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Section Six: Finances, Business Structures and Taxes

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B. Business Structures - The four most common forms of a business organization are sole proprietorship, partnership, corporations and limited liability company.

Local Resources are:

• Prince William Regional Chamber of Commerce Certified Public Attorneys
• SSC Business Registration Guide

A Sole Proprietorship is a business that is owned by an individual who is solely responsible for all aspects of the business. All that is necessary is to establish a sole proprietorship is to obtain necessary local licenses. Sole proprietorship is the easiest of the legal structures to set up and is the most common small business legal structure.

A General Partnership is a legal entity that is jointly owned by two or more persons. As in the sole proprietorship, the owners are personally responsible for all debts of the firm, even those debits in excess of the amount invested in the business. An attorney should be consulted to help prepare the partnership agreement.

A Limited Partnership must be filed with the State Corporation Commission. The requirements for establishing a limited partnership include filing a certificate that contains the name of the partnership, its specified office location, its registered agent, and the name of each general partner.

A Corporation is a business that is formed and authorized by law to act as a single person, although constituted by one or more persons, and is legally endowed with rights and responsibilities. There are two general types of corporations: regular and Subchapter-S.

The Regular Corporation is the better-known corporate structure. This type of corporation requires several procedures:

• obtaining a corporate taxpayer identification number from the IRS
• obtaining a state certificate of incorporation
• holding a stockholders' meeting to elect directors who in turn elect the corporate officers. (at least once a year meetings)

The Subchapter-S Corporation is a new venture that can have no more than 75 shareholders and no more than 20% of its income earned from passive investments. The losses of the corporation can be deducted by the individual stockholders and can be earned forward or backward to off set any gains. This is a significant advantage in attracting capital from individual investors who want a tax write-off the first several years when the corporation is losing money. When the new venture starts to earn a profit, the structure can be changed from an S corporation to a regular corporation with its accompany tax laws.

It is advisable to consult an attorney when organizing a corporation to assure full compliance with Virginia and Federal laws. All corporations are required to file articles of incorporation and amendments with the SCC. Corporations that do business in more than one state must comply with the federal laws regarding interstate and commerce and with the various state laws.

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Business Start-Up and Growth Guide Menu:

  Select a Guide Section GUIDE COVER INTRODUCTION ACKNOWLEDGEMENTS ------------------------------------------------------------- SECTION ONE: SERVICE/PRODUCT STRATEGY A. Introduction B. Developing Your Product/Service Description C. Developing Your Competive Comparison D. Developing Your Equipment Description E. Developing Your Technology Description F. Developing a "Fulfillment" Description G. Developing a Pricing Strategy H. Developing a Description of Future Products and/or Services I. Sample Business Plans ------------------------------------------------------------- SECTION TWO: MARKETING A. Introduction: What's Marketing? B. Starting Your Marketing Program...Before You Hit the Pavement C. Researching Your Marketing Strategy D. Identifying Your Marketing Strategy E. Develop Your Marketing Plan -- Market Segmentation F. Improving Your "ROI" on Your Marketing Dollars G. Understanding Marketing Tools H. Understanding Market Segmentation I. Marketing to Consumers J. Marketing Through the Prince william Region's Chamber K. Marketing to Local Governments L. Marketing to the Commonwealth of Virginia M. Marketing to the Federal Government N. Writing Proposals O. Creating Your Marketing Materials P. Benefiting from the Small Business Administration Q. Receiving Assistance from Retired Business Executives Additional Reference Websites ------------------------------------------------------------- III. SALES A. Introduction: Sales Plan B. Targeting Customers C. Earning Consumer Satisfaction and Loyalty D. Dividing Sales Responsibilities E. Setting Sales Goals and Measurements F. Forecasting Sales G. Sales and Customer Relationship Managment Software ------------------------------------------------------------- IV. BUSINESS, PROFESSIONAL AND OCCUPATIONAL LICENSE A. Introduction B. Registering a Trade Name or General Partnership C. Registering a Corporation or Limited Partnership D. Complying with Zoning and Building Requirements E. Application Checklist F. Information for Contractors G. Special Trade Contractor H. Worker's Compensation I. Federal Taxes J. State Sales Taxes K. Food Establishments L. Alcoholic Beverage Importation and Sale M. Peddlers and Itinerent Vendors N. Pawn Shop Owners and Dealers of Special Metals and Gems O. Professional Registration License ------------------------------------------------------------- V. OPERATIONS A. Introduction B. Building Management Team and Staffing C. Choosing a Business Location D. Minimizing Utilities Costs E. Insuring Your Business F. Doing Business on the Internet ------------------------------------------------------------- VI. FINANCIAL A. Preparing a Financial Statement B. Business Structures C. Taxes ------------------------------------------------------------- VII. ADDITIONAL RESOURCES A. Introduction