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    Posted by Bernie Dietz
    Categories: Virginia limited liability companies

    One of the nice benefits of an LLC in Virginia is that you have many choices for how you will be taxed by the IRS.  The choices available to you will depend on whether you’re a single-member LLC or a multiple member LLC. 

    If you are a single-member LLC, the default tax status is as a sole proprietor.  This means that if you do nothing else, the IRS will disregard your LLC for tax purposes.  If you choose, however, you may elect to be taxed as either a C corp or an S corp.  An S corp may be beneficial for you because you can avoid some wage taxes on distributions.  in order to elect to be taxed as a C corp or a S corp, please keep in mind that you will need to file an additional form with the IRS.  That form, form 2553, can be found on the IRS website (opens as a PDF).

    If you are a multi-member LLC, the default tax status is as a partnership.  This means that if you do nothing else, the IRS will disregard your LLC for tax purposes, and the owners will be taxed on their proportion of income and losses in relation to their ownership share.  If you choose, however, you may elect to be taxed as either a C corp or a S corp.

    You should check with your CPA for more information on which tax status would be most beneficial for you.


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    Posted by Bernie Dietz
    Categories: Franchises

    Are you considering buying a franchise in Virginia?  If you are, the first thing you should do is make sure that the franchise you’re considering has properly registered in Virginia.  Virginia, along with 14 other states, requires franchise registration.  This means that before a company can start selling franchises in Virginia, they must submit documentation and be approved by the Virginia State Corporation Commission.  If they have not done so, they have violated the laws of Virginia.

    It’s easy to determine whether a company has registered to sell franchises in Virginia.  The Virginia State Corporation Commission, Division of Securities and Retail Franchising, provides an online database where you can search for companies that have registered to sell franchises in Virginia.  The database can be found here: SCC franchise database.

    Additionally, you can visit the Division of Retail Franchising in person to review any of the documents that have been filed by franchisors.

    Once you’ve done this initial due diligence, you can do further due diligence.  For more information on that, check out our Top 10 Checklist for Evaluating a Franchise.


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    I form a lot of Virginia limited liability companies and Virginia corporations for clients.  When deciding what entity to operate a business under, one of the first questions is "what is the difference between a Virginia corporation and a Virginia LLC?"  Here are my top five differences between the two:

    1. Cost: to form a Virginia corporation, the filing fee paid to the State Corporation Commission starts at $75.00 and the annual renewal fee starts at $100.00 (both depending on the number of authorized shares of the corporation.  For a Virginia LLC, the filing fee paid to the Virginia SCC is higher – a flat $100.00 – but the annual renewal fee is $50.00, less than a corporation.  So, in the long run, a LLC pays less in filing fees.
    2. Flexibility:  LLC’s are less rigid in their structure than corporations, so you have more flexibility in adapting the LLC to your unique business.  The Operating Agreement of a LLC (which you should definitely have if you are a LLC) can be structured in a limitless amount of ways.
    3. Annual Reports: Required for a corporation, not required for a LLC.  Less paperwork = good thing.
    4. Formality:  A corporation is a formal entity with officers and directors (at least one of each) required.  A LLC, on the other hand, can be "member managed" and run in a less formal way.  For small, start-up businesses, less formality means you can focus on making money rather than administrative work.
    5. Tax Benefits:  LLC’s have more options as to how they are taxed.  Corporationc can choose between taxation as a C corp or S corp (if they qualify) while a LLC can decide to be taxed as a  sole proprietorship (if single owner) or partnership (multiple owners), C corp, or S corp.  You can also switch your tax status as a LLC once every sixty months.  More choices are usually better than less.

    Those are my top five differences. I’m sure others out there might have additional differences.  Just keep in mind that the major benefit of corporations and LLC’s are the same (assuming you formed your corporation or LLC correctly) – limited liability for the owners.


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    Posted by Bernie Dietz
    Categories: FAQ

    Welcome to my Virginia business law blog and this first post.  I have been meaning to start this blog for quite some time now and am glad to finally get started.  I plan to use this blog to provide useful information to entrepreneurs and business owners and answer the frequently asked questions that come across my desk. 

    If you’re wondering who I am, I am a Virginia (and Maryland and D.C.) licensed attorney that focuses on business  legal  issues.  I represent a wide variety of businesses and business people around the country and around the world (with my Internet law work) and enjoy helping entrepreneurs in many different industries.  For more about me and my background, you can visit www.DietzLawFirm.com/aboutus.htm

    If you have any issues you would like to see addressed on this blog, please send me an email and let me know.  Thanks for reading!

    Bernie Dietz



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