As many Virginians are familiar, forming a limited liability company (LLC) in the state of Virginia is not an easy task.
There are fees and requirements to form an LLC.
This article will go into precisely what you need to know to start an LLC in Virginia.
Quick Steps to Starting an LLC in Virginia
First, you will create your LLC through the Office of Corporation Counsel, which is an online service set up by the state: http://www.corporationcounselva.com/forms/filing-start-your-company/.
The process is pretty simple. It will ask for your name, address, contact information, and a dollar amount.
Step 1: Choose a name for your LLC.
There are over 20,000 names currently available to choose from. Be careful not to choose a name that confuses you with another business. There is a particular name. However, that has already been registered and will cost hundreds of dollars in filing fees :).
Virginia LLC name requirements
- The name of the LLC cannot contain less than three syllables.
- The name of the LLC must not be deceptively similar to a trade or business name already registered in the state.
- A Virginia name search will return all names currently registered in the state. The “www.VNSearch4Names.com” service is available for a nominal fee, and it’s free if you register using your email address and a valid credit card.
- The LLC name must be distinguishable from all other business names in Virginia.
- The name cannot contain the word “inventor”, “development”, or “international”.
- The name cannot be a service, trademark, or certification mark registered with the U.S. government.
- The name cannot contain the abbreviations “Inc.,” “Ltd.,” or “U.S..”
- The name cannot contain a word prohibited by state law.
If you are having trouble choosing a name you want, I would suggest going to your local Chamber of Commerce and asking about what names have been registered by other businesses in the area.
This will help you narrow down the list of available names.
Here is the link directly to Corporation Counsel’s LLC name search: http://www.corporationcounselva.
Name availability and reservation.
LLCs can reserve a name from the list of over 20,000 names by paying a $200 fee. The LLC will be given six months to reserve the name you have chosen.
If someone else uses that name within that time frame, you will need to pay an additional $400 fee to claim the name.
Using a DBA
A DBA will allow you to use the same name in your business, which means you can have a DBA for your LLC.
If you do not reserve a name through Corporation Counsel, you will need to register for a DBA at the Department of Professional and Occupational Regulation: http://www.dpor.virginia.gov/.
Step 2: Appoint a registered agent in Virginia.
To carry out business in Virginia, you will need to appoint an agent for the service of the process. This is like a notary in that they are involved with the process of retaining documents for your LLC.
You should also pick an address for your registered agent and fill out the required information. The site will ask you to choose between a registered agent or a resident agent.
You can choose a resident agent if your business is centered around Virginia.
To appoint a registered agent, you must submit the following:
- The name of the LLC formation service and its status (active/inactive).
- The signature of an individual authorized to sign on behalf of the LLC.
- The street address for service of process. This can be anywhere in the world.
- The mailing address for service of process. This can be anywhere in the world.
- The street name and number of the street where your business is located.
- The city where your business is located.
- The state where your business is located.
You will also need to provide a $50 state fee for the process to be processed by the Secretary of State’s office and for you to receive a certificate that shows that your documents are registered in Virginia: http://www.vacr.org/forms/apply-for-dba.aspx.
If you hire an agent for service of process, you will need to share the following information:
- The street address where the LLC is located.
- The name of the person appointed as the registered agent and his/her mailing address.
- The name of each person to whom that agent will deliver documents on behalf of the LLC within one year from the date of appointment and their mailing addresses at that time.
Each state has its own registration requirements. You should make sure that you check the regulations of your business’ state and county to make sure that you are in compliance.
Virginia Registered Agent service Requirements
- You can use a Virginia resident agent if your LLC is registered.
- You must keep the same registered agent as long as the LLC is active and three years after it becomes inactive.
- You must appoint an agent at least 60 days before obtaining service of process, or you may incur additional fees.
- You must use a Virginia registered agent that is physically located within the state of Virginia.
- The registered agent must use his/her name printed on their business card for service of process.
- The registered agent shall be an individual with a Virginia mailing address.
- The registered agent may not be the same person as its owners or members.
- The registered agent must be a resident of Virginia.
- The registered agent may not be a minor.
Step 3: Determine if you need a Virginia business license.
To determine if you need a Virginia business license, you will need to check the regulations of your city and state.
You will also need to check the regulations in your industry or profession.
Here’s a list of some professional associations that may be able to help you with these questions:
I. American Bar Association: http://www.abanet.org/
II. American Psychological Association: http://www.apa.org/
III. National Association of Social Workers: http://www.socialworkers.org/
IV. National Association of Children’s Hospitals and Related Institutions: http://www.nachri.org/states.cfm
V. National Association of Insurance Commissioners: http://www.naic.org/states_state_division_state_agencies_directory.htm
For more information on becoming a business owner in Virginia, visit the State Corporation Commission’s website: http://www.scc.virginia.gov/forms/.
Step 4: File articles of organization of your LLC.
You will need to file a copy of Virginia LLC articles of organization with the Virginia Secretary of State.
You will need to sign the articles of the organization in the presence of a notary public and have them notarized.
You will also need to make sure that you include the following information:
- The name, address, and signature of an individual with authority to execute and file articles on behalf of the domestic LLC.
- The date upon which these records were signed.
- The county in which the records were signed.
- A statement showing compliance with Virginia’s limited liability company law. If the LLC is not registered in another state, you will need to check the box that shows that it is not registered in another state.
- If your LLC is registered in another state, you will need to attach a copy of your certificate of registration or any required amendments. You will also need to attach a copy of the papers or instruments filed by the foreign LLC with its home Secretary of State. If you do not include records from your home Secretary of State, your filing may be returned. You will need to amend your articles of organization at a later time.
- If your LLC is registered in another state, you will also need to include a statement that shows the name and address of your registered agent. If applicable, you will also need to provide documents that show each person whom the registered agent has agreed to accept service on behalf of your LLC. This includes names and addresses of persons accepting assistance and the method by which they may be contacted (usual service by mail).
- If your LLC is registered in another state, you may be exempt from following certain portions of the Virginia Limited Liability Company law. You will not have to include a statement regarding this unless the Secretary of State indicates that it is required. To discover whether this applies to you, please refer to http://www.vacr.org/forms/chapter_6.aspx or contact your Secretary of State’s office for information and assistance.
After you have filed your articles of organization, you will need to send a copy to all owners:
- To the registered agent at least 60 days before you file your application for registration.
- If there are members or managers, the same day.
- If there are no members or managers, within 30 days.
You can send your documents via U.S. mail or private courier to the Secretary of State’s Office: Virginia Department of Business & Professional Regulation P.O. Box 1197 Richmond, VA 23218-1197
Step 5: Draft an LLC operating agreement.
To begin the process of registering your LLC, you will need to draft an LLC operating agreement.
This is a binding and enforceable document that outlines how your business will be run.
LLC operating agreement should include the following information:
- The name of your LLC.
- A statement that shows that all parties are entering into the operating agreements willingly and voluntarily.
- The LLC’s purpose or tasks.
- Where the LLC will be formed, if your LLC will be formed in another state, you will need to include the date that it was formed in your agreement. If your LLC is formed in another state and incorporated by a foreign entity, you will need to show this as well. Include documentation that this is the same as what was filed with your Secretary of State.
- Who owns the shares of stock. If you have members, list them. If you have no members, record the number of shares that each person owns.
- The name and address of the registered agent. If your LLC is registered in another state, you will need to include a statement that shows the address of your registered agent and the process by which service may be made on it (standard service by mail).
- The name and address of each manager. If there are no managers, include a statement that shows this as well. You can also state if the managers are elected at a shareholders’ meeting or by written consent.
- The term of a special meeting called for any purpose other than electing at the issue of all interests (this should be in writing). If your special meeting requires written notice, include how and when this will be provided. Suppose it doesn’t require written notice, including a statement to that effect. You should also have what must be included in the notice.
- A statement that shows how any remaining property will be distributed.
- A statement regarding several managers participating in a meeting by telephone conference call or similar means.
- Disclosure of each manager’s identity and current business address in relation to his or her ownership interest in the LLC.
- A statement that shows who your LLC members are, including any terms by which members can be removed.
- The signatures of every owner or member, manager, and the LLC’s registered agent.
- A statement that shows how managers may participate in meetings by telephone conference call or similar means (if applicable).
- The terms under which a manager can be removed.
Step 6: Comply with state employer obligations.
If you have employees, you will need to comply with the state laws requiring certain notice to be given to employees when fired or laid off from employment.
These notices require:
- Notice required if a member is terminated for cause.
- Notice is required if an employee is terminated for cause based on a personal reason other than for wrongdoing (such as family obligations).
- Notice of termination is usually 30 days but could be longer if the termination is for “good reason” under certain circumstances.
- A notice of termination that is required to be given to an employee who was rehired within six months of being fired must be at least 15 days.
- Notices given to ex-employees must clearly state that the employee is to be considered a former employee for the purposes of any future claim filed by the ex-employee.
- Consideration of nondiscriminatory reasons in filling positions (commonly referred to as “job security”).
- The notice must be given to the employee when cuts are made. Cut notices should be based on seniority unless certain circumstances apply.
- Notices will not be required if a layoff is expected to last less than five days. If an employee has been employed for more than six months, the employer must provide 30 calendar days’ notice to terminate employment. This does not apply if the termination is due to circumstances that adversely affect other employees, such as a prolonged strike.
- Notice is required if an employee leaves the country or faces a transfer of a substantial amount of work.
- If an employee seeks new employment outside the U.S., the employer must provide 60 days’ notice for permanent relocation and 40 calendar days’ notice for temporary transfers.
- Notices are required to close an office or facility, lay off employees, layoffs, and termination of employment.
Step 7: Pay taxes and state fees for your LLC.
As with other entities, you will need to pay property tax on your LLC. If you have employees, you will need to report earnings and pay income tax on the money that you make from your LLC.
If there are any other business activities, then you will need to report those activities as well.
The taxes that you must be prepared to pay to include:
- Federal income tax on the profits from the LLC. These taxes can be deferred if your LLC is taxed like a partnership. In this case, the profits are taxed only at the member level and not at the LLC level.
- Employment tax on money earned from your employees. You will need to make sure that all income is reported and that appropriate amounts are paid to social security (FICA) and other taxes at both federal and state levels.
- Any other taxes that may apply, such as sales tax or property taxes.
- Any applicable fees and penalties.
Step 8: Comply with federal requirements.
In addition to complying with state and local laws, you will also need to comply with federal requirements.
- Register your LLC with the Internal Revenue Service (IRS). The IRS website has a special section that is dedicated to explaining how to do this at IRS.gov.
- Make sure that all payments are made on time for the taxes which are due on your LLC.
- File annual reports for your LLC. These must be filed with the state that it is registered in, and the documents can be obtained online or by mail.
- File annual information returns, including a Form W-9 for each of your members or partners.
Forms must be filed with the IRS by February 28th of each year.
Make sure that all payments are made on time for federal taxes, which are due on your LLC. These include the following:
- Tax withheld from wages (FITW) if you have employees.
- Social security and Medicare (FICA) if you have employees.
- VAT if you import goods.
- Any other taxes that may apply, such as sales taxes or property taxes.
Benefits and drawbacks
Just as with any other business entity, a limited liability company has positives and negatives.
One of the main positives is that you will have limited liability for almost anything related to the LLC.
- You can limit the liability for any debts of the LLC by keeping your personal assets separate from the assets of the LLC.
- You can shield yourself from personal lawsuits by claiming that you are not responsible for anything that may be done with your LLC.
- Your name will not appear on company documents, so other individuals or entities cannot sue you personally.
- If someone sues the LLC, then they must sue all of its members and not just you specifically.
- No special licenses are required in order to start a limited liability company.
- You can be a member of more than one LLC at a time.
- You will need to pay fees and taxes in order to maintain your LLC and comply with state and federal laws.
- You will need to keep track of things like your registered agent, registered office, and tax I.D. number.
- You may be required to obtain licenses from the state or federal government.
- You may need to file annual reports with the state or federal government if you want to continue operating as an LLC.
Some states allow for both limited liability companies and professional associations (P.A.s).
The most important thing to note is that P.A.s are not considered to be businesses or corporations, so they cannot file a federal tax return.
Limited liability companies, on the other hand, are registered as a business with the IRS and are required to pay taxes in some form (if applicable).
How much does it cost to start an LLC in Virginia?
The initial filing fee is $50. This is paid to the Secretary of State’s office when you file the Articles of Organization.
After that, the annual registration fee for maintaining your LLC is $75 in the first year and $100 in each subsequent year.
This covers the cost of registered agent services, maintaining a registered office, and providing corporate records.
How much does a Virginia LLC cost per year?
Annual fees for maintaining your LLC are $75 in the first year and $100 in each subsequent year.
This covers the cost of registered agent services, maintaining a registered office, and providing corporate records.
How do I open a bank account for my Virginia LLC?
You need to maintain a bank account for your LLC in order to receive the required federal income tax check, which is Form 940.
You must also maintain a bank account in your name if you are not filing an annual report with the state (see above for more details).
If you want to receive money into your bank account, you will need to provide an address that is separate from your LLC’s registered office.
How to Build Business Credit
In order to get business credit, your credit report will need to have an updated company address.
This is because a single LLC that owns multiple locations can only have one registered office.
If you open a checking account, you must provide the full address of your LLC.
What should I know about Virginia LLC taxes?
Taxes are calculated for your LLC based on the profits or losses that you make. This means that your LLC is treated as a pass-through entity and does not pay any taxes itself.
However, it must file an annual return with the state and report all of its income to the IRS, including all tax withholdings made from employees’ salaries (FITW).
If you elect to have your LLC’s profits taxed as a separate entity, this is called subchapter S LLCs.
There are federal taxes, state and city taxes, or a combination of the three.
These are calculated based on the following:
- The business income that is generated by your LLC.
- The amount of profit or loss that you have made in a given year.
- The percentage of profits (or losses) that are attributed to each member’s share interest in the LLC (instead of a percentage of gross profits, most states have different formulas).
- The amount of federal, state, and local taxes that are withheld from employee salaries.
- Any estimated taxes that have been paid by the LLC, such as self-employment tax.
How often do I need to file taxes for my Virginia LLC?
Your LLC is required to file an annual report and pay the annual fee.
After that, your LLC must file a federal corporate tax return to report any income that has been generated by your business.
Does a Virginia LLC need a business license?
A Virginia LLC does not need a business license to operate unless it is required by the jurisdiction in question.
Most states will require all businesses to have a business license for certain types of activities. Business licenses can be obtained at the local city or county office.
In Virginia, you may also apply for a tax number, which is a zero-dollar value that is used to identify your LLC with state and federal tax authorities.
In addition, you may need to file annual reports with the state government.
Do I need a trademark or copyright for my Virginia LLC?
If you own a specific trademark, then you have the ability to register this with the federal government and prevent others from using this mark.
You should consult an attorney for more information on registering trademarks in Virginia.
Do I need a lawyer to set up an LLC in Virginia?
You may need a lawyer to help you with the legalities of forming an LLC in Virginia, such as registering your business name with government agencies.
An attorney can also provide assistance with state and federal taxes for your LLC.
What is the difference between a member-managed company and a manager-managed company?
A member-managed company is one where only the members have voting rights and have control over their own share interest.
A manager-managed company is one where only a board of directors (i.e., managers) has voting rights and control over the organization’s shared interest. Both are considered to be outside investment companies.
Can the members of an LLC sell their ownership interests to outside parties?
Yes, with the approval of at least 75% of the other members. You should be aware that some states set a higher threshold for this requirement, such as unanimous consent.
What are the pros and cons of a member-managed company versus a manager-managed one?
The main benefit to a member-managed company is that the members have direct voting rights, which gives them more influence over business decisions.
In the case of a manager-managed company, the board of directors has more control over the organization’s decisions, which can sometimes result in less input from members. Most states prefer a member-managed company.
If I am in a manager-managed LLC, what is the difference between voting and non-voting member interests?
A non-voting membership interest is one that does not give its holder any direct control over business decisions. This interest can be bought and sold to other businesses or given to employees.
A voting membership interest gives its holder direct voting rights that can be exercised at the annual meeting. The member may also receive a share of profits if they are given a distributive share.
The Virginia LLC is a good choice for a business owner looking to create an entity that is owned by limited liability and will protect their personal assets from creditors.
If you plan to operate as a single business, the double layer of protection provided by the Virginia LLC can be very valuable in protecting your personal assets in the event that your business is brought to bankruptcy.
After you have created your LLC, there are several steps you need to follow in order for things to run smoothly.
This will ensure that you are able to do business with other companies and conduct your operations as smoothly as possible.
If you need additional assistance or have questions about the process of creating a Virginia LLC, you can discuss this with an attorney.
Business law can be complicated, and having a good understanding of the rules that apply to your specific situation is crucial in avoiding future headaches.