When starting your own business, one of the first decisions you’ll have to make is to determine the type of legal business structure you want to establish. A limited liability company (LLC) is one popular option, as it’s easy and cost-efficient to get off the ground. It also helps to protect you personally in case of liability issues.
Vermont is a great choice as the location for your LLC. The state offers an affordable and streamlined startup process, designed to make the procedure as easy as possible for ambitious entrepreneurs. Still, it’s imperative that you follow this step-by-step guide or risk delaying your company’s foundation — or getting into hot water when it comes to important issues like taxes.
This article will give you a detailed breakdown of the actions you need to take to start an LLC in Vermont.
Creating your LLC in Vermont is a straightforward, five-step process. First, you have to choose an acceptable business name, in line with the state’s business naming requirements. Then, you have to select a registered agent, a person who can accept legal paperwork on behalf of your business.
With these tasks completed, you can proceed with filing your Vermont Articles of Organization. This is the application to establish your LLC as a formally recognized business entity in the state. At this point, it’s also a good idea to draw up an Operating Agreement for your company.
With your Articles of Organization successfully filed, the next step is to figure out what tax obligations your Vermont LLC will be subject to. Both state and federal tax requirements need to be considered. As part of this step, you should apply for your federal Employer Identification Number (EIN). This is your company’s unique identifier for all future tax paperwork.
Step 1: Name Your Vermont LLC
Choose your business name carefully. It’s the first impression future clients will get of your business. You want something that is easy to remember and fitting for the goods or services you offer.
Your Vermont LLC’s name must also meet certain legal requirements:
- Choose a distinguishable name: Vermont law requires this so that each registered business is unique in the state’s records. For instance, “X Y Z Company” is not considered distinguishable from “X.Y.Z. Company.” Check the state’s online business name database to see if your name is already being used.
- Include the term “limited liability company”: Your business name must have the phrase “limited liability company” or one of the following abbreviations in the actual name: “LLC,” “LC,” “Ltd. Co.,” or “Limited Company.”
- Don’t use restricted words: A privately owned company can’t have words in the name that would lead people to confuse it with a government agency. Thus, you can’t include terms in your LLC name like “state department” or “FBI.” Note that some words like “attorney” or “university” may require additional documentation, proving you are allowed to operate in these fields.
- Avoid indecent language: Your business name can’t include words or phrases that are seen as obscene or discriminatory. This could include references to sexual conduct or terms offensive to certain genders, races, or sexual orientations, for example.
The Vermont Secretary of State has comprehensive guidance on how to choose an appropriate name. They recommend not investing in any marketing materials, like signage or business cards, until your business name has been approved.
If you come up with the perfect name and want to reserve it, you can do so by applying to the Vermont Secretary of State. Assuming the name meets the above points, the Secretary of State will reserve the name for your exclusive use for 120 days. This ensures your chosen name is safe while you prepare the other steps needed to file your Articles of Organization.
Keep in mind that you can also use a DBA or “Doing Business As.” A DBA sometimes called an “assumed business name” or “fictitious name,” is just another name you can call your business. Businesses will sometimes use a DBA when they want to open a different kind of store or roll out a new product line. See this page for more information on getting a DBA in Vermont.
Check the United States Patent and Trademark Office website to see whether your business name or logo is federally trademarked. If not, you can apply for a trademark through the website if you desire. Trademarks can also happen at the state level, though.
Step 2: Appoint a Registered Agent in Vermont
Any registered Vermont business must have a physical point of contact where legal documentation can be securely delivered. Known as a registered agent, this person has the responsibility of accepting any legal documents directed at the business. This is important because legal papers, like lawsuits, are required to be delivered in person. According to Vermont law, the agent can be an individual residing in the state, a domestic corporation, or another LLC. A foreign corporation or foreign LLC permitted to do business in the state is also allowed. However, keep in mind that an actual individual must be on hand during standard business hours to accept legal notices. You can’t use a P.O. box address for a registered agent. While Vermont law allows you to act as your LLC’s own registered agent, this isn’t advisable. Why? The registered agent’s contact information is a matter of public record, and you likely don’t want your personal details so easily accessible. This is especially true since the registered agent will be the point person for potentially touchy issues, like service of process notices if your business is sued. Although you can be your own registered agent, it is possible (and likely preferable) to hire a registered agent service. They will serve as your point of contact, accepting and securely storing any legal notices. Depending on the provider, you can request additional services, like receiving reminders of upcoming deadlines to respond to legal complaints and ensuring that you remain in good standing with any required paperwork. Some additional benefits of an outside registered agent include:
- Flexibility to work when you’re most productive: Because someone else will be available during traditional business hours, you’ll have the freedom to grow your business on a schedule that works for you.
- Moving your business is less of a hassle: With a designated registered office, you don’t have to worry about changing the address on your LLC paperwork if you decide you need to change locations.
Step 3: File Vermont Articles of Organization
With the above steps complete, you can actually file the Articles of Organization needed to register your Vermont LLC with the Secretary of State. Note, though, that Vermont prefers you file online, so if you’d prefer to mail your Articles of Organization, you’ll need to submit a form requesting a physical copy to fill out. At the time of submission, you’ll also need to submit a $125 filing fee.
The form requires you to provide the following details:
- The LLC’s name
- Resident agent’s name and contact details
- LLC’s office address
- Type of LLC (regular, professional, low-profit)
- The end month of the LLC’s fiscal year
- Business description (use the appropriate NAICS code for this, which you can look up here)
- Any members (owners) of the LLC
You must also define whether the LLC will be member- or manager-managed in the Articles of Organization. A member-managed model is best if there aren’t many members, and the members plan to be actively involved in daily business operations. A manager-managed model is better for larger LLCs with many members, who might not be available to participate in daily business activities.
You can submit the Articles of Organization in person, via mail, or online. Hand-delivered or postal submissions must be directed to:
Vermont Secretary of State Corporations Division
128 State Street Montpelier, VT
They must be accompanied by a check or money order, payable to “VT SOS,” and be accompanied by a self-addressed, stamped envelope. Allow seven to 10 business days minimum for processing.
The faster option is to apply online. Electronic processing usually takes one business day or less. In this case, you can pay the $125 filing fee by credit card or echeck.
Step 4: Create an Operating Agreement
Vermont LLCs are not required to submit an Operating Agreement along with the Articles of Organization. You should consider creating this document nonetheless, however. It benefits you in many ways.
An Operating Agreement defines LLC members (owners) and the duties and responsibilities of the members. It also lays out the procedures for making changes to the LLC, like bringing in a new member. Having such details set in writing before your business operations begin can decrease the likelihood of conflict between members later.
Additionally, an Operating Agreement helps distinguish the LLC, a business entity, from the members who own it. This offers valuable protection for members in case of lawsuits or similar liability claims. Members’ private assets are better safeguarded.
A comprehensive, detailed LLC Operating Agreement will bring clarity to many facets of your business. Paying a professional to create this documentation for you is well worth the price.
Step 5: Apply for an EIN
An Employer Identification Number (EIN) is a unique series of nine numbers. No two EINs are the same. This code is used to identify your business on all tax paperwork. You could compare it to a Social Security number, but for a business instead of a person.
Federal law requires you to provide an EIN if you hire employees. Even if you aren’t planning to hire other people, for the time being, there are other practical advantages to getting an EIN. If you want to open a business bank account, for example, you will likely need an EIN. You can also use your EIN to register on Vermont’s myVTax portal, which allows for simplified tax filing and payment.
Applying for an EIN is easy and free of charge. Just visit the IRS website to complete your request. Given the many benefits, there’s really no reason not to get an EIN. You can do this online and receive your EIN to download, save, and print immediately.
Alternatively, you can fill out Form SS-4 and submit it via postal mail. The form filing instructions detail where to send the paperwork. Note that this option takes longer. You are advised to submit your application four to five weeks before you anticipate needing to actually use your EIN.
How much does it cost to start an LLC in Vermont?
The cost of establishing your Vermont LLC is relatively low. You must pay $125 upon submitting the Articles of Organization.
You may need to apply for permits or licenses, which will incur additional costs. This depends on what type of business you are operating. Businesses that often require additional licenses or permits include food services, plumbing, and construction, among others.
The U.S. Small Business Administration (SBA) has information on both federal and state license and permit requirements. Your local government entities may have licensing requirements for your company, too.
What are the benefits of an LLC in Vermont?
A Vermont LLC offers many advantages. Here’s an overview of how you benefit:
- A streamlined, simple startup process
- Additional organizational guidance possible with an Operating Agreement
- A low-cost foundation, with a filing fee of just $125
- Added protection through the separation of the business entity and your private person
- Easy tax filing through the use of the state’s myVTax portal
How is a Vermont LLC taxed?
Your Vermont LLC tax obligations vary depending on whether you choose to be taxed as a corporation, LLC partnership, or single-member LLC. If you choose to pay individual income taxes on the profits you take out of the LLC as a member, you will be subject to Vermont’s personal net income tax rates.
Be aware that all Vermont LLCs must file an annual report with the Vermont Secretary of State Corporations Division. This must be submitted within the last three months of the company’s fiscal year, as designated in your Articles of Organization. You can file online or by mail. The filing fee is $35 for a Vermont-based LLC.
Your business may also be subject to other types of taxes, depending on how it operates. If you have hired employees, for example, you must pay employer taxes. If your LLC will be selling a physical product, you’ll need to register for a seller’s permit through the Vermont Department of Taxes website; this will allow you to collect sales tax on taxable sales.
Vermont LLC FAQs
What is the processing time to form my Vermont LLC?
This depends on how you file your Articles of Organization with the Secretary of State. If you submit a paper application via mail or in person, expect to wait for seven to 10 business days. Online submissions are usually processed on the same day.
Do I need to file my Operating Agreement with the state of Vermont
There is no legal requirement to submit an Operating Agreement when filing your Articles of Organization. Creating an Operating Agreement is highly advisable, however, as it sets distinct guidelines on who will manage the business and how.
What tax structure should I choose for my Vermont LLC?
LLCs typically elect the default tax status, which means that owners pay state and federal taxes on income earned from the business as part of their individual taxes. Larger LLCs sometimes find it advantageous to file taxes as a corporation. It’s best to consult with a tax professional on what model best suits your needs, however.
Does Vermont allow a Series LLC?
A Series LLC consists of multiple LLCs, which operate under the auspices of one larger LLC. Each LLC has its own assets, rights, and obligations. Series LLCs are not currently permitted in Vermont.
Which licenses and insurance are required for an LLC in Vermont?
Business licenses, insurance, and permits are different based on your industry and the location of your Vermont LLC. You can easily find what licenses are required at the state level here.rnrnIn any case, we recommend hiring a professional service like ZenBusiness, which will provide you with a comprehensive package of all the licenses and insurance required for your Vermont LLC.