How to Start a LLC in Virginia

Do you know why so many people are inclined towards start an llc in Virginia as well as other states? Personal asset protection! As long as you operate your business under the LLC veil, you can consider your personal acquisitions to be safe. We will get into all that later. For now, let us look at if Virginia would be a great place to start your business.

Business Environment in Virginia

When starting a business in any region, you look at the environment to determine if it serves an enabling or disabling role. For example, if the current policies are in favor of business owners, you can look at the environment as enabling. However, if the policies are stringent and tend to oppress businesses, this is a disabling environment. Below are the important determinants in this state:

Accessibility

Where you locate your business plays an essential role in how well you do. For example, if your business requires that you move around a lot, you want to be in a region with adequate transport infrastructure. If your clients need to meet you for transactions, you also need to be easily accessible. Virginia boasts of an ideal location, given that you can easily reach Florida, Maine and Washington DC. Additionally, it lies to the center of the East Coast, putting you smack in the middle of countless opportunities. From highways to airport terminals to seaports, there are quite many ways for you to get to your clients. Your clients and employees will also benefit from this location.

Workforce

A business is only as good as its employees. You might have the best idea ever but without skilled people to implement it, the idea remains but a dream. Virginia is home to both skilled and unskilled workforce, thanks to the numerous training and educational programs. You can thus look forward to working with a diverse group of hires suited to take your business to the next level. Besides, there are many young people hoping to get an early start in their careers, thus providing you with fairly-priced and efficient labor.

Operating Costs

The cost of hiring office spaces in the state is quite affordable. Additionally, there are more options coming up each day, giving you room for customization as needed. Collaboration spaces are also available if you wish to start your business without incurring too many costs.

Legal Framework

The state has an LLC act that works in favor of the members, thus creating an enabling environment. For example, you are free to choose how you will contribute capital to the business as well as how to share profits. We will cover this later in your operating agreement rules. Additionally, the laws also curtail the control of third parties such as suppliers over your operations. These are but some of the benefits that come with starting a business in this thriving state.

So, how can you start your LLC? It is quite simple, and we will take you through the essential steps. For you to formally register your business, please note that you must file the Articles of Organization at a fee of $100. But let us not get ahead of ourselves. Instead, let us cover the necessary steps as follows:

Step 1: Choose a Business Type and Unique Business Name

Virginia is home to an array of business entities, among them LLCs, sole proprietorships and corporations. LLCs have fast become popular owing to their array of benefits which include:

• Pass-through taxation
• Flexibility in structure
• Reduced formation legalities
• Added personal asset protection

These and more are driving factors behind the growth and stability of these entities. For this piece, we will focus on such businesses. However, before deciding on an entity, you should engage an attorney and an accountant to take you through the processes. You may find that your business would be better off with a different structure.

Naming the Business

The name you choose should not only have a lasting impact on your clients but should also be within the bounds of law. Keep in mind that this name will appear on many documents such as those you keep with the bank. However, this does not mean that you cannot get creative with the naming. Quite the contrary, as long as you abide by the following naming conditions:

• It should include ‘Limited Liability Company’ or a similar abbreviation
• It should not imply the existence of another entity by using another entity’s identifier e.g. inc
• It should not suggest an affiliation with government agencies
• It should not have similarities with other LLCs

The next step lies in making sure the name is available; else, it will not go through. Instead of having an attorney do this, you can use the name search website and carefully go through any similarities. While doing this, also look up URLs and trademarks with similar naming. It is best that you ensure full use of the name, if available, by reserving it for a $10 fee. The reservation holds for 120 days, enabling you to focus on other things without worrying that someone else will grab the identifier. Please note that you cannot make this reservation online, and you will have to mail the application to:

State Corporation Commission
Office of the Clerk
P.O. Box 1197
Richmond, Virginia 23218-119

Alternatively, you can present the application in person at the:

Tyler building (1st floor)
1300 East Main Street Richmond
Virginia 23219

The processing will take 5-7 business days, after which you should get confirmation.

Want to learn more? Read our full Choose a business type and Unique Business Name For LLC

Step 2: Assign an Registered Agent to Become an LLC in Virginia

Not unless you are able and willing to receive all official communication between you and the state, a primary point of contact is necessary. This contact person, otherwise known as an agent, receives notifications and other key documents on your behalf. They also receive legal summons such that if you get sued, the state sends the same to them.

Who can represent you? The state requires that this in-between meet the following conditions:

• They should be aged at least 18 years of age
• They should be able and willing to enter into a contractual engagement
• They should have a valid physical address in the state where you conduct your business
• They should be available during the state’s working hours. Without this availability, their intermediary benefit would not serve any purpose and you would be on the losing end.
• They should have Virginia State Bar or be part of your company.

From these conditions, you can see that many people would qualify to be a registered agent Virginia. That means that you, a member of the business or a trusted friend can take on this role. However, given its permanency and importance, it would be ideal that you hire a professional Virginia registered agent to take on this responsibility. Below are some of the benefits of hiring a third party:

• Reduced exposure. When you file your articles as we will see in the next section, you list your address. Suppose you operate from your home, the public would have access to this information, which can be challenging for you. A Virginia LLC registered agent would list their address, enabling you to keep your home affairs private and conduct your business without much intrusion.
• Increased Availability. You might not always be in the office, even when you would like to be. In this case, having a third party on call works in your favor. You can even take a week off work without having to worry about not complying with the laws. The Virginia registered agent services will ensure that you stay on top of things.
• Increased Privacy. Where you do not have an agent, you can receive legal summons to your place of work. This situation can be pretty embarrassing as your clients and employees would witness the exchange. With an agent, you can keep these proceedings on the low as you figure out what is best for the business.
• Compliance. An agent’s work is to sort through all notices and give you reminders on what you need to do to remain compliant with the law. As such, you will not miss out on important filings. Also, this delegation enables you to focus on your business operations.

Here are some of the most reputable agencies in the state:

• ZenBusiness
• IncFile
• Northwest
• Incorp
• LegalZoom
• Harbor Compliance

Want to learn more? Read our full Assign a Registered Agent

Step 3: File the Virginia LLC Articles of Organization

The state requires that you file the Articles of Organization Virginia to get registration for your business. You have two options. You can create an online account where you can do the filing or you can download the required forms and send them to the state. In either case, you will need to include the following information:

• The name of the business as discussed in the first section, ensuring it meets the required guidelines.
• The name of the person or company acting as your primary point of contact.
• The address of the person who will receive communication on your behalf.
• Your address. Please note that this should not be a mailbox.

Once you have filled in this information, you can file the Virginia articles of organization as follows:

Online

The website provides you with the fields you need to fill to complete the application. The processing should be immediate, which is a plus to people who are in a rush.

Mail

All you need to do is fill this form and send it to:

State Corporation Commission
Clerk’s Office
P.O. Box 1197
Richmond, VA 23218-1197

Alternatively, you can present the forms in person to the following address:

State Corporation Commission
Clerk’s Office, First Floor
1300 E. Main St.
Richmond, VA 23219

The processing takes between two and five business days.

All applications will set you back $100.

Want to learn more? Read our full File LLC Articles of Organization

Step 4: Get an Employer Identification Number (EIN)

An EIN number Virginia identifies your operations to the IRS for ease of filing returns as your business progresses. Before applying for one, ensure that you have registered your business and received approval of the same. Also, you should understand if one is necessary in your case or if you can make do without it. Below are motivating factors behind getting this ID:

• Where you share your company with another person, you will need to make an application.
• Where you intend to bring in hires, you will need a Virginia EIN number.

You might look at the above factors and realize that you are in the clear and do not need to get one. You might also realize that you need one but wonder what the benefits of making an application are. We have covered some below:

• Most financial institutions expect you to have this ID and may refuse you some services where you lack the same. For example, when opening an account as we will later see, this documentation comes in handy.
• You cannot start getting hires until you have this ID, as doing so would not be in line with the law. For your operations to remain compliant with the law, you need to register for taxes, and for that, you need this ID.
• A good reason to have this ID is to keep your SSN private. Else, you will be exposed to identity theft, which can put your assets at risk.

You can make your application in the following ways:

Online

Online – if you want your application done fast and without much hassle, this is the best option. Once you go through the processes and provide the required information, you get a number immediately. Please note that this works for people who can provide an SSN. If not, consider the options below:

Mail

You will wait a while under this mode, and it can take as long as four weeks. To start the application, you need to manually fill Form SS-4 and mail it to:

Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999

FAX

Instead of mailing a completed Form SS-4, you should fax it to (855) 641-6935. The confirmation should be ready in about four business days, provided you have filled out the required fields.

All applications are free of charge.

Want to learn more? Read our full Get an Employer Identification Number For LLC

Step 5: to Start a LLC in Virginia Create an Operating Agreement (OA)

An operating agreement LLC Virginia (OA) sets out the guiding framework for your business operations. It is like a constitution by which you will abide to ensure that the business operations run as planned. The state does not require that you have one. However, in the event of a disagreement, the law works with the OA first to settle disputes among members. Where you lack one, the law uses default rules to settle the problem. These laws are highly generalized and will not do much to serve you. For this reason, many business owners make their own OAs to create guiding principles to help them run their operations efficiently.

How can you make an OA? You have the following options:

• The Guided Journey. Members of the company can come together and brainstorm ideas for what they think should be in the OA. You can also borrow ideas from the numerous templates online and draft a document from these.
• The Legal Route. While the first method is effective, it helps to engage an attorney who can find loopholes in the Virginia LLC operating agreement. Remember that all operations are different and the online templates may not include matters that pertain to your company.

Below are the segments that should be part of your agreement:

• Formation and organization. Include the members of the company, when you got your license, how much you all own in the business and the distribution of shares. For example, if some people have more stake than others, you should indicate this.
• Power. Who has control over the operations? Some organizations pass this to the members while others prefer to have a central head taking over managerial functions. Show this to prevent wrangles over the day-to-day running processes. Additionally, include voting procedures as well as how many votes each member has.
• Investment. How much have members put into the company? The OA should show this, as well as how much money future members have to invest to get stake in the organization. On this, you should also include how you will share profits and losses. The distribution should be clear, be it by stake or other factors.
• Structural Changes. As the company grows, you will face changes in the membership, with some people leaving and others joining the operation. You should be clear on how ownership should change hands and who gets priority when transferring roles.
• Termination. If you decide that you all no longer wish to keep the company running, how will you go about it?

Please note that companies are different and you may need more than the above segments in your OA. It is advisable that you engage professionals to handle this for you.

Want to learn more? Read our full Create an LLC Operating Agreement

Step 6: Open an Account to Set Up an LLC in Virginia

An LLC comes with the added advantage of protecting what belongs to you by separating it from the business. However, this benefit only applies to you if you can separate the finances too. Where you mix your business profits with your personal finances, you create room for trouble. If you get sued and the other party wins, the law provides that you can also lose what is yours in the account as no separation is in place. That is all the more reason why you should open a bank account for your LLC once you have your registration and business ID in order.

Here are some other benefits that accrue from this separation:

• You can forge a relationship with your financial provider which works in your favor. Some years down the line, you might find that you need some extra finances to keep the business going. With this established relationship, you should not have a hard time with getting this extra financing.
• You can tell how much you have made as a business, as the separation enables you to see what you have coming in and going out. That gives you a better picture of how well you are doing and if you need to make any changes to your operations.
• People take your business more seriously when they see you have gone through all the paperwork needed for an account. It is much different from when your name is present in the documentation. You might find it easier to attract clients and investors thanks to this business appearance.
• When it comes down to keeping records and filing your returns, you will not have much work to do. In the event that you hire help to take you through this, you will find that you will spend less time and money on it.

These are but some of the benefits of choosing separation. Now, what should you have in order to get your account ready? Well, different institutions call for different paperwork. However, the standard requirements are as follows:

• Valid ID, one with a photo
• EIN
• Articles of Organization 
• Operating Agreement

Want to learn more? Read our full Open a bank account for your LLC

Step 7: Remain Compliant

To keep operating within the state, you will need to keep up with any filings as required by the law as follows:

Licenses

You might find that you need extra licensing to conduct your business in the state, more so when you work in industries such as catering and health. Please note that the permits required vary based on your operations and you should thus check with the state as to what applies in your case. You might even find that you need to undertake some training before you can start your operations.

Annual Registration

On the upside, you do not have to keep up with yearly reports. However, you must pay a $50 annual fee to the state. This filing should take place latest on the last day of the month in which you registered your business. For example, if you start your business in December 2020, you should ensure that you make this payment by the end of December 2021.

Ensure that you are prompt with your payment; else, you will have to include a $25 penalty when effecting the registration. Additionally, note that failure to pay this fee within three months of the due date can lead to dissolution of your business.

Business Taxes

There is a beauty of starting an LLC in that you can enjoy pass through taxation. How does this work? Well, instead of paying income taxes to the federal government from the business, this comes out of your pocket. Thus, all members are responsible for filing their returns with the government, taking the burden off the business. It gets even better in Virginia. You see, in some states, authorities make up for this benefit by charging a separate fee. They refer to it as the privilege of doing business in a region, which is not the case with Virginia. As we earlier saw, there is not much you need to do other than to file the yearly registration fee.

How you get taxed depends on how you decide to treat your structure. Some LLCs behave like corporations when it comes to taxation, such that they file separate tax returns. In this case, the rate would be 6% of the net income, which would be payable to the state.

Please engage your attorney and accountant when deciding on what structure works best for you.

Employer Taxes

Do you remember when we mentioned that getting a business ID would allow you to get people to help with your operations? Well, having employees means that you need to pay some taxes. Some of these are payable to the IRS and you must understand what you need to pay and to whom.

First things first, you need to register with the department of taxation. You can then proceed to pay your taxes as follows:

• Withholding
• Unemployment Insurance

Sales & Use

These payments are applicable to businesses that sell tangible goods to their clients. You need to keep up with all sales you make from which you can deduce how much you owe the state. Once again, you need to register with the taxation department and make periodic payments based on your sales. Registration can be online or you can send a complete R1 form to the department. Once you have your registration certificate, you can proceed with the required payments on a given timeline.

Please note that you must be aware of which taxes are applicable to you for you to remain compliant. You can get more information here.

Want to learn more? Read our full Taxes and license fees

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Frequently Asked Question

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