One of the most important considerations when starting a business is how you will structure it legally. One common way of structuring a business is by incorporating it. Incorporating a business in the state of Virginia not only allows for flexibility and legal protection, but it also has several tax benefits over other states. Here are 6 tax benefits of incorporating in Virginia.
1. Reduced Personal Liability
One of the biggest concerns that often leads people to choose to incorporate their business is that their personal assets will be compromised should there be any business debts or liabilities. A business that sets itself up as a corporation or a limited liability company (LLC) protects its owners’ assets by essentially making the business a separate legal entity. In other words, generally the business owners’ personal assets will be protected from matters of the business.
2. Pass-Through Taxation
Another benefit of incorporating in Virginia is pass-through taxation for LLCs. Whereas a C Corporation, which taxes the business owners separately from the business, the income of an LLC passes through to the owners or members. This can be helpful in that the LLC does not pay federal income taxes, but the members report their income (and losses) on personal tax returns, often paying less.
3. Lower Corporate Income Tax Rates
Virginia also boasts generally favorable corporate income tax rates when compared to other states. Virginia C Corporations have a flat corporate income tax rate, which is sometimes lower than individual income tax rates. When a business has substantial profits, this can lead to savings in taxes.
4. Deductible Business Expenses
So long as there is proper documentation and accurate records, corporations and LLCs are able to deduct ordinary and necessary business expenses from their taxable income. This includes things such as:
- Rent
- Utilities
- Supplies
- Salaries
5. Tax Credits and Incentives
Virginia also offers different tax incentives and credits in order to help encourage businesses to choose to incorporate within the state. There are different credits for things like job creation, investment, and research and development depending upon the location and industry of the business.
There are many different tax benefits that come from incorporating a business in Virginia. However, it’s extremely important to ensure that your business is properly incorporated so that it is able to enjoy these benefits. Since the incorporation process is often complex, it can be a good idea to consult with an experienced Virginia tax attorney.
Surovell Isaacs & Levy PLC Can Help Those in VA Who Wish to Start a Business
If you are looking to incorporate your business in Virginia, or have legal issues with your Virginia business, a knowledgeable and experienced tax attorney can help. It’s important that you seek assistance as soon as possible so that you don’t miss out on tax advantages and instead can maximize them.
At Surovell Isaacs & Levy PLC, we have experience with business formation and taxes. We will help to set you and your business up for success. To learn more or to schedule a consultation, contact us today!
Posted in: Business Law