Create an LLC

How to start an LLC in Virginia

Looking to form a business in the state of Virginia? Here’s a simplified process for filing an LLC in Virginia.

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Key takeaways

  • To open a Virginia LLC, you will need to come up with a business name, find a registered agent, draw up an operating agreement, obtain an EIN, get relevant business licenses, and open a business bank account.
  • The total cost of starting a business in Virginia is $100, with an additional $10 if you want to use a DBA name.
  • Like all other states, Virginia requires entrepreneurs to appoint a registered agent when forming an LLC in the state.
  • Virginia has both state and federal taxes for limited liability companies operating in the state. There’s also a sales tax for specific products.

Virginia LLC fee breakdown

The state fees for starting a Virginia limited liability company are $1001. This fee is only to file your LLC’s articles of organization. It does not include ongoing charges like mandatory annual fees. Besides, if you wish to register a “doing business as” name (also known as DBA name or fictitious name) for your business entity, you will incur a filing fee of $10, payable to the Virginia State Corporation Commission2.

Keep in mind that fees change over time. Therefore, it may be a wise idea to check the Virginia SCC website for the latest state fees before you start to register a Virginia business. Beyond that, you may also incur additional fees if you hire the services of third-party firms that help with LLC formation.

For example, if you hire a law firm to write up an LLC operating agreement for your company, they will charge you a fee based on the state’s going rate. It’s worth noting that legal documents like the articles of organization and operating agreement are extremely important, not just to the formation of the company, but to its entire existence. If you are not sure how to write them, you may consider the services of a qualified professional.

With all that said, if you are ready to start forming your  limited liability company, you can proceed as follows to create your Virginia LLC.

How to form an LLC in Virginia

Step 1: Name your Virginia LLC

When creating a Virginia LLC, the first thing you will want to do is come up with a business name for it. This is a legal requirement in the state – that every business must have a designated name. Ideally, your LLC name should be one that can attract clients by providing insight into your brand and products.

As a Nielsen study found, a business name can “lend credibility to product efficacy and provide an assurance of quality, letting consumers know what they can expect3.” So, make sure to pick a business name that gives your LLC an identity that customers can relate with. Just in case you get it wrong the first time, you can always change your business name later.

In addition to the above, the state of Virginia has laws regarding LLC names. Here’s what you need to know:

  • The name of your company must include the words “limited liability company”, “Limited Company” or their abbreviations like LC, LLC or L.L.C. Thus, you can name your business something like “ABC LLC”.
  • You cannot use the word “Corporation” in your LLC name.
  • Your chosen Virginia business name should not include words that can make people confuse your LLC with a government agency such as the State Department or FBI.
  • There are restricted words in Virginia (e.g. University, Bank and Attorney) which you can only use if you have someone in the relevant field as part of your company. For example, you can’t use “Attorney” unless a lawyer is a member of your LLC.
  • Your Virginia LLC name should be available for use within the state. In other words, it should not be taken by another company. You can run a quick name search on the State Corporation Commission’s website to find out if your preferred name is available.

An added advantage of running a name availability check is that it gives you the chance to check whether the URL for that name is available. It is not a legal requirement, but it will ensure that your business has a clear and catchy domain. This will come in handy when it’s time to create a website for your LLC.

After confirming the name availability of your LLC, you can go ahead and reserve that name to ensure that nobody else uses it. This will protect the LLC name for 120 days as you prepare to formally file articles of organization. To add an extra layer of protection, you can also trademark the name of your Virginia LLC.

Finally, in case you want to use a fictitious name for your business, you may file for a DBA in Virginia. Short for “doing business as”, a DBA allows you to trade using a name other than your registered Virginia LLC name. If, for example, your business is “ABC LLC” but you want to trade as “XYZ”, you can register “ABC” as your legal business name and “XYZ” as your fictitious or DBA name.

Step 2: Choose a registered agent in Virginia

Virginia law requires all business owners to appoint a registered agent when setting up a limited liability company in the state. A registered agent is essentially an individual or firm that you designate to accept official service of process and correspondence on behalf of your company. This may include receiving government mail, notices of lawsuits, legal documents, tax forms, and so on.

When hiring registered agent services, it’s worth keeping in mind that Virginia law requires the agent to be a legal resident of the state. In other words, they must have a physical address in Virginia. A P.O. Box alone is not enough because registered agent service providers must be ready to accept legal documents like subpoenas in person.

An added advantage of using registered agent services – especially one with multi-state presence – is that you can register their offices as your own in every state where you do business as a foreign LLC. For example, if your business is based in Virginia but you want to operate in Maryland as a foreign LLC, you can hire a registered agent with offices in both Virginia and Maryland. In doing so, you can use your own office in Virginia and register the agent’s Maryland office as your own.

Can you be your own registered agent in Virginia? Yes, you can be your own registered agent. In fact, anyone in your company can be a registered agent for your Virginia LLC.

Step 3: File Virginia articles of organization

To formally create your Virginia LLC, you must file your company’s articles of organization with the Virginia State Corporation Commission. This basically involves filling and submitting Form LLC-1011.

Source: Virginia SCC

The document collects information about your Virginia business, including:

  • LLC name
  • Principal office address of the LLC
  • Name and address of your registered agents
  • Name and signature of the organizer. An organizer is someone who is authorized to fill legal documents used in Virginia LLC formation. While some registered agent service providers may act as organizers, you may still opt to file Form LLC-1011 on your own. This will make you the organizer.

There are two ways to submit your Virginia articles of organization to the VA SCC. You can either mail them or file online. If you prefer to use the mail, download Form LLC-1011, fill it out and address to:

State Corporation Commission

Clerk's Office

P.O. Box 1197

Richmond, VA 23218-1197

If you would rather file online, head over to the State Corporation Commission’s website, and use this step-by-step guide for LLC formation in Virginia. Remember that you will first need to log in or create an account at cis.scc.virginia.gov before you can form your company.

Whether you send your documents via mail or online, the filing fee for a Virginia LLC application is $100, which you must pay upon submission. For mail filing, write out and send a check payable to the State Corporation Commission. If you choose to file online, you may pay the filing fee via echeck or credit card.

The Virginia SCC typically takes three to 12 business days to process articles of organization when filed by mail7. But if you choose to file online, you will get an immediate response once you pay the filing fee.

Step 4: Receive a certificate of formation from Virginia

Following approval of your articles of organization, the state of Virginia will issue you a certificate of formation. Apart from serving as proof that your company now formally exists, you can use this certificate to obtain business licenses, Employer Identification Number (EIN), and even open a business bank account.

Step 5: Create a Virginia operating agreement

Although Virginia law doesn’t mandate LLCs to have a written operating agreement, it’s always a good idea to have one anyway. This document outlines the ownership, financial and functional decisions of an LLC, including its rules and regulations. Think of it as bylaws, but for LLCs.

Among other things, the LLC operating agreement of your Virginia business may specify:

Besides setting out guidelines on how your Virginia business should be run on a day-to-day basis, an LLC operating agreement puts all shareholders on the same page. This is vital for multi-member LLCs because it can help avoid conflict. But should there be disagreements anyway, the business owners can refer to the operating agreement as a guideline for conflict resolution.

While an LLC operating agreement is, by and large, an internal legal document, many investors often ask to see it before putting money into your business. Therefore, make sure to have a well-crafted one in your company’s file, especially if you plan to bring in new investors in the future.

Step 6: Get an EIN number

The Internal Revenue Service (IRS) requires all multi-member LLCs, or LLCs with employees to have an EIN. Therefore, you need this number if your Virginia business has more than one owner, or if it’s a single-member LLC that plans to have employees.

Short for employer identification number, an EIN is a nine-digit number issued and used by the IRS to identify businesses for tax purposes. That’s why it is at times known as the Federal Tax Identification Number (FTIN) or Federal Employer Identification Number (FEIN). EIN is like a social security number, but for businesses.

Although it’s mostly used for tax purposes, an EIN can also help you open a business bank account and access business loans. Many financial institutions generally ask for it before approving account applications and loans. Rather than scrambling to get your EIN later on when your bank asks for it, you can apply for it during the business formation phase of your VA LLC.

You can get an employer identification number for free from the IRS. There are two ways of doing that: online or via mail. To apply for an EIN online, head over to the IRS’s EIN application page and follow the step-by-step procedure. If you prefer to apply for your EIN via mail, download Form SS-4, fill it out and send it to the IRS at the following address:

Internal Revenue Service

Attn: EIN Operation

Cincinnati, OH 45999

Fax: 855-641-6935

Note that you can still apply for an EIN even if you don’t have a social security number (SSN). This may be the case for entrepreneurs who are noncitizens or based abroad but want to start an LLC in Virginia. If you are one such entrepreneur, simply fill out IRS Form SS-4 and leave section 7b blank. Once done, call the IRS at (267) 941-1099 to complete your EIN application.

What if you already have an EIN for a sole proprietorship? According to the IRS, you must obtain a new EIN when converting your sole proprietorship to an LLC.

Step 7: Get Virginia business licenses and permits

The state of Virginia has only one general business license requirement – the sales tax certificate4. This state-level permit is mandatory as long as you are engaged in business within Virginia. You can obtain one for your company by visiting the Virginia tax website.

Beyond that, you may need additional business licenses and permits depending on the nature of your business. For example, you must apply for licenses and permits if your business falls in an industry that’s regulated by the federal government. These industries include:

  • Agriculture
  • Alcoholic beverages
  • Aviation
  • Drilling & mining
  • Firearms, explosives, and ammunitions
  • Fish, wildlife & commercial fisheries
  • Maritime transportation
  • Nuclear energy
  • Radio and TV broadcasting
  • Transportation and logistics

Additionally, you may need to apply for state and local business licenses and permits depending on the nature and location of your business. For instance, all businesses that are located in Richmond are required to obtain a Richmond business license. Similarly, restaurants and hotels generally need building permits, health permits, and signage permits before they go into business.

Applicable fees for Virginia licenses and permits typically vary depending on the type of business license you are applying for. In case you are not sure about the licenses to obtain, you can visit the state’s Department of Professional and Occupation Regulation to find out the federal, state and local business licenses and permits that are required for your Virginia LLC.

Remember, you can always reach out to professional business license service providers who are based in Virginia. They will help you determine all the licenses and permits that your LLC requires, and some may even obtain those permits on your behalf to keep your new business compliant from the outset.

Step 8: Open a business bank account for your Virginia LLC

A dedicated business bank account allows you to keep track of your company’s incomes and expenses, deposit other payments under the company name, and simplify tax reporting. If you already have an EIN, you may use it (rather than your personal social security number) to open the business bank account.

Doing so will help separate business finances from personal finances. That’s very important in ensuring that you get liability protection. In other words, you won’t be personally responsible for business liabilities, even if you are the sole owner of the business. If your Virginia LLC is sued for defaulting on credit, the creditor cannot seize your personal assets and property to recover business debts.

As you open a bank account for your Virginia business entity, you can also look into getting a business credit card. Much like a personal credit card, you may use a business credit card to make purchases, pay some bills and (in some cases) draw funds on credit. The difference is that a business credit card is strictly for business transactions. It may come in handy when your LLC lacks sufficient liquidity to complete some payments.

Just as important, having a business credit card for your Virginia LLC may help build the business’s credit score. With a good score, your business will easily qualify for credit facilities and tradelines without you having to use your personal credit score. That’s another way to protect your company’s corporate veil by separating your personal finances from business finances.

Step 9: Complete everything else

The Virginia LLC application process is not fully complete until your business is up and running. There are a few things you can do to ensure a successful launch, and that you start off on the right foot. These mostly involve putting in place infrastructure that the business can rely on to start and grow. Here are some things you can do:

  • Get business insurance: insurance is a powerful tool for managing risk. When you are properly covered, you will be less worried about potential jeopardy and more focused on growing your business. Some of the most common types of insurance covers that you may need for your Virginia business entity include general liability insurance, professional liability insurance and workers’ compensation insurance.
  • Create a business website: having a professional website is a good way to legitimize your business. It will also help you reach a wider audience. Most consumers are now online, and that’s where you need your business to be. Specifically, 53% of people in Virginia make their purchases online5, making it the fifth-ranked state when it comes to online purchases. Having an online presence will help you tap into this market.
  • Create a marketing strategy: marketing is a must-have for promoting your brand and products or services. But you don’t need to spend an arm and a leg to sell your Virginia LLC. Some modern advertising tools like Google My Business are completely free, yet effective. Overall, a good marketing strategy should establish your brand presence, provide publicity, and create a long-lasting impression. Here are some ways to advertise your Virginia business entity at any budget.
  • Hiring employees: there’s no requirement in Virginia law stating that every business must have employees. In fact, some types of businesses (like freelancing) don’t need employees, even though you can register them as LLCs. However, if your business will require employees, make sure that you are fully compliant according to the state law. First, verify that the people you plan to hire can legally work in the U.S. You will also want to report them as new hires. As the employer, you’re tasked with providing worker’s compensation insurance for your employees. Finally, it’s your responsibility to withhold employee’s income tax.

Virginia tax compliance

When you get an employer identification number (EIN), the IRS will inform you of the various tax category options that are available for businesses in Virginia. Many limited liability companies often opt for the default tax status. This means they are either taxed as sole proprietorships (for single-member LLCs) or partnerships (for multi-member LLCs).

While this is beneficial because sole proprietorships and partnerships enjoy a streamlined tax process, you should know that you can potentially save a lot on LLC tax by choosing the S corp status because this business structure has a lower self-employment tax liability6.

Regardless of the tax category you choose, you must register your LLC with the Virginia Department of Taxation if your business sells goods that are subject to sales tax or if you have employees. There are two ways of doing this. First, you can register via mail by sending Form R-1 to the Virginia Department of Taxation, or you can register online through the VATAX website.

Besides state taxes, you’re also required to pay federal taxes for your Virginia LLC to the IRS. Again, the business structure you choose will affect your tax liability at the federal level. Here’s a breakdown of the business taxes to keep in mind while doing business formation in Virginia:

  • Virginia sales tax: these are state taxes applicable to businesses that sell physical products. The LLC is tasked with collecting sales tax on every taxable sale.
  • Virginia employer tax: if your LLC has employees, you will be required to enroll for unemployment insurance tax and withhold income tax for those employees.
  • Federal tax: these are taxes paid to the IRS for income earned by the business. The exact form to use when filing federal tax depends on the structure of your LLC. Use IRS Form 1040 Schedule C if it is a single-member LLC that’s taxed as a sole proprietorship, and IRS Form 1065 for a multi-member LLC that’s taxed as a partnership. Use IRS Form 1120-S or 1120-C to file federal tax for an S-corp or C-corp respectively.

As is the case everywhere, keeping up with business taxes in Virginia can be hard, especially for new business owners. If you are not entirely sure about your tax responsibility and how to stay compliant, consider hiring or outsourcing a business accountant.

Virginia annual registration fee

All Virginia LLCs as well as foreign LLCs operating in the state must pay an annual registration fee of $50. The payment is due each year at least a day before the anniversary date when you registered your Virginia LLC. If, for example, you register your company on 5th of June, 2022, then the first annual registration fee will be due on or before 4th of June, 2023. You can pay sooner.

The Virginia Corporations Commission will send a notice of assessment to the office address of the registered agent of your LLC. This acts as a reminder of the annual registration fee, and it includes the exact date when it’s due. Failure to comply attracts a $25 penalty. Even worse, entrepreneurs risk losing limited liability protection when they miss one or two state filings.

There are two ways to pay your Virginia LLC annual registration fee. You can pay online via the State Corporation Commission’s website or by postal mail.

FAQs about LLC formation in Virginia

How much does it cost to start an LLC in Virginia?

Starting an LLC in Virginia costs $100, payable to the Virginia State Corporation Commission. If you are planning to use a “doing business as” or fictitious name, you will need to pay an extra $10.

How long does it take to form an LLC in Virginia?

Business filings in Virginia can take anywhere from three to 12 business days to process. However, you may apply for expedited service, which will add an extra charge.

What are the benefits of an LLC in Virginia?

The biggest advantage of starting an LLC in Virginia is tax flexibility. Business owners can decide between being taxed as corporations or as pass-through entities. Whatever the case, LLCs in Virginia are not subject to double taxation of income as is the case with corporations.

Beyond tax benefits, Virginia is a great state to start an LLC because it has no annual report requirements. The low state fees (filing fee of $100 and annual fee of $50) make it a cost-effective state for small business owners who are looking for an affordable state to launch a business in.

Finally, LLCs in Virginia generally have fewer compliance requirements compared to other states. And since it’s a limited liability company, entrepreneurs typically get liability protection against business debts and litigation.

How is a Virginia LLC taxed?

Limited liability companies in Virginia are taxed both at the federal and state levels. If you choose to be taxed as a pass-through entity – i.e., as a sole proprietorship, partnership, limited liability company, or S-corporation – you and your co-owners will pay self-employment tax, state income tax, and federal income tax on business profits.

LLCs are also required to pay sales tax on all eligible products. And since employees are required to pay state and federal income taxes on their wages, the company is responsible for withholding and filing these tax returns. Virginia has no franchise tax.

What are the types of LLCs in Virginia?

There are six common types of limited liability companies:

  • Single-member LLC: this is a limited liability company that’s owned and operated by only one person. It is essentially a sole proprietorship, with the added advantage of liability protection. However, for tax purposes, single-member LLCs are usually not treated as pass-through entities.
  • Multi-member LLC: this type of business has more than one owner. Unlike a single-member LLC, owners of a multi-member LLC enjoy pass-through benefits when filing tax returns.
  • General partnership: this is a business structure with multiple members who may share responsibilities for debts, transactions, and business taxes. Typically, at least one member of a general partnership must have unlimited liability.
  • Family limited partnership: this is a general partnership that is owned by members of a family.
  • Professional limited liability company: this is a type of LLC formed to create professional services, such as legal, medical, accounting, and finance services.
  • Series LLC: this is a limited liability company with segregated assets. Basically, the company subdivides its assets into separate series in order to protect them from creditors.
  • Member-managed and manager-managed LLCs: while member-managed companies are run by the shareholders of the business, manager-managed LLCs are run by hired professionals, with the owners remaining passive. Virginia allows both types of LLCs.

Where can I conduct a name search for my Virginia LLC?

You can check for name availability via the Virginia State Corporation Commission’s website.

References

  1. TRUIC. “How Much Does an LLC Cost in Virginia?.” 04 Mar. 2022, https://howtostartanllc.com/virginia-llc/cost-to-form
  2. Virginia State Corporation Commission. “Fictitious Names.” 01 Jun. 2022, https://www.scc.virginia.gov/pages/Fictitious-Names
  3. Åsa Nyström. “The Research Behind How Brand Names Impact Customers and What Name We’ve Changed at Buffer.” Buffer, 16 Aug. 2017, https://buffer.com/resources/names-impact-customers/
  4. TRUIC. “How to Get a Business License in VA.” 11 May 2022, https://howtostartanllc.com/business-license/virginia-business-license
  5. Sherin Shibu. “Online Shopping Has Skyrocketed: Here Are Trends in Your State.” PCMag, 02 Nov. 2020, https://www.pcmag.com/news/online-shopping-has-skyrocketed-here-are-trends-in-your-state
  6. Prableen Bajpai. “Understanding S Corporations.” Investopedia, 10 Jun. 2021, https://www.investopedia.com/articles/investing/091614/understanding-s-corporations.asp
  7. Incorporate.com. “LLC, Business License, Incorporation in Virginia.” 01 Jun. 2022, https://www.incorporate.com/learning-center/virginia/
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