Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
If you are looking to start a business in Virginia, forming an LLC may be a great option. It is one of the most popular business formations due to the tax advantages offered while maintaining flexibility as a sole proprietorship or partnership. But where do you start?
In this article, you’ll find a complete guide on how to form your LLC in Virginia, from a step-by-step guideline to answering frequently asked questions.
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Step 1: Choose a Name For the Business
Choosing a name for your LLC is the very first step in forming an LLC in Virginia. When deciding on a name, you should remember that the state of Virginia has some naming guidelines that must be adhered to.
- The chosen name must not be used by any other business in the state. To search if your desired name has not been taken already, you can search the State Corporate Commission website (SCC).
- The chosen name needs to have the following phrases or abbreviations: Limited Liability Company, LLC, L.L.C, L.C, or LC.
- The chosen name cannot have words used to describe governments or military institutions in the United States. Examples of these are Federal or Government.
- In the state of Virginia, you are not allowed to use the words bank, trust, architecture, land surveyor, or engineer in your name unless your business offers those services.
You are not registering your chosen name now in this step; that is done when you complete the Articles of Organization in a later step. However, Virginia allows business owners to reserve a name in case they are worried it may get taken before filing. For a fee of $10, you can reserve the name for up to 120 days. There are two ways of doing this, send the form by mail, or you can reserve the name online through the SCC Website.
Many businesses in Virginia like to operate under a different name than what they submit in the Articles of Organization; this is known as a DBA, Doing Business As. To use this assumed name, you must register online or by mail for another $10.
Step 2: Appoint a Registered Agent
By law, all LLCs operating in Virginia need to have a designated registered agent. A registered agent is either an individual or a company who will accept and manage all legal administrative matters on behalf of your business. They act as the middleman between your LLC and the government.
The chosen registered agent must be one of the following:
- A Virginia resident who is a member or manager of the LLC (including yourself) with a physical street address in the state.
- A registered agent service that is authorized to do business in Virginia.
Step 3: File the Articles of Organization
This step is where you will complete form LLC – 1011 to officially register your LLC in Virginia. You can submit this form online or by mail.
There is a $100 non-refundable fee that needs to be paid when completing the form. This can be in the form of a check payable to the State Corporation Commission.
In Virginia, the Articles of Organization do not require as much information as in other states. The Articles of Organization will include only the following:
- The name and physical address of the LLC.
- The name and address of the chosen registered agent.
- The name as well as the signature of the organizers.
Step 4: Obtain Relevant Business Licenses and Permits
Certain businesses in Virginia may need special business permits. If your LLC sells taxable goods or services, you will need to register with the Virginia Department of Taxation (DOT) for a seller’s permit so that you can collect sales tax and report it to the state.
There may be other licenses and permits you’ll need, according to your business type. To understand what you’ll need to legally operate your business, check out Virginia’s Department of Professional and Occupational Regulations website.
Step 5: Obtain an EIN
The Employer Identification Number (EIN) is a nine-digit number issued by the Internal Revenue Service to identify LLCs as taxable entities. Consider it a social security number for your business. Having an EIN allows you to hire employees, open bank accounts for the business, and manage and pay state and federal taxes.
You can apply for an EIN online or by submitting the form by mail. There is no fee to apply for an EIN.
Step 6: Pay Annual Registration Fees
LLCs in Virginia do not need to submit an annual report. Instead, they must pay an annual registration fee of $50 on the last day of the month in which the LLC was registered. This needs to be submitted each year online or by mail. Failure to pay by the due date will result in a $25 penalty fee.
Cost to Start an LLC in Virginia
Starting an LLC in Virginia does not have to be costly. Registering an assumed name, or DBA, is $10, and there is another $10 fee if you would like to reserve your chosen name for up to 120 days before you file your Articles of Organization. There are also registered agent fees that need to be paid. The last expense of starting an LLC in Virginia is the Articles of Organization fee of $100.
Keep in mind that if you hire an LLC formation service, additional costs may be on top of the actual filing fees mentioned above.
These are just the minimum costs of starting the LLC. More costs will incur as you start running your business.
What To Do After Forming Your LLC in Virginia
Congratulations on officially forming an LLC in Virginia! However, there are still several tasks you need to complete to ensure your LLC runs smoothly.
Create an Operating Agreement
You are not legally obligated to draw up an operating agreement in Virginia, but it is strongly recommended that you do so. The operating agreement is a document that outlines how the business operates; it’s like a user manual for the business. This document can be drafted by a lawyer or by the members of the LLC so long as everyone is in agreement about all points. Having an operating agreement is also helpful in the event you end up being taken to court.
There are no set requirements on what needs to be included in the operating agreement, but here are some things you may want to include:
- The name and address of the LLC
- A brief summary of the information included in the Articles of Organization
- The management structure of the LLC
- The names and addresses of the managers
- A brief outline of the purpose of the business and services offered
- The financial contributions of the members
- A guide to how the profits and losses of the business will be divided
- An outline of the general day-to-day business
- The procedures for hiring new staff and members leaving
- The signatures of agreement from all members of the LLC
Open a Business Bank Account
It is strongly recommended that you separate your personal assets from the business as this can protect your personal property from any liabilities. Opening a bank account purely for the company is a way to do this. It will also help keep track of business expenses and make tax filings much easier. As an additional step, consider getting a business credit card as well.
Get Business Insurance
Like you would insure your house or car, you should insure your business. You should at least consider getting general liability insurance to protect you and your business in case of a lawsuit.
There are many different types of business insurance out there provided by several companies. If you aren’t entirely sure what to get for your specific business, consult a broker or business attorney for help.
How to Keep Your LLC Compliant in Virginia
You’ve done all the hard work and formed your LLC in Virginia, and you don’t want to risk losing the business by not remaining compliant.
Here are a few ways you can keep your LLC complaint in Virginia:
- Pay the annual registration fee before the deadline.
- Maintain your registered agent.
- Report new hires within 20 days to the Virginia New Hire Reporting Center.
- Pay all state and federal taxes on time.
- Ensure that all permits are not expired.
- Keep up with regulations and any changes that are made.
Tax Filing Requirements for LLCs in Virginia
LLCs in Virginia are automatically treated as pass-through entities. This means that the LLC itself does not actually pay any taxes. Instead, the individual members of the LLCs pay federal taxes on their profits withdrawn from the business.
In the state of Virginia, there are a couple of other taxes you’ll need to pay on top of your federal tax return. The first is sales tax; this is for LLCs that have a seller’s permit. However, some cities and counties in Virginia have additional taxes. You can read more about these here.
The second type of state tax is employee taxes, for which you will need to register for on the Virginia Tax Website. This is applicable for LLCs that have employees. Employee taxes include unemployment insurance tax and employee withholding tax.
On the other hand, if you opt to be taxed as a corporation instead of as an LLC, the business will need to file a separate tax return. Virginia’s corporate income tax should be paid to the state’s Department of Taxation.
Frequently Asked Questions
How long does it take to register an LLC in Virginia?
Registering an LLC in Virginia is fast if you choose to do it online. Currently, the processing time is around 2-3 business days. Once approved, you can download the certificate immediately. Registering by mail takes longer. The approval process takes about a week, but you will also need to factor in mailing time.
There is an option to expedite the process for both online and mail filings for next-day delivery. This costs an extra $100 on top of the $100 filing fee, for a total of $200.
What tax structure should I choose for an LLC in Virginia?
All LLCs in Virginia are automatically considered pass-through entities. This tax structure is the most common and highly recommended because of its flexibility and ease. An LLC treated as a pass-through entity is not seen as a taxable entity, so you can avoid double taxation. As a pass-through entity, the LLC itself does not pay any taxes. Instead, the individual members of the LLC pay taxes on their own tax returns.
However, taxing as a corporation could be advantageous in some cases. If you’re unsure what tax structure to choose, it may be wise to seek professional advice.
Should you hire an LLC formation service in Virginia?
You do not have to hire an LLC formation service if you are confident and know what you are doing. There is not as much information needed in the Articles of Organization as in other states, making the process slightly easier.
However, if you’re still unsure or simply do not have the time to complete the paperwork needed to form an LLC, then hiring an LLC formation service is a great option. Many formation services also provide registered agent services, so you can kill two birds with one stone.
Filed under: Virginia Business Guides