You were probably advised to consider a form that would limit the owners' personal liability due to the activities or obligations of the business. Recent changes in Virginia law may impact that choice. Failure to file the annual report and pay the annual fee on time results in automatic termination of corporate existence. Those who act on behalf of a dissolved corporation can be held personally liable for obligations undertaken and liabilities incurred after dissolution of the corporation, even if the dissolution occurs automatically as a result of failure to file an annual report, as decided by the Virginia Supreme Court in McLean Bank v. Nelson. You cannot avoid personal liability incurred during such a period of automatic dissolution by having the corporation pay the fee, file the report and reinstate its corporate status.
Limited liability is a status bestowed by statute.
Without the entity status, limited liability may disappear, especially if the entity is a corporation. In McLean Bank, the bank held what appeared on its face to be a corporate note because the note was signed by the Secretary and President of the corporation in their capacity as officers. When the note was not paid, McLean Bank sued the signing officers personally on the grounds that the corporation had been automatically dissolved at the time the note was executed. Under former Virginia Code 13.1-752, if a corporation failed to file an annual report or pay its annual fee by September 1 of the year in which the report or fee was due, corporate status was terminated on that date. The law was previously unclear as to LLCs.