You’ve come across a golden business opportunity, and you’re ready to make your entrepreneurial dreams come true. Your market research is telling you that Virginia is the place to be, and now, the only thing left to do is get the gears in motion.
As an entrepreneur, you’re well aware of all there is to do when starting a business, but Virginia is new territory for you. Below is your concise guide to starting your business in Virginia.
Step 1: Decide On A Structure and Entity
If you already have an idea of what structure you’d like your business to run under, you can skip to the letter corresponding with your choice.
- Sole proprietorship
- Limited-liability corporation (LLC)
If you’re still deciding on what structure would best fit your business idea, read through each section to better understand what the process entails.
(a) Sole proprietorship
A sole proprietorship is a type of business owned and run by one person (the owner). There is no legal distinction between the sole proprietor and the business entity.
A sole proprietorship is the most simple and common structure chosen to start a business.
If your business uses a different name from your legal name (as the business owner), you must register a Certificate of Assumed or Fictitious Name. It is also good to choose a name that is not too similar to another registered business because of standard and federal law trademark protections.
To establish a sole proprietorship in Virginia, you don’t need to file any organizational documents with the state.
Under a sole proprietorship, you’ll pay taxes for your business with your personal state income tax returns using Form 760.
In general terms, a partnership is an arrangement between two or more people to oversee business operations. There are four different types of business partnerships; LLC partnership (Multi-member LLC), Limited liability partnership (LLP), Limited partnership (LP), and General partnership (GP).
Suppose your business is registered under a name different from the legal surnames of you and your partners. In that case, you must register a Certificate of Assumed or Fictitious Name. It is also good to choose a name that is not too similar to another registered business because of standard and federal law trademark protections.
To create a general partnership in Virginia, you don’t need to file any organizational documents with the state. Although not legally required, your partnership should have a written partnership agreement. A written agreement can be beneficial if there is ever a dispute among the partners.
To form a limited liability partnership, you must file a Statement of Registration with the Virginia SCC.
Partners pay state taxes on their partnership income separately using their personal tax returns. In addition, Virginia partnerships also must file Form 502, Pass-Through Entity Return of Income, and Return of Nonresident Withholding Tax.
(c) Limited liability company (LLC)
A limited liability company (LLC) is the US-specific form of a private limited company. It is a business structure that protects its owners from personal responsibility for its debts or liabilities.
For LLCs, you want to ensure that your name is distinguishable from other business entities already on file with the Virginia State Corporation Commission (SCC). You can check for available names by doing a business entity search on the SCC website.
If you have an idea for your business’s name, you can reserve it for 120 days by filing Form SCC631. Keep in mind there are specific name requirements like including a word such as “Limited Liability Company,” “Limited Company,” or the abbreviations “LLC,” “LC,” “L.L.C.,” or “L.C.”
To create an LLC in Virginia, you must file articles of organization with the Virginia SCC. You will also need to appoint a registered agent in Virginia for the service of process.
While not required by law, you should prepare an operating agreement to establish the basic rules about how your LLC will run.
Members pay state taxes on their share of LLC income on their personal tax returns. In addition, LLCs themselves have to file an additional state tax form. The specific form used will depend on how the LLC is classified for federal tax purposes.
Virginia LLCs must also file an annual report (also known as an annual registration fee). The annual registration fee is due yearly on or before the last day of the month in which your LLC was created. The filing fee is $50, but there is an additional convenience fee if you’re paying online.
A corporation is an organization, typically formed by a group of people or companies authorized by the state to act as a single entity.
Corporations are recognized as a legal entity that is separate and distinct from their owners. Despite being disconnected from their owners, corporations possess many of the same rights and responsibilities as individuals.
Many types of corporations operate in the United States, including C corporations, S corporations, B corporations, and nonprofit organizations.
For corporations, you want to ensure that your name is distinguishable from those of other business entities already on file with the Virginia State Corporation Commission (SCC). You can check for available names by doing a business entity search on the SCC website.
If you have an idea for your business’s name, you can reserve it for 120 days by filing Form SCC631. Keep in mind your corporation’s name must contain the word “Corporation,” “Incorporated,” “Company,” or “Limited,” or the abbreviation “Corp.,” “Inc.,” “Co.,” or “Ltd.”
To create a corporation in Virginia, you must file articles of incorporation with the Virginia SCC. You will also need to appoint a registered agent in Virginia for the service of process.
Although not legally required, you also should prepare bylaws to establish your corporation’s internal operating rules. These rules give the basic guiding principles of your corporation.
Small business corporations (S corporations) must also file IRS Form 2553 with the IRS.
Shareholders must pay state taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on their personal state tax return. Moreover, the corporation itself is subject to Virginia corporation taxes and must file an annual report with the Virginia SCC.
For every kind of structure, a few procedures remain consistent. If you hire employees, you must also consider state employer taxes. Apart from Virginia taxes, there are always federal income and employer taxes detailed in IRS Publications 334, Tax Guide for Small Business, and 583, Taxpayers Starting a Business.
Step 2: Get Your Licenses and Permits
Proper Tax Filing
If you are selling goods in the state of Virginia, you must register with the Department of Taxes (DOT) to collect sales tax. If your startup has employees, you must register with the DOT for employer withholding taxes.
You can register for both sales and employer withholding taxes and other business taxes, either online via VATAX Online Services or on paper using Form R-1, Virginia Department of Taxation Business Registration Form.
If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business-smart reasons for doing so. Banks often need an EIN to open an account in the business name, and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website.
Regulatory licenses and permits cover areas of health and safety, the environment, building and construction, and specific industries or services. Depending on what kind of business you’re opening, you’ll need different documents that different agencies issue.
You should also contact your town or city licensing department to determine if you need a local business license.
Professional and occupational licenses cover people who work in various fields. The Virginia Department of Professional and Occupational Regulation (DPOR) handles most licensing. The DPOR website has sections listing various professional regulatory boards and regulated professions and occupations.
When it comes to your business’ location, you’ll need to check local zoning regulations. It is essential to verify that the area is zoned for your type of business. You can find zoning regulations for your town or city by reviewing local ordinances and contacting your town’s zoning or planning department. The location that you choose needs to be legally acceptable for whatever you plan to do there.
Step 3: Set up A Business Bank Account
You should consider opening a separate business bank account to track and manage your income and expenses with greater ease, no matter the type of business you form. For some business types, like LLCs and corporations, a separate bank account is necessary to maintain your liability protection (this is where your EIN comes into play).
Step 4: Protect Your Assets (Insurance)
Business insurance can protect your company and your personal assets from the fallout of unexpected challenges, such as personal injury lawsuits or natural disasters. An insurance agent can help you explore the different coverage options for your business.
General Rules of Thumb
No matter what business structure you’re leaning towards, there are some concepts you should consider in addition to the basics of starting your business.
No matter what kind of business you’re looking to open, online services will probably play a significant role in your success. Your physical address will be just as important as your online one. Ensure that your business is searchable on the internet by purchasing a domain name that aligns with your business’ reputation.
People will be looking for your business on the internet and on individual social media platforms. Even if you’re not ready for a full-on social media presence, you may want to claim a username on multiple social platforms.
A business plan is also a key element in starting your new business. Business plans allow internal and external stakeholders to fully understand your business’s mission and vision. You should prepare a document that details everything there is to know about your business so that you can efficiently distribute it to banks, potential investors, and future partners.
Take Advantage of Local Resources
Starting a business in any state can benefit from some local insights. Virginia business groups build connections between you and other entrepreneurs looking to grow. Partnering with local businesses or starting a dialogue with neighbors, real estate agents, and industry leaders can give you business resources and insights that you can’t find on the internet.
Complete Your Business Formation
Once you’ve decided on how to form your business and you’ve filed all the pertinent paperwork, it’s time to start growing.
Funding is an integral part of starting your business as it allows you to file papers, purchase materials, and begin operations. You saw the opportunity to start a business in Virginia, and now you need funding options that fit what you need and match what you do.
You can turn to small business funding providers like biz2credit every step of the way as you grow your business. biz2credit ensures businesses of all kinds are connected to the best funding solutions for their needs.
You should rest easy knowing that your business is legitimate and properly operating under Virginia’s regulations once you’ve filed all the necessary forms. For business needs that require monthly or yearly checkups, you should note them in your calendar to avoid being penalized or charged additional fees.
If you don’t want to run into any issues as you establish your business, always check with multiple advisors. Having the materials detailed above is a great way to start your path to success.