How to manage a business in the Old Dominion state? This is a question all aspiring entrepreneurs are concerned with when facing business formation. In a broad sense, the business should be managed in a way that will keep it compliant with state laws and regulations while making up steam and growing its profit.
However, different business structures offer a different approach to management at a structural level. So, if you stand on the verge of LLC formation and wonder how an LLC company is managed, keep on reading to get a better understanding of the LLC management and control system.
Creating an LLC in Virginia: Let the LLC Services Do This Job For You
First appeared back in 1977, LLCs have become by far the most popular business structure since then, and for a good reason.
In contrast to other entity types, LLC companies allow for relatively simple management, without a load of regulatory requirements and restrictions to match.
Besides, LLC formation lends more legal protection to the company owners, separating them from the business entity at a legal level, which used to be pertinent only to corporations.
Thus, smartly combining the best features of partnerships and corporations, a limited liability company is a relatively new legal entity’s form perfectly fitting the modern business environment.
Suitable for different types of business activities, it’s a great choice for smaller and mid-range businesses with growth potential and a real find for startups and family-owned ventures.
One more obvious benefit of the LLC is an easy formation process, with not so many formalities to follow. Technically, to file an LLC company in Virginia, you just need to get the Articles of Association (which is the company formation doc) approved by the Secretary of State.
In practice, though, the process is a bit more complex. First, you need to determine the state of formation and consider filing fees and reporting requirements imposed by that state. Then you need to invent a name for your future company and check if it’s available. Besides, without finding and appointing the registered agent, you won’t be able to file the Articles of Organization. These are only a few preparation steps, not to mention compliance aspects you’ll have to handle.
So, while you still can finish business formation on your own, by delegating this job to a professional service, you’ll save a lot of time and effort. The benefits offered by multiple LLC formation services cover:
- Thorough checkup of all data you provide for filing;
- Business name availability search and reservation if necessary;
- Registered agent service;
- Customizing and registering your Articles of Organization with the state;
- Getting the Secretary of State’s approval and forwarding the docs back to you;
- Numerous compliance services and helpful add-ons to keep your business in good standing with the state.
Some of the best LLC services such as LegalZoom, Mycompanyworks, and Rocket Lawyer also provide annual reporting services, tax help, and other types of professional legal assistance to businesses.
Serving as one-stop-shops for business formation and maintenance services, these providers also allow for online LLC formation via their protected web platforms.
Company Management Structure After LLC Formation
The managing structure of an LLC company in Virginia is fairly simple, with no strict requirements for bylaws and regular meetings such as those in corporations. Similar to business taxation, the approach to business management is also flexible.
The flexibility here is about giving the LLC owners who are also called LLC members the right to choose how they want to manage their business. Thus, an LLC company can be either member-managed or manager-managed.
Member Management
It’s a default management structure for LLC formation in Virginia unless the company co-owners choose otherwise. In member-managed LLCs, the company owners also function as managers entitled to sign business contracts as eligible company representatives.
In multi-member LLCs, managing members share responsibilities related to ongoing business operations as they deem necessary, taking into account business needs and strategic objectives. In this case, the owners appoint managing members between themselves, and, surely enough, an LLC company can have more than one managing member.
Serving as managing members, the LLC owners still retain their voting rights and the right for the share in the company’s profit. Likewise, even managing the company, they still retain their self-employment tax liabilities.
Manager Management
The other option Virginia LLC company members have at their disposal is to delegate the company management and control over day-to-day operation to a hired manager. Notably, any entity, be it an individual, several persons, or another company, can be an LLC managing manager.
In this case, LLC members only act as business owners not involved in ongoing operations and not entitled to sign business contracts. Notably, still standing under the limited liability umbrella, non-managing LLC members are not exposed to self-employment tax.
Which Management Option Is Right for You?
The member-management structure is valid for both multi-owner and single-owner LLCs. Most often than not, LLC companies in Virginia stick to this option giving company owners full control over all business spheres and the power to work out and realize strategies targeting business growth.
However, some businessmen do choose the manager management option and it can really work in the following situations:
- Passive Investments: Sometimes, the company is financially supported by the members who don’t want to participate in the business management and simply seek to gain profit from their contributions;
- Too Many LLC Members: LLC membership is not limited, which is great for business growth and raising funds. The flip side of this, though, is that decision-making on daily business affairs might become complicated;
- Lack of Professionalism: Being able to pass through business formation doesn’t mean that all LLC members have the necessary management skill to efficiently run the business. Thus, delegating management to a professional with enough experience, you’ll enhance your business chances for success;
- Running Business in Multiple Places: If you have your LLC representative offices in different locations, you won’t be able to be present in all of them, so hiring third-party managers is an obvious beneficial decision in this situation.
Operating Agreement: an Essential Managing Tool to Have After LLC Formation
An Operating Agreement is not a must-have LLC formation doc in Virginia. It’s what we call a company bylaw. Yet, it’s a highly important company management tool, so you shouldn’t disregard it.
If you choose to form an LLC with one of the LLC formation services, many providers have a customized Operating Agreement in their formation bundles or offer it as an option. You can also draft it on your own using one of the templates available on legal websites. However, it’s always nice to have it written by a professional.
Speaking of the company management, an Operating Agreement not only outlines profit distribution principles, ownership rights, and membership conditions but also sets up the company management structure along with ongoing operation procedures and managers’ responsibilities and obligations.
It’s a sort of internal regulatory tool that allows avoiding disagreement and misunderstanding between the company owners and avoids wrong decisions and conflicts that might negatively impact business growth.
