Choosing a Virginia Business Entity

Choosing a Virginia Business Entity
Publication Date: 2019
Available Formats: Print (264 pages, softcover, 1 volume)
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Content Highlights:

  • Why Use a Business Entity?
  • Comparison of Business Entities
  • Tax Considerations
  • Choice of Entity Chart

The starting point for selecting a business form should be to gather all relevant information as to the nature of the business, business goals, individual concerns and needs, management preferences, ownership considerations, tax considerations, and other information that may help distinguish the business. From there, it is a matter of comparing the characteristics of the different business forms and analyzing which matches up best with the information gathered.

Updated through June 2019, the new edition includes many updates, among them explanation and analysis of the broad impact of the federal Tax Cuts and Jobs Act enacted in late 2017.

How your practice can benefit from this publication:

  • Equips you to advise your client about which type of business organization best fits their situation and purposes
  • Covers management of the organization, day-to-day operations, protection from liability, tax consequences, and exit strategies
  • Includes sample forms for setting up a business organization
  • Compact and portable 7" x 10" softcover format
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Table of Contents

CHAPTER LIST

1. Why Use a Business Entity?

2. Comparison of Business Entities

3. Tax Considerations

CHAPTER 1: WHY USE A BUSINESS ENTITY?

1.1 NATURE AND SCOPE OF THE UNDERTAKING

1.2 MANAGEMENT STRUCTURE
        1.201 In General
        1.202 Authority to Bind the Entity
        1.203 Centralized Management

1.3 LIABILITY PROTECTION
        1.301 Tort Liability
        1.302 Contractual Obligations
        1.303 Statutory Liability

1.4 TAXATION

1.5 Ease of Transfer of Ownership
        1.501 Investors.
        1.502 Employee Ownership and Incentives
        1.503 Sale of Assets and Interests
        1.504 Estate Planning
        1.505 Confidentiality of Ownership

1.6 FINANCING CONVENIENCE
        1.601 Entity Level Debt
        1.602 Bankruptcy Remote Entities

1.7 JURISDICTIONAL ISSUES

1.8 CONVERSION OF REAL PROPERTY TO PERSONAL PROPERTY

1.9 TERMINATION OF AUTHORITY RESULTING FROM HIRING
ILLEGAL ALIENS

CHAPTER 2: COMPARISON OF BUSINESS ENTITIES

2.1 INTRODUCTION

2.2 SOLE PROPRIETORSHIPS
        2.201 Purpose
        2.202 Organization
        2.203 Permitted Ownership
        2.204 Control
        2.205 Duration
        2.206 Owner Liability
        2.207 Classes of Ownership Interest
        2.208 Transfer of Interests and Assets
        2.209 Income Tax Treatment
        2.210 Advantages
        2.211 Disadvantages

2.3 CORPORATIONS
        2.301 Purpose
        2.302 Organization
        2.303 Permitted Ownership
        2.304 Owner Liability
        2.305 Classes of Ownership Interest
        2.306 Transfer of Interests
        2.307 Income Tax Treatment
        2.308 Advantages
        2.309 Disadvantages
        2.310 Benefit Corporations
    
2.4 GENERAL PARTNERSHIPS
        2.401 Purpose
        2.402 Organization
        2.403 Permitted Ownership
        2.404 Control
        2.405 Duration
        2.406 Owner Liability
        2.407 Classes of Ownership Interest
        2.408 Transfer of Interests
        2.409 Income Tax Treatment
        2.410 Advantages
        2.411 Disadvantages
    
2.5 LIMITED PARTNERSHIPS
        2.501 Purpose
        2.502 Organization
        2.503 Permitted Ownership
        2.504 Control
        2.505 Duration
        2.506 Owner Liability
        2.507 Classes of Ownership Interest
        2.508 Transfer of Interests
        2.509 Income Tax Treatment
        2.510 Advantages
        2.511 Disadvantages
    
2.6 REGISTERED LIMITED LIABILITY PARTNERSHIPS
        2.601 Purpose
        2.602 Organization
        2.603 Permitted Ownership
        2.604 Control
        2.605 Duration
        2.606 Owner Liability
        2.607 Classes of Ownership Interest
        2.608 Transfer of Interests
        2.609 Income Tax Treatment
        2.610 Advantages
        2.611 Disadvantages
    
2.7 LIMITED LIABILITY COMPANIES
        2.701 Purpose
        2.702 Organization
        2.703 Permitted Ownership
        2.704 Control
        2.705 Duration
        2.706 Owner and Manager Liability
        2.707 Classes of Ownership Interest
        2.708 Transfer of Interests
        2.709 Income Tax Treatment
        2.710 Advantages
        2.711 Disadvantages

2.8 BUSINESS TRUSTS
        2.801 Purpose
        2.802 Organization
        2.803 Permitted Ownership
        2.804 Control
        2.805 Duration
        2.806 Owner Liability
        2.807 Trustee Liability
        2.808 Classes of Ownership Interest
        2.809 Transfer of Interests
        2.810 Income Tax Treatment
        2.811 Advantages
        2.812 Disadvantages

2.9 CONVERSIONS AND MERGERS
        2.901 Conversion of Limited Partnership into General Partnership
        2.902 Conversion of General or Limited Partnership into Registered
        Limited Liability Partnership
        2.903 Conversion of General or Limited Partnership into Limited
        Liability Company
        2.904 Conversion of Corporation into Limited Liability Company and
        Vice Versa
        2.905 Conversion of Domestic Entity into Business Trust
        2.906 Merger and Share Exchange of Corporations
        2.907 Merger of General Partnership with Limited Partnership,
        Limited Liability Company, Business Trust, or Corporation
        2.908 Merger of Limited Partnership, Limited Liability Company, or
        Business Trust with Corporation
        2.909 Merger of Business Trust with Business Trust or Other Entity
        2.910 Virginia Real Estate Investment Trusts

2.10 DOMESTICATION AND REGISTRATION OF FOREIGN ENTITIES
        2.1001 Domestication of Corporations
        2.1002 Domestication of Limited Liability Companies
        2.1003 Domestication of Business Trusts
        2.1004 Certificates of Authority for Foreign Corporations
        2.1005 Registration of Foreign Limited Partnerships
        2.1006 Registration of Foreign Limited Liability Companies
        2.1007 Registration of Foreign Business Trusts

APPENDIX 2-1: ARTICLES OF INCORPORATION

APPENDIX 2-2: PARTNERSHIP AGREEMENT

APPENDIX 2-3: ARTICLES OF ORGANIZATION OF A LIMITED
LIABILITY COMPANY

APPENDIX 2-4: OPERATING AGREEMENT WITH BUY-SELL
PROVISION AND OPTIONAL MANAGER-MANAGEMENT
PROVISIONS

CHAPTER 3: BASIC TAX CONSIDERATIONS

3.1 INCOME TAX RATES
        3.101 In General
        3.102 American Taxpayer Relief Act of 2012
        3.103 Significant Income Tax Provisions of ATRA 2012
        3.104 Taxation of Qualified Dividends
        3.105 Significant Income Tax Provisions of the Tax Cuts and
        Jobs Act of 2017
        3.106 Section 199A—The Qualified Business Income
        Deduction
        3.107 Implications of Tax Rate Changes-A Recent History
    
3.2 PASS-THROUGH ENTITY VERSUS C CORPORATION
        3.201 Initial Considerations
    
3.3 PASS-THROUGH ENTITIES
        3.301 LLC As Entity of Choice
        3.302 S Corporation as Entity of Choice
        3.303 Advantages of Pass-Through Entity
        3.304 Disadvantages of Pass-Through Entity
        3.305 Advantages of C Corporation
        3.306 Disadvantages of C Corporation

3.4 DISREGARDED ENTITIES
        3.401 In General
        3.402 Election to Be Taxed as S Corporation
        3.403 Qualified Subchapter S Subsidiary
        3.404 Multiple-Member Entity
        3.405 Conversion from Disregarded Entity to Partnership or
        Corporation
        3.406 Conversion from Partnership or Corporation to
        Disregarded Entity
    
3.5 MISCELLANEOUS CONSIDERATIONS
        3.501 Passive Activity Rules
        3.502 Tax Year
        3.503 Tax Filings
        3.504 Constructive Dividends

CHOICE OF ENTITY CHART
        Pre-Organization Considerations
        Tax Issues
        Organizing the Entity
        Owners
        Operations
        Changes in Ownership
        Dissociation and Dissolution
        Estate Planning Considerations

TABLE OF AUTHORITIES

INDEX


Authors

Richard H. Howard-Smith, Flora Pettit PC / Charlottesville

Richard H. Howard-Smith is a tax attorney with the Charlottesville office of the law firm of Flora Pettit PC, practicing primarily in the areas of estate planning and administration, business organizations and transactions, charitable planned giving, taxation, tax-exempt organizations, and general business work. He graduated from the University of Virginia (B.A. 1981), and the Marshall-Wythe School of Law, College of William and Mary (J.D. 1984; Master of Law and Taxation 1985). He is a member of the Virginia State Bar (Taxation; Trust & Estates Sections); the American Bar Association (Taxation; Real Property, Probate and Trust Law Sections); the Virginia Bar Association; and the Charlottesville-Albemarle Bar Association (serving as President for the 2019-2020 term). Mr. Howard-Smith is also a Fellow in the American College of Trust and Estate Counsel.

Mr. Howard-Smith has been a lecturer for Virginia CLE seminars on Choice of Entity, Estate Planning and Administration, Trusts, Negotiating the Purchase and Sale of a Business, Limited Liability Companies, The 2001 Tax Act, and Bridge the Gap.

Mr. Howard-Smith has been listed in Best Lawyers in America (Tax; Wills, Trusts and Estates), Virginia Business magazine’s “Legal Elite,” Virginia Super Lawyers, Who’s Who Among American Lawyers, and Who’s Who in American Law.

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