To remain in the good books, you need to be aware of what applies to you regarding filing and any paperwork you must have in place before setting up shop. This article covers this and more:
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Licensing
You must obtain a license to be in line with prevalent regulations in the state. For example, if you wish to open a restaurant, you must have health permits, among other provisions to conduct your business. However, you may find that most people tend to ignore such needs. They wrongly assume that they can get the certificates when things take a wrong turn. That is not the case and authorities will not be easy on you if you are on the wrong side of the law. Not only can you get fined but you can also incur penalties for not having the right papers. In worst case scenarios, the government can shut down your operations. It is thus not as easy as it may look.
What papers do you need? The best way to understand what you must get lies in following the steps below:
- You must be aware of all activities that encompass your operations, including the products and services you offer to the masses. Dissect each product and service looking at what goes into it and any areas which feature blurring with other industries.
- From these activities, select the areas which you think require a special permit to conduct. For example, if you will handle food at any given time for commercial purposes, public health regulations come into play. Do this for each activity.
- Where you run your venture out of various regions, take stock of these locations and find out which regulations are applicable in each area. Please note that this will apply to you even if you run the operations out of your house or an online setting.
Once you understand which papers you need to move forward, you can then start making applications to the licensing agencies in all levels of government. You can handle this on your own, which may or may not be easy based on where you are and how capable you are of handling such papers. You can also delegate this service to an online agency that can handle the filing or help you with the forms. The latter might be the best option given that there are thousands of licensing jurisdictions in the US, each bearing its requirements. Some even require that you attend some training prior to getting the certification.
Must you get a license? You may wonder if you can bypass this step, but as we earlier covered, being on the right side of the law is in your best interests. Here are some other reasons why you may want to get the paperwork done before you open shop:
- The authorities will have an easier time identifying your business and they can keep tabs on you. It also ensures that you remain on top of things by carrying out your operations as stipulated by the governing authority.
- You also protect yourself, your employees and the general public when you obey the law. For example, if you handle food, the authorities will come in and make sure that you operate in a sanitary environment. They will also offer you tips on how to keep the environment clean, thus safeguarding the lives of people.
- Finally, it makes it easier to track monies that relate to your tax requirements. At the end of each financial year, you will have an inkling of what you owe the government.
What kind of tax will you owe on Virginia business income?
Federal taxes
The chances are high that you will have to report your income to the federal government. However, you don’t need pay federal income taxes or to file a corporate tax return. The way you report depends on how you pay yourself from the company as follows:
Default Rules
If you have not elected a different way of making payments, the authorities will expect you to file based on the number of members in the business. For businesses with one member, the authorities will treat this as a sole proprietorship. Businesses with more than one person will fall under a partnership. Under these entities, the taxes will move to each member, such that the business will not pay anything. However, you are free to choose other forms of filing as follows:
Sole Proprietorship
Where a business has only one person, the authorities categorize it under this filing option. For you to benefit from this selection, you do not have to file anything with the authorities. They will look at the membership and decide that this is the best structure for you. Under this, the business will not be responsible for any profits or losses. Instead, these will pass on to you and you can include them in your returns.
Partnership
Once again, you do not have to make any documents and send to the authorities if this is how you would like to file your returns. As long as the business features more than one person, this will be the default selection.
S-Corporation
If you would rather not go with the default selection, you can choose to file under this entity. However, to qualify for this, you must file form 2553. Under this, you will pay self-employment taxes as you would, but with the added benefit of not getting taxed on the distributions. It allows you to enjoy considerable tax savings, more so where you make high profits.
C-Corporation
If you would like to fall under this selection, you need to file form 8832 with the federal government. However, you will note that not many companies opt to go down this route. It allows you to keep money in the business by paying yourself a salary that is beneath what you would take as profits. As a result, your tax bracket remains on the lower side. On the downside, you will get taxed twice under this entity and you could thus end up paying more in earnings accumulation.
The best option for any of these structures is to engage a professional who is conversant with present laws. They can advise you on the best selection based on your earnings and willingness to take on risk. You might as well choose to remain with the default options.
State taxes
The good thing with an LLC structure is that you can avoid getting taxed on two levels thanks to the Pass-Through Entities Income Tax provision. Instead of having the company pay the taxes, these payments can pass to the members of the business. As such, your business will not pay the tax but you and other members will. However, note that states also impose additional fees on businesses as a privilege of doing business in the area. In Virginia, this comes in the form of an annual fee which we will later cover. You can decide how you wish to pay your taxes by embracing the structure of another entity as we covered earlier. Some other categories also come up depending on the nature of your activities as follows:
Employer Taxes
These apply to companies that hire people. Some of the applicable payments go to the federal government and you should be aware of what is due to who and when. For you to start paying taxes to the IRS, you have to get hold of an EIN, which is thankfully free. This ID also comes in handy when operating a bank account as well as keeping your information private.
On the state level, you must pay taxes to the authorities if you have any people working for you. These are due to the DOT (department of taxation). To start paying these, you must register with the DOT online or by mailing in your form R1. From here, you can start making payments based on a given schedule e.g. monthly or every two weeks. Additionally, you need to reconcile your payments each year. The Virginia Tax website site can provide you with more information on this.
Moreover, you need to keep up with the state unemployment insurance (UI) taxes, for which you can register online or by paper. Every quarter, you must report on how much you have paid out in wages as you make these UI payments.
Sales and Use Taxes
Where you intend to sell tangible good to your clients, you need to set up a collection and payment point by registering with the DOT. It allows you to collect taxes on a periodic basis and render the same every period. This registration can take place online or by mailing in the R1 form, after which you will receive a registration certificate permitting you to collect the payments on the DOT’s behalf. Returns filing takes place online on a periodic basis such as quarterly or monthly. You can find more information on the DOT website for areas where you need additional information.
Miscellaneous Taxes
If you will conduct business in other states, you need to figure out if you must make additional payments to carry out your transactions. You may find that you are subject to other taxes of which you might not have been aware. Engaging your attorney can help you avoid any pitfalls that may be in your way.
What is franchise tax? Do I need to pay franchise tax in Virginia?
Virginia doesn’t have a “franchise” tax.This tax applies to businesses operating in states which charge for operation within the region. They are seen as the cost of doing business in a given area, and they can be quite high, more so for startups which are grappling to make ends meet. Virginia is quite friendly and does not impose such a fee on business owners, enabling them to focus on their activities rather than on making constant payments to the authorities.
Is a business license required in Virginia?
Not every Virginia business needs a license. As we earlier covered, having the right paperwork is essential to carrying out your business operations without incurring fines, penalties and shut downs. However, not all business operations require paperwork for you to start your business. To find out if you are subject to extra documentation, you must understand all activities which you carry out and if these require special licenses. You might find that you can go on without any or that you need some form of training to get the certification.
Do LLCs file annual reports in Virginia?
No, instead you are subject to pay theannual registration fee for your company, whether foreign or domestic, to continue with its operations. The filing fee currently $50 is due on the last day of the month in which you registered the business. For example, if you get your approval in May 2020, the filing is due on the 31st of May 2021. On the plus side, the state does not ask that you file an Annual Report in Virginia, as is the case with many other states. However, you must be prompt with your filings; else, you will attract a penalty of $25.
If three months go by after the deadline before you file this fee, your business can undergo automatic dissolution. Please note that this can happen to any business as long as you miss one or more filings. When this happens, you not only lose your business but also your limited liability. Thus, if anyone was to sue you at this point, you also stand the chance of losing your personal assets. If you have a hard time keeping up with these notices, it might be best that you hire a commercial agent to keep an eye on these upcoming dates.
You can file your fee as follows, keeping in mind that it is non-refundable:
- Online- a non-refundable fee of $50 is due to the corporate commission, accessible on this site. Mailing is not available.
Do you want to know when you need to make the next payment to the state or submit a report to the tax office? Use the services Registered Agent
He will regularly notify you of all letters from the state and remind you to make a payment. In addition, Registered Agent provides a number of other useful services for business.
How do I file an annual report in Virginia?
No Virginia LLC annual report is necessary for your LLC. However, other entities may require such filings. Instead, you are due to pay an annual registration fee of $50, which you should pay on this site.