There are four major benefits to creating an LLC in Va as a single member LLC over operating your business as a sole proprietorship. With the costs of starting and maintaining a limited liability company being so minimal, most attorneys and accountants would universally recommend the use of the LLC. . . it is a protection vehicle and simple to maintain.
PROTECTION, PROTECTION, PROTECTION
An LLC in Va provides an automatic layer of protection between you and your business activities. This means that if someone were ever to sue your business for a business obligation or liability, then you would not be personally liable just because you are the owner.
Who can sue your business? Anyone that comes in contact with your business. It could be a customer, person you contract to get services from, employee, contractor, even just a person who may fall on your property.
Now, you can start to think through the chances of who can sue you but it is a fact in this country that business lawsuits are an epidemic. They are about money. If your business starts to make money, your chances of lawsuits are higher. Instead of justifying or hoping you never get sued as a sole proprietor, it is better to ask whether paying a few hundred dollars to create an LLC in Va and a $50 annual registration fee is worth having this protection. If you need a registered agent, your costs may increase by another $100 a year.
NO ADDED COMPLEXITY WHEN IT COMES TO TAXES
For a single member LLC, there is no difference in how federal and state income taxes are paid. The IRS disregards the LLC for tax purposes only and so you pay taxes the same way as if you were sole proprietor.
Taxes are paid on a Schedule C of your personal tax return. Accordingly, by operating a single member LLC in Va as opposed to a sole proprietorship, you get all the state benefits of the limited liability company without any added income tax complexity.
MORE PROFESSIONAL AND TRUSTWORTHY
One way that customers separate the real serious businesses from the rest is when a business is operated through a legal entity such as a limited liability company. It is so easy to come up with a creative name and just call yourself a business- this is what sole proprietors do. You have no idea what other formal planning a sole proprietor has done.
The astute customer understands that a business that has gone through the effort of creating an LLC in Va to operate the business has intelligent and serious owners behind it. This is a sign of trust and professionalism.
Now, there are many reputable sole proprietors out there but upon first glance it is hard to know who is legitimate and who is not. By having an LLC designation after your business name, it makes things easier to get started and get customers.