If you’re considering establishing a corporation, Vermont is a solid choice. Many companies that got their start in the state have become nationally recognized enterprises, from the iconic ice cream duo Ben & Jerry’s to solar power company Norwich Solar Technologies. Read on to find out what it takes to start your Vermont corporation.
How do I form a Corporation in Vermont?
Steps to form your Vermont Corporation
- Name Your Corporation
- Appoint Directors
- Choose an Vermont Registered Agent
- File the Vermont Articles of Incorporation
- Create Corporate Bylaws
- Draft a Shareholder Agreement
- Issue Shares of Stock
- Apply for Necessary Business Permits or Licenses
- File for an EIN and Review Tax Requirements
- Submit your Corporation’s first report
The key to starting your Vermont corporation is filing the Articles of Incorporation with the Secretary of State. It takes more than filling out a single form, however. Before you submit this document, you need to take other steps, like choosing a legal business name and selecting a registered agent service. To help, we’ve broken down how to start a corporation in Vermont into 10 straightforward steps:
Step 1: Name Your Vermont Corporation
The first step when starting a corporation in Vermont is straightforward enough — you need a name. Your business name should be easy to identify and remember and further reflect the goods or services you offer. A one-of-a-kind name is memorable and avoids confusion when people search for your business.
Your business name should be unique from not only a practical but also a legal standpoint. Vermont requires each corporation to have a name that is “distinguishable on the record,” meaning that it isn’t too similar to an existing entity registered in the state. Search the database of Vermont business names to discover whether your chosen name is available.
Vermont has additional legal requirements for naming a corporation:
- The name must include the word “Corporation,” “Incorporated,” “Company,” or “Limited” or one of the following abbreviations: “Corp.,” “Inc.,” “Co.,” or “Ltd.”
- The name may not imply that the business performs any unlawful purpose or any purpose other than described in its Articles of Incorporation.
- The name may not include the word “Cooperative” unless the corporation is specifically a worker cooperative corporation. Discriminatory, unlawful, or indecent language is likewise prohibited.
Once you have the perfect name, you may want to reserve it. This ensures that no one else can take it while you complete the rest of the steps needed to file the Articles of Incorporation. To reserve a business name, open an account with the Secretary of State’s Online Business Service Center (you will need this later). Once logged in, on the left side of the page, click “Name Reservation.” You will have to pay a $20 filing fee.
If you are considering doing business under a name other than the official business name you’ve reserved, now is the time to request an assumed name or “doing business as” (DBA) name. Vermont defines an assumed business name as “any assumed or fictitious name, style or designation other than the proper name(s) of the individual(s) or business/nonprofit entities doing business as such name.” You can register a DBA name online for no extra fee.
Check the U.S. Patent and Trademark Office (USPTO) to see if your desired business name has been federally trademarked to avoid future legal trouble. Trademarks also exist at the state level, and those apply only within the borders of a state. To see if your name has any Vermont trademarks, you can check the state trademark database.
Step 2: Appoint Directors
A corporation’s directors are responsible for overseeing the day-to-day operations. Vermont requires you to name at least one director when filing the Articles of Incorporation. Directors may also be owners of the corporation — but they don’t have to be (while owners can also be directors).
Directors should be selected at an organizational meeting before filing the Articles of Incorporation. The number of directors may be amended but should always be accurately reflected in the Articles of Incorporation and corporate bylaws. An organizational meeting is also an opportunity to establish these bylaws and other operational details, like the share structure.
Step 3: Choose an Vermont Registered Agent
Vermont requires every corporation to have a registered agent. The registered agent is an individual or corporation, physically located at a registered office in the state, who accepts legal mail on behalf of the company. A P.O. box is insufficient since legal mail (like lawsuit notices) must be delivered to an individual.
Note that the registered agent is a matter of public record. Anyone can look this information up online. Thus, it’s not necessarily advisable to serve as your corporation’s registered agent or use your corporation’s place of business as the registered office. You run the risk of your personal information becoming public or having lawsuit notices served at your business.
Step 4: File the Vermont Articles of Incorporation
With the above steps complete, you can file your Vermont Articles of Incorporation. These are the documents you submit to the Secretary of State to establish your business as a legally recognized entity. Some states refer to this paperwork as a Certificate of Incorporation.
You can file the Articles of Incorporation online through the Secretary of State’s Online Business Service Center (you may have opened an account earlier to reserve your business name). You will need to provide the following information:
- Business name
- Fiscal year-end
- Description of the business purpose
- Business contact details
- Principal office (where the corporation will operate)
- Registered office and agent contact details
- How much authorized stock (number of shares) that the corporation may issue and whether shares are divided into any classes or series (preferred stock versus common stock; preferred stockholders are entitled to dividend payouts annually, and common stockholders are not)
- Names and addresses of directors (at least one)
- Name and signature of the incorporator
Online filing costs $125 and typically takes less than one business day. Alternatively, you can download the paperwork and submit it by postal mail or in person (the address is on the form, which can be downloaded from the Online Business Service Center). The filing fee remains $125.
Step 5: Create Corporate Bylaws
Although Vermont doesn’t require you to include a copy of your corporate bylaws with your Articles of Incorporation, the state does mandate that a copy of this documentation be kept at the corporation’s principal office. When you hold your organizational meeting to name directors, draft the corporate bylaws.
Bylaws detail both day-to-day managerial principles and big-picture operating principles for your business. They can help to prevent conflicts, for example, on important issues like who is allowed to vote on corporate decisions. Here are some points you may include:
- Business purpose
- Business owners, their rights, and duties (such as voting rights)
- Directors and their responsibilities
- Procedures for replacing directors
- Management structure
- Details (where and when) regarding director, board, and shareholder meetings
- How corporate stock is issued
- How financial reporting is conducted
- Rules for amending the bylaws
Step 6: Draft a Shareholder Agreement
Shareholders are the owners of the corporation. They own shares in the corporation and have certain rights and duties. A shareholder agreement spells these out. When you draft your bylaws, take the opportunity to draft a shareholder agreement, too. It might include details like:
- Shareholder names and contact information
- Shareholder voting rights
- Shareholder responsibilities (such as financial obligations)
- How shareholders may transfer or sell stock
- How dividends (if applicable) are to be paid out
- Rules for who may buy shares
- What happens to shares if the corporation winds down
- How the shareholder agreement may be changed
The shareholder agreement is another valuable legal document that will bring clarity to your Vermont corporation’s operations and prevent needless disputes. Prepared templates can help you get started with this process, but it’s also wise to have a legal professional go over it with you.
Step 7: Issue Shares of Stock
A corporation is set apart from a limited liability company (LLC) partially by its ability to issue shares of stock. In fact, a corporation is required to issue stock. You had to provide details on the amount and types of shares your corporation may issue in your Vermont Articles of Incorporation. Your corporation may never issue more shares than what is detailed here.
A corporation can opt to issue stock publicly or privately. Privately issued shares usually go to people directly related to the company’s operations, like the founders, private investors, or employees. If a corporation goes public, stock can be bought by the general public.
A corporation must keep track of all issues of stocks. This is detailed in your corporation’s annual report (more on that in step 10). If you issue shares publicly, you must register with the State of Vermont Department of Financial Regulation Securities Division. You must also file quarterly reports with the U.S. Securities and Exchange Commission (SEC).
Step 8: Apply for Necessary Business Permits or Licenses
You will likely need permits or licenses to operate a business in Vermont. For example, if you’re starting a personal fitness business, you may need an athletic trainer’s license. The Vermont Office of Professional Regulation has a list of regulated professions and what certifications you need to present to practice in certain fields.
Vermont has a licensing page to help you determine what licenses and permits your business requires at the state level. Additionally, you need to consider federal and regional regulations regarding logistics and practical matters. For example, if you want to start a restaurant, it must be built in line with public health and safety codes. The Vermont District Office of the U.S. Small Business Administration (SBA) can point you toward local resources. Always check what permits or licenses are needed before starting operations.
Step 9: File for an EIN and Review Tax Requirements
An Employer Identification Number (EIN) is a personalized number used to identify your corporation on tax returns and other important financial paperwork. You need a Vermont EIN for your corporation. You can get one from the IRS online for free. You are also legally required to register for a Vermont business tax account.
In addition to federal income tax, your corporation will pay corporate income tax to Vermont. You’ll also pay a minimum annual $300 tax to the state if your corporation’s gross receipts are $2,000,000 or less; $400 for $2,000,001 to $5,000,000 in gross receipts; and $750 for $5,000,001 and over in gross receipts.
Vermont S corporations can avoid paying federal and state income tax, but they do have to pay a Business Entity Income Tax. The shareholders will still pay federal and state income taxes on their portion of any profits from the corporation on their personal tax returns.
Step 10: Submit Your Corporation’s First Report
Every profit corporation in Vermont must file an annual report (nonprofits must file biennial reports). This must be done within the first two and a half months following the conclusion of the fiscal year-end, as designated in your Articles of Incorporation. This includes updates on the corporation’s ownership and contact details. Reports can be filed online through the Online Business Service Center. The filing fee is $45.
How much does it cost to start a corporation in Vermont?
Filing your Vermont Articles of Incorporation requires a filing fee of $125, whether you file online or by mail. Reserving a business name in Vermont costs $20. The cost of reserving a domain name varies depending on the provider and the name you choose. In terms of ongoing costs, there is the $45 filing fee for the annual report and any permit or licensing fees required to maintain your business. ZenBusiness can alleviate stress by supporting you as you form your Vermont corporation. We can help you through the administrative complexities and help keep your business compliant with Vermont laws for a low annual fee.
What are the benefits of a corporation in Vermont?
A corporation is an official business structure recognized nationally and internationally. It protects shareholders’ personal liability and assets by delineating these individuals from the business entity itself.
So, if your Vermont corporation gets into hot water legally and is sued, your personal liability is limited — and your assets are protected. A corporation also has other benefits, like providing the opportunity to issue shares.
Making Vermont your corporation’s home has additional benefits, including:
- Capital and incentives: Vermont has a variety of capital and incentive initiatives designed to help small and midsize enterprises thrive.
- Opportunity zones: Vermont has certified 25 census areas (for instance, in low-income communities) as “opportunity zones.” Businesses that invest in these zones receive preferential tax treatment.
- International trade assistance: Vermont’s State Trade Expansion Program (STEP) provides financial support to eligible Vermont corporations wanting to enter foreign markets or expand international exports.
Although there are benefits to starting a Vermont corporation, there are also drawbacks to consider. A corporation is a complex business structure, and if you make mistakes, like not meeting tax or reporting requirements, you could face criminal penalties. Consult with a professional business and tax attorney to stay safe.
How is an Vermont corporation taxed?
Your Vermont corporation may be taxed as a C corporation, an S corporation, or a nonprofit. A C corporation is taxed independently from any shareholders. It is taxed as its own independent legal entity.
An S corporation splits profits among shareholders, and each shareholder pays taxes on their earnings (while the corporation isn’t taxed). Submit IRS form 2553 for S corporation status. As stated in Step 10, S corporations do have to pay Vermont’s Business Entity Income Tax.
Nonprofit corporations can apply to the IRS to be exempt from federal taxes. They can also apply to be exempt from some of Vermont’s state taxes. See this Vermont Department of Taxes page for guidance.
In addition to state taxes, Vermont corporations are subject to federal tax reporting and payment requirements. There are also additional taxes to consider, depending on the nature of your business, like payroll tax (if you have employees), sales and use tax (if you sell goods), or meals and rooms tax (in the case of businesses like hotels).
Vermont Corporation FAQs
Does running a corporation in Vermont involve more paperwork than running other types of businesses?
In general, corporations face more complex reporting requirements than other business models. For example, since limited liability companies (LLCs) can’t issue shares, no shareholder agreement is needed.
What is the difference between an LLC and a corporation in Vermont?
Both an LLC and a corporation are legally recognized business entities. However, a corporation may issue shares, while an LLC may not. There are also differences in terms of reporting and taxation requirements.
How do I change my corporation’s name in Vermont?
You can change the name of your corporation in Vermont by filing an amendment with the Secretary of State.
How many people are needed to form a corporation in Vermont?
A single person can form a corporation in Vermont.
Can I form my Vermont corporation online?
Yes. Using the Secretary of State’s online filing system, you can take care of all of your business filings, including initial registration.
How do I dissolve my Vermont corporation?
To dissolve your corporation, you will need to file the Articles of Dissolution.
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