Business Formation & SBA 504 Guidance in Northern Virginia

A business formation attorney helps select and document the legal structure, ownership, management authority, and agreements the business will use. The work can also include coordinating financing, property ownership, registrations, and lender requirements. The scope depends on the business and the engagement.

Sources: Va. Code § 13.1-1011: LLC articles · Va. Code § 13.1-1023: Operating agreements

The choice depends on the owners, management preferences, investment plans, tax treatment, and liability concerns. An LLC and a corporation are different state-law structures. Review the legal choice alongside tax advice rather than assuming one structure is best for every business.

Sources: Va. Code § 13.1-1011: LLC articles · IRS: LLC tax classifications · IRS: S corporations

Not exactly. S corporation status is a federal tax election for an eligible entity. A qualifying LLC can elect corporate tax treatment and may qualify for S corporation treatment. The entity filing and tax election are separate steps, with eligibility and timing requirements to review with a tax adviser.

Sources: IRS: LLC tax classifications · IRS: S corporations

Virginia law generally does not require an operating agreement to be written unless the articles or a written agreement require it. A tailored written agreement is still useful to document ownership, management, contributions, voting, distributions, transfers, and exits. Lender or transaction requirements may also call for written evidence of authority.

Sources: Va. Code § 13.1-1023: Operating agreements

No. Virginia law generally protects a member from company liabilities solely because of membership, but a separate personal guaranty creates a different obligation. Entity formation does not erase a guaranty or every other basis for personal liability. Review the documents the business and each owner are asked to sign.

Sources: Va. Code § 13.1-1019: LLC liability · 13 CFR § 120.160: Loan conditions

Formation creates the entity under state law. An employer identification number is a federal tax identifier issued by the IRS; it does not create the entity or replace a required license. An EIN obtained directly from the IRS has no IRS application fee. A Virginia LLC also needs a qualifying registered agent and registered office.

Sources: Va. Code § 13.1-1011: LLC articles · IRS: Employer identification numbers · Va. Code § 13.1-1015: Registered agents

No. State entity formation is separate from local business licensing, zoning, occupancy, professional licensing, and applicable tax or employer registrations. The requirements depend on the activity and location. Check them before opening or relying on a proposed commercial property for the business.

Sources: SBA: Launching a business

Under FinCEN’s current guidance reviewed October 3, 2026, entities created in the United States are exempt from federal beneficial ownership information reporting. Certain entities formed under foreign-country law and registered in the United States may still have reporting duties. This exemption does not eliminate separate bank, lender, tax, or state information requirements.

Sources: FinCEN: Current BOI reporting guidance

Yes. The firm can review existing filings and agreements, ownership and management authority, and proposed changes connected with growth or financing. A new entity is not always needed. The existing obligations, tax consequences, lender requirements, and transaction objectives should be reviewed before restructuring.

SBA 504 financing supports eligible long-term fixed assets, such as owner-used commercial property and qualifying equipment. A project commonly combines a bank or other third-party loan, a CDC/SBA-backed portion, and a borrower contribution. The fixed-rate feature relates to the CDC/SBA portion; the separate bank loan has its own terms.

Sources: SBA: 504 loan program · 13 CFR § 120.920: Third-party lending

No. Shin Law Office provides legal guidance on entities, agreements, financing documents, and closing. The bank, Certified Development Company, and SBA perform their respective lending, eligibility, and approval functions. Legal representation does not guarantee financing or a particular rate or closing date.

Sources: SBA: 504 loan program

Eligible projects can include commercial buildings, land, construction or renovation, and qualifying long-term machinery and equipment. Related project costs may qualify under the rules. The CDC and lender must assess the specific assets, project budget, business use, and documentation.

Sources: SBA: 504 loan program · 13 CFR § 120.882: Eligible project costs

504 is not a general inventory or working-capital program, and a standalone passive rental-property investment is generally ineligible. Its focus is eligible fixed assets used by an operating business. Certain refinancing structures have separate rules, so ask the CDC to assess the actual use of proceeds rather than treating all business expenses as eligible.

Sources: SBA: 504 loan program · 13 CFR § 120.882: Eligible project costs · 13 CFR § 120.110: Ineligible businesses

The rules permit applicable industry size standards or an alternative financial test. Under that alternative, the applicant and affiliates generally must have tangible net worth no more than $20 million and average net income after federal income taxes, excluding carryover losses, no more than $6.5 million for the preceding two completed fiscal years. Other eligibility and credit requirements still apply.

Sources: 13 CFR § 121.301: Size and affiliation

No. Under 13 CFR 120.910, the minimum is generally 10 percent of project cost excluding administrative costs, 15 percent if the business has operated for two years or less, and 15 percent for a limited or single-purpose building or structure. Both conditions together generally require at least 20 percent. A particular transaction may require more.

Sources: 13 CFR § 120.910: Borrower contributions

A new business is not automatically excluded, but it must meet applicable program and credit requirements. A business operating for two years or less generally triggers at least a 15 percent contribution, or 20 percent when the limited or single-purpose property condition also applies. The lender and CDC must evaluate the business plan, repayment ability, and other criteria.

Sources: SBA: 504 loan program · 13 CFR § 120.910: Borrower contributions

No. The 504 lending limit applies to the 504 portion, not automatically to the entire project including bank financing and borrower funds. The general outstanding 504 limit is $5 million for a borrower and affiliates. Certain qualifying manufacturing or energy projects have a $5.5 million per-project limit. Existing debt, eligible fees, and program conditions need review.

Sources: 13 CFR § 120.931: 504 lending limits

Not necessarily. The CDC/SBA-backed portion provides long-term fixed-rate financing. The bank or other third-party loan has separate terms and may use a fixed or variable rate, a rate reset, or an earlier maturity. Read both sets of documents before comparing total borrowing costs.

Sources: SBA: 504 loan program · 13 CFR § 120.920: Third-party lending

SBA lists 10-, 20-, and 25-year maturities for 504 financing. The appropriate term depends on the financed assets and applicable requirements. The bank’s repayment schedule and maturity are separate. A bank loan can have a balloon balance if it matures before its amortization schedule ends.

Sources: SBA: 504 loan program

For an existing building acquired, renovated, or reconstructed with the financing, the borrower generally must permanently occupy and use at least 51 percent of the rentable property. Up to 49 percent may be permanently leased. If an Eligible Passive Company owns it, the operating company or companies must satisfy the occupancy rules.

Sources: 13 CFR § 120.131: Building occupancy

The business generally must permanently occupy and use at least 60 percent of the rentable property. Up to 20 percent may be permanently leased. It must plan to use some of the remaining space within three years and all remaining space not permanently leased within ten years. The CDC should review the specific occupancy and expansion plan.

Sources: 13 CFR § 120.131: Building occupancy

Potentially. The SBA Eligible Passive Company exception allows a qualifying property-holding entity to lease eligible assets to an eligible operating business. Both the structure and documents must satisfy program conditions. Creating a separate LLC alone does not establish eligibility, remove guaranties, or make a passive investment property eligible.

Sources: 13 CFR § 120.111: Eligible Passive Companies · 13 CFR § 120.110: Ineligible businesses

The lease must be written, subordinate to the SBA lien, and supported by an assignment of rents. Its remaining term, including qualifying renewal options controlled solely by the operating company, must cover the loan term. Rent is limited to the loan payment and permitted direct property-holding expenses. The operating company must be a guarantor or co-borrower.

Sources: 13 CFR § 120.111: Eligible Passive Companies

Owners with at least a 20 percent interest generally must guarantee an SBA business loan. In an Eligible Passive Company structure, the rule reaches qualifying owners of either the property company or the operating company. Additional guarantors may be required for credit or other reasons. A smaller ownership percentage is not an automatic exemption.

Sources: 13 CFR § 120.160: Loan conditions · 13 CFR § 120.111: Eligible Passive Companies

Review the commitments, notes, guaranties, liens, collateral, covenants, default provisions, prepayment terms, and conditions to funding. Entity authority, title, insurance, lease terms, purchase contingencies, and any environmental obligations should be coordinated with the transaction team. The review should occur before the scheduled signing.

There is no single timeline for every project. Eligibility review, underwriting, appraisals, environmental work, title issues, construction, approvals, and document completion can affect timing. Ask the lender and CDC about the specific milestones and any interim financing. Do not assume a consultation or preliminary discussion satisfies a purchase-contract deadline.

No. It models a proposed allocation and principal-and-interest payments using the rates and periods entered. It excludes financing and servicing fees, taxes, insurance, closing costs, rate changes, and bank balloon balances. It does not underwrite the business, determine eligibility, or account for existing affiliate debt. Replace the example rates with lender assumptions.

Some refinancing can qualify, but the rules distinguish different structures and impose conditions on the debt, collateral, business use, and eligible costs. A conventional loan or ownership change is not automatically eligible. Have the CDC and counsel review the current rule and complete transaction before relying on 504 refinancing.

Sources: 13 CFR § 120.882: Eligible project costs

Bring existing entity filings and agreements, an ownership chart, the project budget, any purchase contract or lease, lender or CDC correspondence, and proposed loan documents. Identify the desired outcome and any deposit, financing, or closing deadlines. Financial and tax records can be shared through a suitable channel when needed.

Shin Law Office has offices in Leesburg and Fairfax, Virginia. Call 571-445-6565 or use the contact page to request a consultation about formation, ownership documents, or the legal side of 504 financing. The firm is not a lender, and sending an inquiry does not establish representation or secure financing.