How to Start an LLC in Virginia [2021]: What’s the Cost?

A limited liability company (LLC) is a legal arrangement for a firm. It blends a corporation’s limited liability with the independence and absence of formalities offered by a company or sole proprietorship. Any business owner who wants to restrict his or her legal responsibility for company defaults and claims should think about creating an LLC.

EIN (Employer Identification Number)

You can receive an Employer Identification Number (EIN) by filling out a PDF Document (Form SS-4) from the Internal Revenue Service (IRS) or by applying for one on the IRS website. Any LLC that hires people involves an Employer Identification Number in order to pay withheld taxes on such jobs, open bank accounts, register for credit cards, and otherwise function separately as a corporate organization.

Operating Agreement

Operating agreements are not necessary when establishing a Virginia LLC, but these operating agreements are highly essential. By forming an operating agreement, you are creating a guideline on how the Virginia LLC will operate; basically, a model about how the business’s corporate relations will be organized.

Creating such an operating agreement has been seen to prevent disagreements between staff and owners.

Renewal of LLC

Both corporate companies shall preserve their good reputation by sending an annual report to the Secretary of State. Renewals may be done electronically in a matter of seconds by utilizing the record identifier or ID search feature (found linked in the heading of this paragraph).

In Virginia, state authorities only need the registered agent information, the principal office address, and a few other bits of specific information. Both filers must request a $10 filing charge for their periodic report, but this fee will escalate if the renewal is late.

State Corporation Commission

Utilities, insurance, state-chartered financial institutions, shares, retail franchising, and railroads are all controlled by the State Corporation Commission (SCC). It serves as the state’s central filing office for businesses, limited partnerships, limited liability companies, and liens under the Uniform Commercial Code.

The State Corporation Commission is a separate branch of state government with fiscal, legislative, and judicial authority. It serves as a court of record and holds formal hearings as required. Decisions of the State Corporation Commission can only be appealed to the Virginia Supreme Court.

The Virginia Constitution established the State Corporation Commission in 1902, and it began operations in March 1903. The State Corporation Commission was initially established to manage Virginia’s railroad, telephone, and telegraph industries. Since then, the Virginia General Assembly has expanded its legislative power.

The state constitution and state law define the State Corporation Commission powers, which range from issuing rules and regulations to setting rates paid by large investor-owned utilities. The General Assembly elects the three commissioners of the State Corporation Commission for six-year terms. The State Corporation Commission’s work is directed by the commissioners, who work full-time.

The State Corporation Commission was established by the Virginia Constitution in 1902 to replace the Virginia Board of Public Works and the Office of Railroad Commissioner. The three-member Commission was tasked with controlling Virginia’s state railroads, telephone and telegraph companies, and registering corporations.

On March 2, 1903, the State Corporation Commission began operations. The Virginia General Assembly has since expanded the State Corporation Commission’s legislative power.

The State Corporation Commission was given three types of power in the 1902 Constitution: judicial, legislative, and executive. When necessary, the State Corporation Commission serves as a court of record and holds formal hearings.

It can use fines or contempt citations to enforce its orders. Any State Corporation Commission decision has the right to be appealed to the Virginia Supreme Court. The executive power of the State Corporation Commission is exercised in its day-to-day administration. When it makes laws or sets prices, it exercises its legislative authority.

The State Corporation Commission is made up of three commissioners, each appointed by a joint vote of both houses of the Virginia Legislature. No person shall be eligible to serve on the Commission unless he is a registered voter under Virginia law at the time of his election or appointment.

At any given time, however, at least one member of the commission must meet the standards set out for judges of a Virginia court of record. The commissioners serve six-year terms that are staggered such that a new appointment or reappointment vote takes place every two years.

Steps to Starting an LLC in Virginia in 2021

1. Choose a Name for Your LLC

According to Virginia law, the terms “Limited Liability Company” or “Limited Company” or the abbreviations “LLC,” “LC,” “L.L.C.,” or “L.C.” must appear in the name of an LLC.

The name of your LLC must be distinct from the names of other business organizations on file with the Virginia State Corporations Commission, Office of the Clerk. The Virginia company name database can be used to verify the availability of names.

By submitting an Application for Reservation or Renewal of Reservation of a Business Entity Name (Form SCC631) to the Commonwealth of Virginia State Corporation Commission, you can reserve a name for 120 days. The reservation must be mailed. The filing fee is ten dollars.

When doing business in the real world, you are not required to use the official legal name registered in your LLC Articles of Organization. You may instead use a trading name, also known as a fictitious business name, “DBA” (short for doing business as), or trade name.

In Virginia, you must file a certificate of assumed or false name with the clerk’s office of the circuit court of the county or city where the LLC operates. There is a filing fee of $10. The Virginia State Corporation Commission must receive a certified copy of the certificate.

This is something that can be achieved online. As of January 1, 2020, assumed name certificates will no longer be required to be filed with the circuit court. Instead, they will be filed with the Virginia State Corporations Commission directly. For more information, visit the Virginia State Corporations Commission’s website.

2. Appoint a Registered Agent

Every Virginia LLC must have a registered agent service in the state. This is a person or business company that offers to sign legal documents on behalf of the LLC in Virginia if it is sued.

The registered agent in Virginia may be (1) a Virginia resident who is a member or manager of the LLC, a member or manager of another LLC in Virginia that is a member or manager of the LLC, an officer or director of a corporation that is a member or manager of the LLC in Virginia, a general partner of a general or limited partnership that is a member or manager of the LLC, a trustee of a trust that is a member or manager of the LLC, or a member or manager of a trust that is a physical street address in Virginia is needed for the registered agent in Virginia.

3. File Articles of Organization

A Virginia LLC is created by filing Articles of Organization (Form LLC-1011) with the Virginia State Corporations Commission. The articles must include:

  • the LLC’s name
  • the name and address of the LLC’s registered agent
  • the LLC’s initial principal office address, and
  • signatures of the LLC’s organizers.

The articles may be filed online at the Virginia New Entity Formation webpage, or by mail. The filing fee is $100.

4. Prepare an Operating Agreement

In Virginia, an LLC operating agreement is not necessary, but it is highly recommended. This is an internal document that outlines how your LLC will operate. It outlines the members’ and managers’ rights and obligations, as well as how the LLC will be handled.

It will also help you keep your limited liability by demonstrating that your LLC is a distinct business entity. In the absence of an operating agreement, your LLC’s operations will be governed by state LLC law.

5. Obtain an EIN

Even if your LLC has no employees, it must obtain its own IRS Employer Identification Number (EIN) if it has more than one member. If you form a one-member LLC, you must receive an EIN only if it would have employees or if you want to tax it as a company rather than a sole proprietorship (disregarded entity).

You can get an EIN by filling out an online EIN application on the IRS website. There is no filing fee.

6. Open a business bank account

Keeping your personal and corporate accounts apart allows your accountant to prepare your taxes more efficiently. It may also be used to show that the organization is a different agency from you. If your accounts are intertwined, you may lose your personal money as well as your company profits in a dispute.

Well, the limited liability company feature of your Virginia LLC covers you, but how can anybody tell what money is yours and what belongs to the company if the finances are all merged into the same bank account?

Many banks would need evidence that the Virginia LLC is licensed by a registered agent with the State of Virginia in order to open an account. Expect to be sent the following forms:

  • A stamped—or official—copy of your Articles of Organization
  • A Certificate of Good Standing indicating that the organization is duly licensed by a registered agent as a Virginia LLC.
  • A duplicate of your EIN (unless you are a single-member LLC without any employees)

The first two papers are available for free printing from the Secretary of State website. Simply browse their company database for your Virginia LLC.

7. Get a business license

A general business license is not needed to create an LLC inside Virginia, however, you will need an occupational license to work in some controlled industries. Among the regulated occupations are:

  • Psychologists, psychiatrists, alcohol educators, and social services are also examples of professionals.
  • Engineers, developers, and landscape architects
  • Cosmetologists, barbers, nail designers, and estheticians are also examples of beauty professionals.
  • Electricians and plumbers

Check out the city-specific criteria for the cities in which you would be working. There may be general business licenses or industry-specific licenses. Denver, for example, does not require general licensing but does require permits for food peddlers, dry cleaners, child care centers, and other companies.

8. Open a wage withholding account

Do you plan to recruit staff and deduct taxes from their pay? The state of Virginia then allows you to open a salary withholding account, which you can do for free online. If you’re recruiting W-2 workers or withholding taxes from 1099 contractors, you’ll need this. You will use this account to administer and reimburse deferred income tax.

9. Pay Annual Registration Fees

A $50 annual registration fee is required for all Virginia LLCs and foreign LLCs that are allowed to do business in the state. The fee is due on or before the last day of the month in which your LLC was established each year. A notice of assessment will be mailed to the LLC’s registered agent at the registered office address by the Virginia Corporations Commission.

A $25 penalty will be levied if the Commission does not obtain the LLC’s annual registration fee payment on or before the due date indicated in the notice of assessment. Annual registration fees can be charged online at the Corporations Commission’s State Corporation Commission website or by mail.

Benefits of Forming an LLC

Personal responsibility insurance and pass-through taxes are the two primary advantages of creating an LLC in Virginia. We’ll proceed with the most significant. Personal responsibility insurance is a privilege provided by all businesses and limited liability partnerships.

It creates a “security shield” between the personal assets and the assets of the company. If the company is prosecuted, you cannot use your personal assets to pay off any loans or obligations. The second advantage is that pass-through taxation is available to LLC, sole proprietorships, and partnerships.

Your corporation is not taxed on its own under this principle. Instead, all corporate gains or expenses are reported in an annual report on a personal tax return. You escape the downside that Corporations face: double taxation. Paying taxes at both the business and personal levels is referred to as double taxation.

Virginia LLC vs Corporation

An LLC is Cheaper to Create and Maintain

Unlike a corporation, managing and forming an LLC does not cost a lot of money. The Virginia Secretary of State charges a one-time filing fee of $50 when forming an LLC. The Periodic Initial Annual Report, which is due once a year, costs just $10. It is therefore less costly to manage an LLC than it is to maintain a corporation.

An LLC has Less “Red Tape”

An LLC, unlike a corporation, is not burdened by strict organizational laws. It is not necessary to appoint a board of directors, employ corporate officers, or schedule corporate meetings. A company is liable for this.

An LLC is Not Subject to Double Taxation

As previously said, the gains and expenses of an LLC “pass in” on your personal federal tax return. That is not the case for a corporation, since its earnings are taxed twice. This ensures that earnings are levied at the corporation level, and then dividends are taxed again at the shareholder level.

A limited liability company (LLC) is a “pass-through” organization. This ensures that the earnings are charged at the same pace as your own. The LLC does not file income taxes with the IRS. This is not to say that a Corporation has little potential for development.

This isn’t the case. They are simply more difficult to manage and are best fit for businesses that need to attract capital from outside investors. Consider technology and startup firms to start an LLC.

To start an LLC could be a safer choice for business owners (especially those just starting out) who want to escape the hassle of operating a complicated corporate structure (but also want personal asset protection).

Virginia LLC vs a Sole Proprietorship/Partnership

An LLC Member Enjoys Personal Liability Protection

An LLC provides a “shield of security” between your personal assets and the assets of your company. When the corporation is prosecuted, only the company’s funds will be used to compensate for the LLC’s debts. In brief, your personal belongings (bank account, home, vehicle, etc.) are safeguarded and secure in the event that the company is sued.

There is no other precaution for a single proprietorship. Since the law considers you and your company to be the same thing, your personal properties will be included if your business is prosecuted. The same holds true with a Partnership.

There is no different agency formed in this situation. When the business is prosecuted, your and your partner’s personal properties will be used to pay off its debts.

Get Business Insurance For Your Virginia LLC

Company insurance enables you to control costs while concentrating on the success of your LLC. The below are the most popular forms of company insurance:

  • General Liability Insurance: This is a large insurance scheme that covers the corporation against claims. The majority of small companies obtain general liability protection.
  • Professional Liability Insurance (PLI) is a form of company insurance that protects cases of malpractice and other business negligence for professional service suppliers (consultants, accountants, and so on).
  • Workers’ Compensation Insurance: A form of insurance that protects staff who are sick, disabled, or killed on the job. Workers’ compensation policy is required by statute in Virginia for companies with one or more staff, except officers and LLC registered agent.

Create Your Business Website

Creating a website is a significant move toward legitimizing the business. Any organization requires a website. And if you believe the company is too limited or in an offline market, if you do not have a website, you are losing out on a significant portion of future clients and sales.

Some people may believe that designing a company website is out of their control because they lack website-building expertise. Although this was a legitimate problem in 2015, online technology has seen substantial strides in recent years, rendering the lives of small business owners even easier.

The below are the key explanations why you can not put off creating your website:

  • Any legal company has a website, period. When it comes to bringing your company online, it doesn’t matter what size or sector it is.
  • Social networking accounts, such as Facebook pages or LinkedIn company profiles, are not a substitute for a business website that you own and manage.
  • Website builder software, such as the GoDaddy Website Builder, has made it incredibly easy to create a basic website. You don’t need to employ a web developer or designer to build a website you’re proud of.

Send Out a Press Release

Press releases are one of the simplest and most effective ways to advertise the business. They are still one of the least expensive tactics since they:

  • Gives advertising
  • Establish your brand’s online presence Boost your website’s search engine optimization (SEO), drawing more customers
  • Are a one-off commitment in terms of time and resources
  • Have long-term advantages

Federal LLC Formation Tax Filing Requirements

Most of the LLC formation must file Form 1065 Partnership Return (most multi-member LLC use this form) and Form 1040 Schedule C with the IRS each year (most single-member LLCs use this form). Your federal taxes would be affected by how you pay yourself as an owner.

Avoid Automatic Dissolution

When an LLC fails to file one or more state reports, it can face penalties and even automatic dissolution. When this occurs, LLC shareholders run the risk of losing their LLC limited liability rights. A good licensed registered agent service will help you avoid this by informing you of impending filing deadlines and sending information on your behalf.

Hiring Employees

If you want to recruit staff for your business, take these measures to keep in compliance with the law:

  • Confirm the prospective employers are qualified to serve in the United States.
  • Employees can be reported to the state as “recent recruits.”
  • Employees can be equipped with employees’ compensation benefits.
  • Employee taxes should be withheld.
  • Print workplace compliance posters and display them in high-traffic parts of the workplace.

The minimum wage in Virginia

The Virginia minimum wage stands at 7.25 USD per hour.

Frequently Asked Questions (FAQ)

Should I form an LLC in Virginia?

If you are just starting out or have been working as a sole proprietor, you should think about creating an LLC. LLCs restrict an owner’s personal responsibility for business debts and claims and provide a great deal of flexibility in terms of business ownership, management, and taxation.

How do I know if my LLC name is available?

It is important that the name of your LLC be distinct from the names of other existing companies on file with the Virginia State Corporations Commission. To ensure that your proposed name is available, you can perform a free name search on their website.

How much does it cost to form an LLC in Virginia?

To file the Certificate of Formation, the Virginia State Corporations Commission charges a fee of $100. For a fee of $10, you can reserve your LLC name with the Virginia State Corporations Commission.

Filing on your own is frequently the most cost-effective alternative, but completing all of the forms and filing them on your own can be difficult. Hiring a lawyer is another choice, but it will usually cost you hundreds, if not thousands, of dollars.

Do I need an operating agreement for my Virginia LLC?

Operating agreements are not required in Virginia for LLCs, but they are strongly recommended. An operating agreement will help protect your limited liability status, avoid financial and managerial misunderstandings, and ensure that you choose the laws that govern your company rather than state law by default.

Do I need a business license in Virginia?

Depending on the nature of your company and where it is located, your LLC can include additional local and state business licenses. Check with the clerk of the city where the LLC’s primary place of business is located for local licenses (or county if it is in an unincorporated area).

Are there Virginia business taxes I need to pay?

In certain situations, such as whether you would be employing people or selling goods and collecting sales tax, you must register with the Virginia Department of Taxation. You can file for several state taxes either online (via the VATAX online service) or on paper (typically using Form R-1).

Can a foreign LLC do business in Virginia?

All LLCs formed outside of Virginia must register with the Virginia State Corporations Commission in order to conduct business in the state. For service of process, foreign LLCs must appoint a registered agent.

A Virginia resident who is a member or manager of the LLC, a member or manager of another LLC that is a member or manager of the LLC, an officer or director of a corporation that is a member or manager of the LLC, a general partner of a general or limited partnership that is a member or manager of the LLC, a trustee of a trust that is a member or manager of the LLC, or a member of a trust that is a member or manager of the LLC

To register, submit an Application for a Certificate of Registration to Transact Business as a Foreign Limited Liability Company in Virginia (Form LLC-1052). The application can be submitted either online or by mail. The filing fee is one hundred dollars.

The completed application must be accompanied by a certified or otherwise validated copy of the LLC’s original articles of organization or equivalent document from its home state, as well as any changes and corrections to it that are less than one year old. The Secretary of State’s or a similar official’s certificate must state that the copy of the articles is a “real and accurate copy” of the official documents or words to that effect. A Certificate of Existence/Fact/Good Standing is not enough.

Check the Virginia business name database before filing the application to ensure that the LLC’s name is available in Virginia. If the desired name is not valid, the LLC must use a specified name in Virginia. On the first line of the application, after the LLC’s real name, have the “for use in Virginia” name in parentheses.

Can I form a single-member LLC in Virginia?

A Virginia single-member LLC is treated the same as a multi-member LLC for most purposes of creation. The procedures for forming a single-member LLC in Virginia are the same as those outlined above. When it comes to filing a tax return, single-member LLCs have more leeway.

Can I form a professional LLC in Virginia?

If you want to form an LLC in Virginia and provide a licensed professional service, you must first form a professional limited liability company (PLLC). Architects, lawyers, dentists, certified public accountants, and other professionals are examples of professional services.

In general, if you offer a service that necessitates obtaining a Virginia state license before practising, you are providing a skilled service. LLCs can be formed to provide professional services under Virginia law.

However, only one type of service can be offered, and all of the LLC’s owners must be licensed or registered to provide the professional service for which the LLC was established.

Can I dissolve my Virginia LLC when I’m done?

If you decide to shutter the company and end all activities, you can properly disband your limited liability company to reduce your responsibility for claims and government fines.

Conclusion

If you want an easy, low-cost company that covers your personal properties in the event of litigation, then forming a limited liability company is definitely the best choice for you. If you want a company that is easy, affordable and protects your personal belongings, an LLC is a right choice for you.

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