The Limited Liability Company (LLC) is a popular entity structure for businesses starting in the state of Virginia. The LLC provides personal liability protection and has the potential to save money on taxes. With our step-by-step guide, you can learn how to form an LLC in Virginia 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.
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.
Steps to Form a Virginia LLC
Let’s break down the steps to complete the Virginia LLC formation process.
Total Time: 10 minutes
Step 1: Choose a Name for the LLC
The first step in forming a Virginia Limited Liability Company is to make sure the name you want is available.
It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of Virginia. The Virginia State Corporation Commission makes it easy to search and verify if your LLC name is available. Here is more information on how to do a Virginia LLC name search.
In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
– Limited Liability Company
– Limited Company
A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.
If there is an LLC name you want to use, but you are not ready to register the LLC, file the Reservation of a Business Entity Name (Form SCC631) with the Commonwealth of Virginia State Corporation Commission. The name reservation fee is $10 and will hold a name for up to 120 days.
If you plan to use a different name from the one that you register (perhaps you want to run multiple businesses under the LLC), you can use a fictitious name (sometimes referred to as a trade name, assumed name, DBA, or Doing Business As name). To register a fictitious name, the Certificate of Assumed or Fictitious Name, along with a $10 filing fee, will need to be sent to the Commonwealth of Virginia State Corporation Commission.
Before settling on a name, you may want to do a domain name search (also referred to as a URL) search to see if there is a domain available to match your business name.
Step 2: Appoint a Virginia Registered Agent
Every LLC in Virginia is required to have a Registered Agent. A Registered Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.
The basic requirements to be a Registered Agent in Virginia include:
– The agent must be a Virginia resident at least 18 years of age or a commercial Registered Agent service with a registered office in the state.
– The agent must have a physical address in the state (PO Boxes aren’t allowed).
– The agent must generally be available during normal business hours at the address provided to receive service of process.
Learn more about the requirements for a Registered Agent in Virginia
Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when running the business from home or while still employed. Hiring a company like Northwest Registered Agent to be the Registered Agent will reduce unwanted phone calls and mailings.
Step 3: File the Virginia Articles of Organization
The paperwork to officially create an LLC in Virginia is called the Articles of Organization. To submit the paperwork, either file online through the Virginia State Corporation Commission’s website. If you prefer to fill out and mail the application, download the Articles of Organization (Form LLC-1011).
Estimated Cost: 100 USD
Turnaround Time: LLCs formed online are processed immediately, while mailed in forms can take up to two weeks.
You don't have to form your LLC by yourself or pay an attorney!Forming an LLC is a little intimidating, especially when it’s your first time. Professional entity formation services help guide you to make sure it’s done right. Check out our reviews of popular LLC formation services to learn more.
You have a Virginia LLC! Now what??
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 Virginia LLC Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, how new members are added, 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.
Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Federal Tax Identification Number) 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
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 is that 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 formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- Occasionally, the bank will request a Virginia Certificate of Good Standing to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
In addition to forming the LLC, 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 starting.
- Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
- Sales Tax Certificate – To sell products and certain services, registration with the Virginia Department of Taxation will be necessary.
Get Business Insurance
Even with the asset 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.
File the Annual Registration
Instead of an annual report, LLCs are required to file an annual registration with the Virginia State Corporation Commission. The annual registration fee is $50 and is due each year on the last day of the month that the LLC was formed. For example, if the LLC was formed on November 15th, 2021, the first annual registration would be due on November 30th, 2022.
If the Annual Registrations aren’t paid by the due date, the Virginia Corporations Commission will assess a $25 penalty to the LLC and eventually dissolution if not paid.
Common Questions To Starting An LLC In Virginia
How much does it cost to start an LLC in Virginia?
The Virginia State Corporation Commission filing fee to start an LLC in Virginia is $100.
Is there a yearly fee for an LLC in Virginia?
Each year, an annual report and $50 filing fee must be sent to the Virginia State Corporation Commission.
How long does it take to start an LLC in Virginia?
LLCs formed online are processed immediately, while mailed in forms can take up to two weeks.
Do I have to pay to hire a registered agent?
No. Anyone can act as a registered agent, provided they are at least 18 years old, reside in the state, and are generally available to receive documents during normal business hours.
If I have an LLC, is a business license required?
It’s sometimes thought that the LLC and business license are the same, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is approval from a government entity to legally operate.
What is a Foreign Limited Liability Company?
A foreign LLC refers to an LLC that is physically operating in states outside of the state where it was formed. Physically operating means having a presence, such as having an office or employee in the state. The LLC will need to register as a foreign LLC in each state that the LLC plans to operate.
What is a Professional Limited Liability Company?
Businesses that require occupational licensing in Virginia, such as accountants, architects, veterinarians, etc., will want to file for a Professional Limited Liability Company (PLLC) instead of an LLC. Filing for a PLLC is very similar to that of the LLC.