’s bills (money the company owes to others – wages, vendor invoices, rent, etc.), and distributing the excess (or profits) to the LLC members per the terms of your Operating Agreement.  Once that is done, the LLC files Articles of Cancellation with the Virginia State Corporation Commission.  The Virginia SCC will process the Articles and send back a Ceritificate of Cancellation stating the effective date of termination.  Once you have that, the LLC is done.  Be sure not to do any business under the LLC name after that point.

    If you would like to shut down your Virginia corporation, you start by filing Articles of Dissolution with the Virginia State Corporation Commission.  Once you have filed Articles of Dissolution, the only activity allowed to be done by the corporation is the "winding up" of its affairs.  Like with an LLC above, this means amounts due to the corporation are collected and bills are paid.  Once this is completed, the corporation files Articles of Termination with the Virginia SCC that end its existence.  The Virginia SCC will then return a Certificate stating the effective date of termination to you and the corporation no longer exists.

    The above information just relates to the organizational issues involved with terminating your existence.  There are also tax issues that must be dealt with as part of this process, which a good CPA should be able to help you navigate.


    Posted: July 13th, 2007 at 7:36 am | | Email Post |
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    Every once in a while I am asked questions regarding the possiblity of converting a Virginia corporation to a Virginia LLC.  Corporate owners sometimes want the benefit of the relaxed requirements of operating an LLC (no required annual meetings, no required annual report, less expensive SCC renewal fees, etc.) but don’t want to go through the hassle of dissolving their corporation and reforming as an LLC because of the expense, difficulty, legal risks, etc. 

    The answer is that you may convert your Virginia corporation to a Virginia LLC without shutting down and starting all over (see VA Code section 13.1-722.9 if you don’t believe me).  To accomplish this, you must file Articles of Conversion which need to contain a detailed conversion plan for your stock (how you’re going to convert the stock of your corporation into membership units of the LLC).  You must also include Articles of Organization for the resulting LLC as an attachment. It’s a bit complicated to get all of these documents done correctly, so you may want to use the services of an attorney that has done this before to get it done properly and efficiently.

    One of the nice benefits of converting rather than shutting down and forming a new LLC is that under the Virginia Code (section 13.1-722.13), there was no interruption of the company (and therefore your limited liability never lapsed).

    One thing to note, as well, is that it works the other way, too – a Virginia LLC can convert to a Virginia corporation (see VA Code Section 13.1-1010.4). Not sure why you would want to do that, though…


    Posted: June 11th, 2007 at 3:50 pm | | Email Post |
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    Following up on this post regarding different forms of tax treatment for LLC’s, I thought it would be helpful to briefly discuss who can elect S corp taxt treatment.  Because of all of the benefits of S corp tax treatment for Virginia LLC’s and Virginia corporations, the IRS has certain rules regarding who may take those benefits.  If you’re a Virginia LLC or Virginia corporation, you may elect S corp tax treatment:

    1. If you file Form 2553 with the IRS within their time deadline (generally within 2 months and fifteen days of formation or the beginning of the year);
    2. If you have no more than 100 shareholders (owners);
    3. If all of those shareholders are individuals, estates, or certain exempt organizations;
    4. If all of the shareholders are US residents (no nonresident alien shareholders allowed);
    5. If the company has only one class of stock (meaning every shareholder/owner has equal distribution rights);
    6. If the company is not engaged in one of the named ineligable types of businesses (banking, insurance, etc.);
    7. If your corporation or LLC has or adopts certain calendar year tax years; and
    8. all of the shareholders/members consent to the S corp tax election.

    If your company satisfies all of those requirements, then you can enjoy the benefits of S corp taxt treatment.  The Form 2553 that you file to elect S corp tax treatment can be found at the IRS website here and the instructions for the Form 2553, which have more details on the requirements and process, can be found here (both forms open as a pdf).


    Posted: June 6th, 2007 at 8:30 am | | Email Post |
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    How do you find out whether the name you want to use for your new Virginia LLC or Virginia corporation is available?  There are two ways:

    1. You can check online by accessing the Virginia State Corporation Commission’s online database (called the Clerk’s Information System) located here.  Type in a potential name you would like to use; or
    2. Call the Clerk’s Office at 804-371-9733 or toll free (if you’re in Virginia) at 866-722-2551 and ask the Clerk to check for you.

    Look for the exact name or a confusing similarity with an existing Virginia LLC or Virginia corporation to avoid having your Articles returned to you.  And beware – this is not the same thing as “trademark clearance.”  Be sure to look deeper to be sure you’re not about to infringe someone else’s trademark.


    Posted: May 25th, 2007 at 7:24 am | | Email Post |
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