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    Archive for the 'Virginia limited liability companies' Category

    Posted by Bernie Dietz
    Categories: Virginia limited liability companies

    An Operating Agreement is the name we give a legal contract for a limited liability company.  That contract covers all of the details about your LLC, including who the owners are, what percentage of the LLC they each own, how the LLC will be managed on a day-to-day basis, and how new Members will be added and current Members allowed to leave.  These details are very important, even if you are the only owner of your Virginia LLC.

    For example, how will you prove that you own your LLC so you can open a bank account?  Your name as owner is not in the Articles of Organization filed with the State Corporation Commission.  And how will you show that you respected the separate legal nature of the LLC if you get into trouble and a creditor is trying to pierce through the veil of limited liability protection?  And will the default laws of Virginia for LLC’s be sufficient for how you want to make decisions for your LLC?  Without an Operating Agreement, the Virginia Limited Liability Company Act will control the things that happen to your LLC.

    So yes, it’s important (and useful) to have an Operating Agreement even if you’re the only owner.  It can be short and simple and doesn’t need to include confusing legalese.


    Posted: February 18th, 2014 at 11:42 am | | Email Post |
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    Posted by Bernie Dietz
    Categories: FAQ, Virginia limited liability companies

    One of the nice things about a Virginia LLC is that it is completely flexible in how you set it up.  Unlike a corporation that has a more historical and set way of doing things, the sky is really the limit with your LLC.  So with a little advance thought and planning, you can arrange your Operating Agreement for your new LLC to handle things the way you would like.

    One of the first things to decide for your LLC is how it will be managed on a day to day basis.  For example, how will decisions be made, who will be in charge, and how will you hold yourself out to the public – your customers, vendors, suppliers, etc.  There are two basic options with a Virginia LLC, both of which can be further customized to suit your needs:

    1. Management by the Members (also known as the owners).  Member management is less formal than traditional corporate-style management by directors and officers and more mimics operations as sole proprietorship (without the terrible legal risks of actually being a sole proprietor) or a partnership (without those major legal risks, too).  Especially for start up businesses with just one or a few owners, this simple informal structure can help you get things done quickly without a lot of back office paperwork to keep track of.
    2. Management by designated Managers (appointed by the Members – aka owners).  Manager management more closely resembles a traditional corporate management structure where individuals are appointed to specific roles and given titles such as “President,” “Vice-President,” “Treasurer,” and the like.  The managers don’t necessarily have to be owners of the LLC as well but can be if you like.  This management structure is more appropriate for a larger scale operation where you want to be sure all company tasks and responsibilities have been delegated and covered so nothing slips through the cracks.

    If you handle it properly in your Operating Agreement, you can even set your LLC up so that you start out as member-managed initially, enabling you to move swiftly and informally, and then are able to transition to a manager-managed structure in the future when more formality and role responsibility structure is needed.

     


    Posted: January 18th, 2014 at 8:06 pm | | Email Post |
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    Posted by Bernie Dietz
    Categories: Virginia limited liability companies

    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.


    Posted: October 25th, 2012 at 3:58 pm | | Email Post |
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    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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