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 Green Mountain 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. Along the way, we’ll also show you how our services can cut through the red tape and help take the stress out of starting your new company.
Creating your LLC in Vermont is a 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.” You can use our free Vermont business name search tool to see if your name is available for use.
- 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 Liability Co,” “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. If you’d rather not deal with this process yourself, we have a business name reservation service that can handle it for you. As part of the service, we also check to see if your desired name is available.
When you’re coming up with a business name, it’s wise to consider whether you can secure a matching domain name so that your future website can be easily found online. We have a tool to help you do a preliminary domain name search, and our domain name registration service can help you secure the online name that will best serve your company.
Keep in mind that you can also use a DBA or “Doing Business As” name. A Vermont 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.
To make sure you’re entirely in the clear with your business name, visit the United States Patent and Trademark Office website to see whether your business name or logo is federally trademarked. Trademarks can also happen at the state level. To find out if your desired business name is already trademarked and/or apply for a trademark of your own, go to the Secretary of State website page for trademarks.
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.
Although you can be your own registered agent, it is possible (and likely preferable) to hire a registered agent service in Vermont. They will serve as your point of contact, accepting any legal notices. Some additional benefits of an outside registered agent service 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 registered agent 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.
Filing official government documents like this can be intimidating for many people, which is why we’re here. With our business formation plans, our professionals handle the filing for you to make sure it’s done quickly and correctly the first time. But, although we can handle this for you, we’ll show you how the process works below.
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 filing fee.
The form requires you to provide the following details:
- The LLC’s name
- Registered 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)
- 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
128 State Street
Montpelier, VT 05633
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 filing fee by credit card or eCheck.
If you have us handle filing your Articles of Organization, once the state approves your LLC, your paperwork will be available from your ZenBusiness dashboard, where you can keep it and other important paperwork digitally organized.
Once you get your physical paperwork back from the state approving your new LLC, you’ll want to keep it in a safe location along with your other important documents, such as your operating agreement, member certificates, contracts, compliance checklists, transfer ledger, etc. We offer a customized business kit to help you keep these important documents organized and looking professional.
By now you’re realizing how often you’ll need to supply an address for your new business. That can be unsettling for some business owners, especially those running their business from home. In instances where you’re not required to give the registered agent address or official principal address for your business, a virtual business address can come in handy.
With our virtual business address service, we supply you with a physical street address where you can have your mail sent without divulging your real address to more people than necessary.
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 additional protection for members in case of lawsuits or similar liability claims. Members’ private assets are better safeguarded.
A comprehensive, detailed Vermont operating agreement will bring clarity to many facets of your business.
If you’re unsure as to how to start creating an operating agreement for your Vermont LLC, we offer a customizable operating agreement template to help get you started.
Step 5: Apply for an EIN
An Employer Identification Number (EIN), also known as a Tax ID Number or Federal Tax Identification Number, is a unique series of nine numbers. No two EINs are the same. This code is used to identify your business on 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 or have multiple members. 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.
You can get your Vermont LLC’s EIN through the IRS website, by mail, or by fax, but if you’re unfond of dealing with that particular government agency, we can get it for you. Our EIN service is quick and eliminates the hassle.
Once you’ve secured an EIN, you’ll be able to open a business bank account. Having separate accounts for your business and your personal banking is critical for sorting out your finances at tax time and helps you avoid commingling funds. Commingling funds can not only make your taxes more difficult, but it could also be used against you if someone takes you to court to challenge whether you and your LLC are truly separate entities.
We offer a discounted bank account for your new business. This allows for unlimited transactions, online banking, a debit card, and more. When you want to authorize others in your business to use the account, we offer a banking resolution template to simplify the process.
For further help managing your new business’s finances, try the ZenBusiness Money App. It can help you create invoices, receive payments, transfer money, and manage clients all in one place.
Vermont LLC FAQs
How much does it cost to start an LLC in Vermont?
The cost of establishing your Vermont LLC is relatively low.
The state fees for forming a Vermont LLC can range from $125 to $145, depending on factors such as whether you choose to reserve your business name. Note that fees change over time, so check the Vermont Secretary of State website for the most recent fee schedule.
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.
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 filing fee
- 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, multi-member LLC, 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. There is a filing fee 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.
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. This is unlike most corporations, in which profits are taxed twice, first at the business level and again at the individual shareholder level. 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 permits are required for an LLC in Vermont?
You’ll need to make sure your Vermont LLC has all the licenses and permits it’s required to have by law. Unfortunately, because licensing varies by industry and location and can occur on the federal, state, and local levels, there’s no central place to check to see if you have all the licenses and permits you need. You’ll have to do some research.
If you don’t have the time or inclination to do all this research, or if you just want the peace of mind to know that your business has all the licenses and permits it’s legally required to have, our business license report service can do the work for you.