Business Entity Formation
A business entity is an organization created by one or more natural persons to carry on a trade or business. Business entities are created or formed at the state level, often by filing documents with a state agency such as the Secretary of State.
Business Trust
A business trust is an unincorporated association whose governing instrument, sometimes referred to as a declaration of trust, provides that one or more trustees will manage property or conduct for-profit business activities on behalf of one or more beneficial owners. A business trust is a separate legal entity and, generally, its trustees and beneficial owners are not liable for the obligations of the business trust.
Corporation
A corporation is an artificial person or legal entity managed by a board of directors, consisting of one or more individuals, who collectively elect officers to run the corporation’s day-to-day business activities. There are two types of corporations in Virginia, stock corporations, which are authorized to issue shares to persons who become shareholders, the owners of the corporation, and non-stock corporations, which may have members, but not owners. Stock corporations are usually formed to generate a profit for the shareholders. Non-stock corporations are usually organized for not-for-profit purposes, such as a tax-exempt, charitable organization or a property owners’ association. Generally, officers, directors, shareholders and members are not liable for the obligations of the corporation.
General Partnership
A general partnership (sometimes simply referred to as a “partnership”) is an association of two or more persons to carry on, as co-owners, a business for profit. Each partner contributes money, property and/or services in return for an interest in the general partnership, shares in the profits and losses of the general partnership’s business, and has equal rights in the management and conduct of the partnership’s business. A general partnership is an entity distinct from its partners, but unless the general partnership is registered as a registered limited liability partnership (see this category, below), each partner is liable for the obligations of the general partnership.
Limited Liability Company
A limited liability company is an unincorporated association of one or more members (the owners) who share in the profits and losses of the company’s business. It is managed in accordance with an operating agreement by one or more members (member-managed) or by one or more managers (manager-managed). A limited liability company is a separate legal entity and, generally, the members and managers are not liable for the obligations of the limited liability company.
Limited Partnership
A limited partnership, which is a type of partnership distinct from a general partnership, is formed by two or more persons with at least one general partner and one limited partner. The general partners exercise control over the management of the limited partnership’s business. The limited partners contribute money, property and/or services in return for an interest in the partnership, and share in the profits and losses of the limited partnership with the general partners in accordance with a written partnership agreement or, if there is none, the value of the unreturned contributions made by each partner. A limited partnership is an entity distinct from its partners. Generally, the limited partners are not liable for the obligations of the limited partnership. Unless the limited partnership is registered as a registered limited liability partnership (see this category, below), however, each general partner is liable for the obligations of the limited partnership.
