How to Form an LLC in Vermont

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Vermont LLC Quick Facts

Vermont LLC Costs

Initial LLC Filing Fees – $125

 

Recurring State Fee: Annual Report Fee – $35

LLC Processing Time

Online – 1 business day

 

By Mail – Up to 2 weeks

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Let IncFile or IncAuthority guide you through the LLC formation process, so you know everything was done right. Only pay state fees!

Quick Reference

The Limited Liability Company (LLC) is a popular business entity choice structure for many businesses starting in the state of Vermont.  The LLC provides personal liability protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in Vermont without an attorney.

Unlike a sole proprietorship or partnership where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.

Related: How Does an LLC Protect You?

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

Costs to Form a Vermont LLC

To form a Limited Liability Company in Vermont, file the Vermont Articles of Organization with the Vermont Secretary of State.  The LLC filing fee is $125.

Approval for the LLC is typically around two weeks when filing by mail or 1 day when filing online.

Guide to Forming an LLC in Vermont

The steps for filing online or by mail are largely the same.  The screenshots show how to file online.

Forming an LLC can be both affordable and is something most people can do themselves. Entity formation companies like IncFile or IncAuthority help guide you through the process and make sure there are no mistakes.

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

Step 1: Create an Account

Begin by creating a user account on the Vermont Secretary of State’s website. If you prefer to fill out and mail the application, download the PDF of the Articles of Organization Form LLC-3(D).

How to Form an LLC in Vermont

  • Click on “VT Secretary of State Online Services” on the left menu and then “Start or Register Your Business.”

Register Vermont LLC

Step 2: Create the Business

Most people on this site will be forming their first LLC, and it will likely be located in the state.  If that is the case, select “I am Creating a New Domestic Business.”   If it originally formed the LLC in another state and want to do business in Vermont, select “I am Registering a Foreign Business” (commonly called a Foreign Entity or Foreign LLC. Other common choices include a professional LLC (PLLC) which is reserved for services that require state licensing (like accountants, architects, attorneys, etc).  Additionally, the low-profit LLC can be selected which is a for-profit business but has a charitable focus. The formation process for each is relatively similar to the domestic LLC in this guide.

A new menu will then appear for “Business Entity,” where you would select “Limited Liability Company.”

From the next menu, select “Limited Liability Company” to start forming your LLC.

Create a New Domestic LLC Vermont

Step 3: Register the Business Name

Enter the name you want for the LLC.  The LLC’s name has to be different from other entity names registered with the Secretary of State.  You can also check on available Vermont LLC names before going through the filing process to ensure the one you want is available.

The name of the LLC must also include a designator at the end of the business name and describes what type of business entity it is. Available designators can use the following words or abbreviations:

  • Limited Liability Company
  • Limited Company
  • L.L.C.
  • LLC
  • L.C.
  • LC
  • Ltc. Co.

A comma may be used after the business name and before the designator.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

You have the option of entering two alternate names in case the one you enter is rejected.

Before settling on a name, you may want to do a domain name search to match your business name and website address.

Register a Business Name Vermont LLC

Step 4: Business Description

This section is asking for information regarding the activities of the business.  To do that, there is a number called NAICS (North American Industrial Classification System).  This code is a six-digit number that classifies and categorizes the different business industries.  This information is used in reporting statistical data for each of the industries in the U.S.  Remember this number as you will need it when filing annual tax returns.  You can do a more in-depth search for your NAICS number here.

If the activities of your business aren’t specifically listed, choose one that is close.

Vermont LLC NAICS Code

Step 5: Domestic Jurisdiction

“Vermont is automatically chosen as the domestic jurisdiction and can’t be changed.

Step 6: Designated Office Information

Physical Address – In this section, enter the street address, city, state, and zip code of the initial principal office.  This address can be the LLC’s physical address, or it can be the address where the business records are stored.  You may not use a PO Box for the designated office.

Mailing Address – A mailing address is required, and it can be the same as the Principal Address.  If the LLC records will be sent to a different address, enter that information in the Mailing Address Section.  If the address is the same as the principal office, click on the “Use this address as the Mailing Address also” box to copy the Principal Address address.

Any address is acceptable regardless of location or PO Box.

VT LLC Principal Office Address

Step 7: Business Email Address

Enter a preferred address where the Secretary of State should send correspondence regarding the LLC formation.

Step 8: Fiscal Year End (Month)

Select the preferred ending month for the LLC’s fiscal year.  Single-Member LLCs and LLCs taxed as a partnership should choose December.

The default end month is December by the state.

Step 9: Registered Agent

To have an LLC in Vermont, a Registered Agent must be identified.  The Registered Agent can either be a Vermont resident, a business entity, or a Registered Agent service.  The agent must have a physical street address in the state (Post Office Boxes are not allowed) and act as a point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.

Even though the business owner can be the registered agent, their name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when they are doing business from home.

If you are using a Registered Agent service, enter their name and select “Search”, otherwise select “Create Agent” to add a new record.

Vermont LLC Registered Agent

Step 10: Manager/Member Information

This section asks about the management choice of the LLC.

  • Member-Managed LLCs have an active involvement in the management and have the authority to act on behalf of the LLC.
  • Manager-Managed LLCs are hired by the members to run the LLC, similar to a CEO of a corporation.  This is generally used when there are passive members in the LLC, and the members do not actively manage or operate in the affairs of the business.

Most LLCs are member-managed.

The next question asks if the LLC has members at the time of filing.  Select “Yes” or “No.”

VT LLC Member Manager Managed

The next section asking for the members/managers address is optional.  Some filers won’t want to include their names because those names become part of public record.  The downside of not include their names is it can make it more difficult to show ownership and do things like get licenses and open a bank account for the LLC.

Step 11: Other Provisions

This is an optional section and not used by most LLCs.  Here you would include additional rules for the operation of the LLC.

Step 12: Certify

An organizer will need to certify the information being submitted is correct.  An organizer is someone involved with the formation of the Articles of Organization.  The Organizer may or may not become a member, such as a mentor, attorney, or accountant, but any of the initial members can be listed as an organizer.

If you want the LLC to start immediately, choose “This statement will be effective as of the date of this filing.”  If you want the LLC to start later, choose “the effective date requested for this statement will be the date” where you can enter a date less than 90 days in the future.  The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year, and the business isn’t going to have any activity until the start of the year.  By delaying until the following year, they will reduce the number of end-of-year filings.

Vermont LLC Certify Articles of Organization

Step 13: Review

Review that all the information is correct.  If there are no corrections, click “Proceed to Pay.”

Step 14: Pay and File

Pay and file the Articles of Organization.

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Tasks After Forming Your LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a Vermont LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: Vermont operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original LLC formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Occasionally, the bank will request a Vermont Certificate of Good Standing to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC 

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting the business. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start.
  • Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
  • Sales Tax Permit – To sell products and certain services, registration with the Vermont Department of Taxes will be necessary.

Related: What Business Licenses are Needed in Vermont?

Get Business Insurance

Even with the liability protection of the LLC, business insurance is important to protect the business. The most common types of insurance include:

General Liability Insurance – covers damages owed and medical expenses for accidents that happen at your place of business.
Business Property Insurance – replaces damaged, stolen, or lost business property. This includes your physical business location, equipment, supplies, and anything else you used to run your business.
Business Vehicle Insurance – covers company vehicles and may also include coverage for personal vehicles used for business-related activities. Many personal policies won’t cover your vehicle if there is an accident while being used for business purposes.
Workers Compensation Insurance – mandatory in most states if you have employees, this insurance covers medical expenses that occur because of an accident or injury that happens to one of your employees while they’re at work.

Related: 7 Types of Insurance Your Business May Need

File the Annual Report

LLCs are required to file an annual report with the Vermont Secretary of State.  The annual report filing fee is $35 each year and the due date is based on their fiscal year. Most LLCs choose their fiscal year as the calendar year, which means their tax period runs Jan 1 – Dec 31.  The annual report in Vermont is due within 3 months following the end of the fiscal year, so LLC’s that use the fiscal year would have their reports due by March 31st.

Related: How to File a Vermont LLC Annual Report