Starting a company of your own in Virginia is an exciting prospect. You will get to be your own boss, overseeing every aspect of operations. The legal paperwork that comes with establishing your company as a legal entity might be daunting at first, but it doesn’t have to be.
Creating a limited liability company (LLC) in Virginia doesn’t have to be complicated. It just requires knowing which steps to complete at which time. This guide can provide you with a comprehensive how-to, taking you through the procedure from start to finish.
The 5 steps to form an LLC in Virginia:
To form an LLC in Virginia, you have to register your business with the Virginia State Corporation Commission. Before you can file this paperwork, however, you have to complete a couple of other steps, including choosing an LLC name, designating a registered agent, and formulating an Operating Agreement.
As part of establishing an LLC, you also have to apply for an Employer Identification Number (EIN) with the IRS. Finally, you have to figure out your tax obligations at the federal and state levels.
While it might sound like a lot, these requirements are easily accomplished through a planned, step-by-step approach. The below points break down the process into manageable actions, allowing you to get on your path to establishing your own LLC.
Step 1: Name Your Virginia LLC
A well-chosen business name helps to attract future clients by providing insights into what services or products your company offers. A formally designated business name is also a legal requirement for your LLC to be recognized by the Virginia government. While you want a business name that’s clear and catchy, there are also legal requirements to consider as you brainstorm your brand’s alias. Keep the following points in mind as you consider prospective ideas:
- Your LLC name must be one-of-a-kind in the state. Virginia law does not allow duplicates of formal business names. Even if you think you’ve found the perfect moniker for your LLC, you can only use it if no other business has claimed it. To determine whether this is the case, conduct a name search through the Virginia business name availability database.
- Your official business name must include a specific version of the term “limited liability company.” If your business is going to be an LLC, the official name must recognize this fact. “Limited liability company” or an accepted variation of it must be incorporated into the name. You can choose how you want to do this. Acceptable options include “limited company,” “L.C.,” “LC,” “LLC,” or “L.L.C.” Whatever you decide on, it must be included at the end of your business name.
- Some words can’t be included. Words like “corporation” cannot be included, and there are specific words like “engineer” that can’t be used unless you prove your business provides this service. For additional information, visit the Virginia State Corporation Commission website.
Once you’ve settled on a unique name, you want to make sure nobody else takes it. To protect it, register the LLC name with the Virginia Corporation Commission. Complete Form SCC631, Application for Reservation or for Renewal of Reservation of a Business Entity Name. Include the LLC name and address where it will be located, plus your phone number and signature. The form can be submitted via mail or online. A filing fee of $10 must be paid upon submission. Once this is done, the chosen name will be reserved for 120 days. This gives you time to complete the LLC formation’s remaining steps without worrying that your business name will be stolen. There are a few other things you want to consider when deciding on your Virginia LLC name. One thing is a fictitious name. Commonly referred to as a DBA or “Doing Business As” in other states, a fictitious name is another name you can use for your business. The fee for filing is $10. While working on your fictitious name, you’ll also want to visit the United States Patent and Trademark Office website to see whether your business name or logo is federally trademarked. Once you’ve confirmed it’s available, you can, if you wish, apply for a trademark. But trademarks also happen at the state level.
Step 2: Appoint a Registered Agent in Virginia
Every LLC in Virginia must appoint a registered agent. This person is responsible for receiving legal documents for the business. For example, if a future client sues the company, the papers will be served to the registered agent as the business representative. In addition to receiving documents, the registered agent can also send documents on behalf of the business. The registered agent must be a legal resident of Virginia. They can also be a corporation that is permitted to do business in the state. In either case, they must have a physical address in the state. A P.O. box is not sufficient because legal paperwork like subpoenas is required to be delivered in person. Although you technically are permitted to designate yourself as a registered agent, this is not advisable. First of all, the registered agent’s address will be a matter of public record. You likely don’t want disgruntled customers or ex-employees showing up on your doorstep. For the same reason, you don’t want to use your actual business location. Having someone deliver a service of process to your business with a lawsuit, for example, will shed a negative light on your business. One affordable solution is to hire an outside registered agent. This individual can receive and send paperwork on your behalf, without jeopardizing your privacy or your business’s integrity. Another benefit of a registered agent service is that they will store your paperwork securely and provide reminders of time-sensitive documents requiring your attention. Some additional benefits of a registered agent service include:
- You can have an office in every state where you do business. If operating as a foreign LLC in other states, using a registered agent service ensures you have a registered office in that state.
- It will be easier to move your business if needed. If you have to change your Virginia business location in the future, you won’t have to deal with the extra paperwork required to update your address because you are using a registered office as your business address.
Step 3: File Virginia Articles of Organization
The next step is to register with the Virginia State Corporation Commission. To do so, you must submit the Articles of Organization of a Virginia Limited Liability Company (Form LLC1011). This two-page document covers relevant details about your business. You need the following information to complete the form:
- Your LLC’s name
- Your registered agent’s name and address
- Your LLC’s principal office address
- The Articles of Organization must be signed and dated by the organizer, the authorized person filing the papers, and include their name and phone number. If you are filing the paperwork for an LLC of your own, you are the organizer.
You can file the Articles of Organization with the Virginia State Corporation Commission (SCC) Clerk by mail or online. A $100 filing fee must be paid upon submission. For a paper filing, send a check payable to the State Corporation Commission. For online filing, you can pay via credit card or e-check.
Step 4: Create an Operating Agreement
Virginia law does not require you to provide an Operating Agreement to establish your LLC. It’s wise to take this step when you are establishing your business, however, as it can help safeguard against certain legal liabilities. An LLC Operating Agreement sets out the precise guidelines that your business will refer to in its day-to-day operations. This includes details, such as:
- Who owns the LLC
- Rights and responsibilities of managers
- How profits and losses are to be distributed
- Technicalities regarding change of ownership
If you are establishing an LLC with other people, the Operating Agreement can help avoid conflicts. Additionally, potential investors may ask to view an Operating Agreement before putting money into an LLC. Finally, an Operating Agreement further separates your business from you as a person in the eyes of the courts, helping you avoid personal liability in case of lawsuits.
Step 5: Apply for an EIN
To ensure you are tax compliant, you may need to obtain an Employer Identification Number (EIN). This is similar to the tax identification number assigned to individuals. It’s basically an identifier for your LLC and will be needed for tasks like hiring employees and tax purposes on your LLC’s profits.
You need an EIN if your LLC has two or more members. If you are a one-person LLC, you still must obtain an EIN if you plan to have employees or if you choose to have your LLC taxed as a corporation, not a sole proprietorship. To get your EIN, apply on the Internal Revenue Service (IRS) website. This is free of charge, and the EIN will be issued right away.
Even if your LLC doesn’t require an EIN, it can be useful for other reasons. It allows you to differentiate your personal finances from those of your LLC, for example, or it can be used to open a business bank account.
There are also state taxes to take into account. If you have employees or are selling goods that incur a sales tax, you must register with the Virginia Department of Taxation. You can do this via mail using the Virginia Department of Taxation Business Registration Form (Form R-1) or online via the VATAX online service.
How much does it cost to start an LLC in Virginia
We mentioned a few different costs above. Here’s the tally of what you can typically expect to pay when you form your Virginia LLC:
- There’s the cost of filing the Articles of Organization, which is $100, whether you file online or by mail.
- If you choose to reserve your business name before filing, that will cost you an addition.
So, in total, you can expect to form your Virginia LLC for just $110. Note that this does not include ongoing operating costs like the annual registration fee of $50 (typically an annual report in other states). If you decide to hire an outside registered agent or consult a professional to draft your Operating Agreement, you will incur additional fees. Collaborating with a single partner to handle the steps described above can save you money and spare you the time and headache that such bureaucracy requires.
What are the benefits of an LLC in Virginia?
We have already touched on some of the benefits of an LLC above. Overall, this is an uncomplicated business structure to start with minimal personal requirements or financial commitments. For the benefits you get, it’s well worth the investment.
With an LLC, you can:
- Enjoy peace of mind knowing your business debts and liabilities are separate from your private person. If you face issues, such as a lawsuit, your personal assets are safe.
- Benefit from quick and easy LLC establishment and simplified management, compliance, and regulatory requirements.
- ake advantage of simplified tax work. Unless they elect to be taxed as a corporation, only the individual members (owners) of the LLC will be taxed, while the LLC will not be taxed on its profits.
How is a Virginia LLC taxed?
An LLC allows for streamlined tax paperwork. As noted above, the business doesn’t have to pay taxes on its profits. Instead, each member pays taxes on their own earnings. Federal taxes are determined by the IRS based on each member’s share in the LLC. There are also state taxes to consider. Unless LLC members choose to have the business taxed as a corporation, they are only responsible for their individual taxes. In this case, the LLC isn’t taxed on its profits. There are other taxes to take into account, however:
- Instead of an annual report, which most states require of LLCs, Virginia requires that LLCs pay an annual registration fee of $50 to do business in the state. This is comparable to a state business tax. This is due on the last day of the month in which the company was formed or registered to transact business in Virginia.
- If the LLC has employees, state employer taxes and unemployment tax must be paid.
- If your LLC sells a physical product, you’ll need to register with the Virginia State Tax Department so that you can file and pay Sales and Use Tax. There are also additional taxes related to certain products, like liquor.
Virginia LLC FAQs
- What is the processing time to form my Virginia LLC?
Usually, the Virginia State Corporation Commission requires three to five business days to process the submission of the Articles of Organization. If you want same-day or next-day service, you can pay an expediting fee ($100 or $50, depending on the form) and get your paperwork sooner.
- Do I need to file my Operating Agreement with the state of Virginia?
No, this is not required. Creating an Operating Agreement is still a smart move, however, as it can protect you both as a business and an individual.
- What tax structure should I choose for my Virginia LLC?
The majority of entrepreneurs opt to have their LLC taxed the default way, meaning as a sole proprietorship or partnership (depending on whether you have one member or more), due to the aforementioned streamlining of taxation this allows. You will pay both state and federal taxes on whatever income you earn from the LLC, but the LLC itself will not owe taxes on its profits. Each member is responsible for their own taxes. rnrnFiling taxes as a corporation becomes more complicated and is generally only warranted for LLCs with very high earnings. A certified tax professional can advise as to whether this is the right option for you.
- Does Virginia allow a Series LLC?
A Series LLC refers to an arrangement in which multiple LLCs operate under the umbrella of one larger LLC. Each LLC interest has its own rights and obligations, as well as its own distinct assets. Virginia passed legislation allowing for Series LLCs in March of 2019, and this structure has been available in Virginia as of July 1, 2020.
- Which licenses and insurance are required for an LLC in Virginia?
Virginia does not have a general business license requirement, but certain occupations will require additional licenses. This varies within the state, depending on the city or county. Check with the clerk of the city or county of your LLC’s primary place of business to learn if you need a license for your goods or services. Licenses and permits are often industry-specific and can exist on the federal level in addition to state and local, so you’ll have to do some research to determine what your business needs.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 Virginia LLC.
- How do I add a member to an LLC in Virginia?
Before adding a member, review your Operating Agreement to see if guidelines are in place for this procedure. If your LLC has other members, they may need to agree on the addition of new members. There may also be other details defined, such as how large a share a new member can hold. Finally, you have to ensure that new members file the required tax paperwork.
- How do I dissolve an LLC in Virginia?
If you transfer only part of the business, you follow the procedure for adding a new member to the LLC (see above). If you transfer full ownership of an LLC, check the buy-sell or buyout provisions of your Operating Agreement. A purchase agreement must be drafted in line with any terms laid out in the Operating Agreement. There are also aspects to consider, such as whether you want to sell the stock of your corporation or membership units or sell the assets of the business — in which case any liabilities linked to the business likewise transfer to the new owner. Following a full sale, you must also file final tax returns.