Estimated reading time: 14 minutes
Creating an LLC in Virginia
Virginia is a great place to start a company. There are many advantages, including it is a right-to-work state, it boasts a strategic location with access to interstates and highways, it has easy access to major U.S. markets, a highly educated and skilled workforce, a variety of workforce development programs, advanced fiber broadband network, and easy access to utilities.
So, let’s dive into how to start an LLC in Virginia step by step.
Table of contents
- Creating an LLC in Virginia
- Choose a Business Entity for Your Virginia LLC
- Virginia State Filing Fee
- Create a Business Name
- Virginia LLC Registration
- Virginia LLC Operating Agreement
- Get Your Employer Identification Number or EIN
- Assign a Registered Agent for your LLC in Virginia
- Open a Business Bank Account
- Tax and Regulatory Requirements
- Pay Annual Registration Fees
- Getting Started with Your Virginia LLC
Choose a Business Entity for Your Virginia LLC
To understand how to start a business in Virginia, you need to understand entity formation. Limited Liability Companies (LLCs) and Corporations are the most popular business types.
Startup formation is important because it sets your company apart as a professional company and not just a hobby.
A corporation is a legal entity created separately from those who own and operate it. A corporation’s debts and taxes are separate from its owners, thereby offering the greatest personal liability protection of all business structures. The two most common types of corporations are S and C corporations.
Limited Liability Company
LLCs are the most popular business structure, blending the aspects of corporations, partnerships, and sole proprietorships into a simple and flexible business entity. Like corporations, LLC formation protects the owner’s personal assets and also shields them from personal liability similar to a corporation. They also possess the “pass-through” tax benefits of a partnership.
There are two types of LLCs. LLC run by just own person (single-member LLC) and LLCs run by multiple people (multi-member LLCs)
Forming an LLC in Virginia can be difficult and confusing, especially as a first time business owner. But with a company like Inc Authority in your corner, you’ll not only have your LLC formed for you, but you’ll also get expert guidance beyond business formation, so you never have to wonder or worry about what to do next!
What About DBAs?
DBAs (which stands for “doing business as”) grant business owners the ability to conduct business under an assumed name. A DBA is also referred to as a fictitious business name and is an authorization by the state for your business to operate under an assumed name.
For sole proprietors and owners of LLCs, DBAs offer an affordable way to gain legal recognition for the secondary name of your choice.
- Sole proprietors: For sole proprietors starting a new business, DBAs are a budget-conscious way to gain legal status and work under a creative company name.
- LLC owners: If the name on your LLC paperwork and your business name differ, DBAs offer the opportunity to operate as an LLC under a different legal name.
A DBA provides privileges like the ability to open a bank account, create enforceable contracts and establish federal employer tax status (getting an EIN). It’s possible to file multiple DBAs, allowing a single LLC to operate different businesses under the same legal umbrella. If you’re starting a business or expanding your LLC in Virginia, get the proper legal recognition early on to start off on the right legal footing.
Virginia State Filing Fee
The Virginia State Corporations Commission charges $100 to file the Certificate of Formation. You can reserve your LLC name with the Virginia State Corporations Commission for $10. When you compare this cost to Massachusetts’ $500 filing fee, you’ll realize how lucky you are to be in such an affordable state.
Create a Business Name
Under Virginia law, an LLC name must contain the words “Limited Liability Company” or “Limited Company” or the abbreviations “LLC,” “LC,” “L.L.C.,” or “L.C.”
Your LLC’s name must be distinguishable from the names of other business entities already on file with the Virginia State Corporations Commission, Office of the Clerk. Names may be checked for availability at the Virginia business name search database.
You may reserve a name for 120 days by filing an Application for Reservation or for Renewal of Reservation of a Business Entity Name (Form SCC631) with the Commonwealth of Virginia State Corporation Commission. The reservation must be filed by mail. The filing fee is $10.
Using an Assumed Name
You don’t have to use your LLC’s official legal name registered in your Articles of Organization when you do business. Instead, you can use a trade name, also called a fictitious business name, DBA (short for doing business as), or trade name.
To do so in Virginia, you must file a certificate of assumed or fictitious name with the clerk’s office of the circuit court in the county or city where the LLC’s conducts business. There is a $10 filing fee. A certified copy of the certificate must be filed with the Virginia State Corporation Commission. This may be done online.
Starting January 1, 2020, assumed name certificates no longer need to be filed with circuit court. Instead, they will be filed directly with the Virginia State Corporations Commission. Check the Virginia State Corporations Commission website for details.
Virginia LLC Registration
Let’s take a look at how to register a business in Virginia, including payables such as the cost, government fees, and so on.
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.
Virginia LLC Operating Agreement
An LLC operating agreement is not required in Virginia, but creating one is highly advisable. The Operating Agreement is the primary document that establishes the rights, powers, duties, liabilities, and obligations of the members among themselves and to the LLC.
The Operating Agreement is an internal document and is not filed with the Department of State. If an existing or newly created LLC does not adopt an operating agreement, its existing articles of organization, bylaws or operating agreement, and/or its member control or limited liability company agreement will collectively become its operating agreement.
Issues that should be defined by your LLC Operating Agreement include:
- Member powers
- Rules for meetings
- Members’ voting rights
- How your LLC will be managed
- Guidelines for losses and profits
- Buyout provisions
Once the operating agreement has been adopted, it will provide protection for the members of your LLC. When the members of your LLC have agreed on the terms of your operating agreement and have signed the document, you should keep the agreement in a secure location.
Inc Authority can remind you to do or do for you if you choose to have us handle the paperwork.
Get Your Employer Identification Number or EIN
The next step you’ll want to tackle is getting your EIN or Tax ID number (TIN). This number is like your business’s social security number, separating you from your business. This protects you from fraud and identity theft.
Additionally, an EIN is required by your bank to open a Business Checking Account, file tax returns, obtain payroll services and credit cards, and pay for any LLC cost that Virginia laws require.
To apply for your EIN, you’ll need to complete form SS-4, which can be found on the IRS website.
Assign a Registered Agent for your LLC in Virginia
There are an estimated 38 million home-based businesses in the U.S., so if you’re thinking about starting a small business in your home, you’re definitely not alone.
But did you know that all businesses are required by law to have an address where they can accept service of legal documents (like a service of process) from the state or government agencies during normal business days and hours? Without an office, that would be your street address or P.O. box.
As you can imagine, that’s not always possible (or advisable) with a home-based or foreign-filed business. That’s where a registered agent comes in.
A registered agent is a responsible third-party in the same state as your business who receives official government notifications (usually tax forms and notice of lawsuits) on behalf of your LLC in Virginia.
Even if you aren’t planning on starting a home-based business or foreign LLC, having a registered agent is still advisable because it will:
- Limit third party access to your personal information
- Ensure that you never miss important documents
- Protect the privacy of owners
- Eliminate junk mail
- Ensure you’re never served with legal papers in front of your clients
- And more!
Setting up a Registered Agent Service
Every Virginia LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on the LLC’s behalf if it is sued.
The registered agent may be (1) a Virginia resident who is: a member or manager of the LLC, a member or manager of a LLC that is a member of 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 the Virginia State Bar; or (2) a corporation authorized to do business in Virginia. The registered agent must have a physical street address in Virginia. Learn more about our registered agent services here.
Open a Business Bank Account
To keep your personal and business expenses separate and to stay in good standing with the Internal Revenue Service (IRS), you need to open a business bank account for your LLC or corporation.
Setting up a separate bank account for your company makes it easier to for you do business, manage a cash balance, complete, and file your income tax returns with the Department of Revenue, deduct business expenses for taxes, conduct proper accounting, and execute employee payroll. Bank accounts also provide better protection in the event of legal action.
Additionally, business bank accounts create historical relevance through the relationship established with the bank, and can create unrestricted access to long-term funding options, business credit cards, and other financial solutions.
Types of Business Bank Accounts
Not all business bank accounts are created equal. That’s why it’s important to distinguish between the good, the bad, and the best business bank accounts.
A business checking is the most common type of business bank account and the first one you’ll want to open for your business. This because business check accounts allow you to:
- Accept deposits (over-the-counter cash, checks, credit card, and electronic deposits).
- Pay for business-related expenditures (payroll, taxes, business insurance, vendors, lenders, and everything imaginable that you’ll need to operate your business).
- Keep detailed records of all expenses and income.
- Protect your money. This account is Federal Deposit Insurance Corporation (FDIC) insured, meaning you’re covered up to $250,000 by the federal government should anything happen to the bank or your money.
- Support dual signatures. If you have a partnership or employees, you may wish to make it required that two signatures be present whenever a withdrawal or deposit is made.
This one should come as no surprise. A business savings account (like a personal savings accounts) lets you safely save money in a bank. You don’t need this right away though, only when you have an abundance of capital sitting in your business checking account, will you need to open a savings account. It allows you to:
- Make saving money a habit. The most successful companies (think blue chips like Wal-Mart, Amazon, General Mills, Hershey’s, and General Electric) all have solid reserves of capital.
- Protect your business during a cash-crunch. Incidentally, 80% of businesses fail because of cash flow problems.
- Save money so that you don’t have to take out expensive business loans.
- Maintain liquidity. With a business savings account, you can liquidate assets to buy equipment, purchase real estate, and make other big purchases for your business.
- Build business credit. Yes, having a business savings account can actually help you establish and build business credit.
Business Certificate of Deposits
A business certificate of deposit (CD) is a term account that offers maximum security and a guaranteed rate of return. You agree to lend your business’s money to the bank for a set period of time at an agreed-upon interest rate. The interest rates are usually higher than you’d receive from a business savings account or interest-bearing business checking account.
Here are the main features of a business certificate of deposit:
- It pays out 1% or more in interest. Some CDs pay over 2% in interest
- You cannot liquidate the account until the term expires. This means you can’t spend the money.
- The longer the term, the higher the interest rate.
- Different banks offer different term limits. Some CD terms are for a week, months, or even years.
Money Market Accounts
This is a lesser-known type of business a bank account and isn’t for every business owner. You’ll want this type of account if you have a lot of money saved, want higher interest rates than a business savings account or interest-bearing business checking account, but still want some access to your money.
Here are the main features of a business money market account:
- Six withdrawals per month.
- Deposit money anytime.
- Deposit as much money as you like.
- Higher interest rates (currently between .1% and 1.6% APY)
- Require a minimum balance.
- Penalties if you withdraw more than six times in a month. Ask your banker what the penalty is if you withdraw more than six times.
How to Open a Business Bank Account
Opening a business bank account is as simple as gathering some information together and completing an application. Here are the steps to open a business checking account:
- Do your due diligence. Research different banks and discover what each one offers. Then decide which one will work best for your business type. An easy way to do this research is to check out some of our business bank reviews.
- Get a tax ID number. You can get one free EIN from the IRS. If you think you already have one, here’s how to look up an EIN.
- Gather your business formation documents.
- Gather your business license or business name filing paperwork.
- Call the bank and find out what other items you’ll need to open a business bank account. Every bank has different requirements, so make sure you check with them first before attempting to open a business bank account. Sometimes this information will be listed on the bank’s website.
- Go in person or online to complete all necessary paperwork and submit your business documents.
At Inc Authority, we make getting a business bank account easy. How so? Well, when you form your business with us, you gain access to a free Bank of America business checking account. So, don’t wait! Form your LLC in Virginia today!
Tax and Regulatory Requirements
Additional tax and regulatory requirements may apply to your Virginia LLC. These may include:
EIN: If your LLC has more than one member, it must obtain its own IRS Employee Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you still need to obtain an EIN or elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online EIN application on the IRS website. There is no filing fee.
Pay Annual Registration Fees
All Virginia LLCs and foreign LLCs authorized to do business in the state must pay a $50 annual registration fee. The fee is due each year on or before the last day of the month in which your LLC was created. The Virginia Corporations Commission will mail a notice of the assessment to the LLC’s registered agent at the registered office address. The Commission must receive the LLC’s annual registration fee payment on or before the due date stated in the notice of assessment or a $25 penalty will be imposed. Annual registration fees may be paid online at the Corporations Commission web page or by postal mail.
Getting Started with Your Virginia LLC
Forming a professional LLC or corporation in Virginia is an exciting opportunity, but like starting any business it can be overwhelming. Why not let the business experts at Inc Authority do all the heavy lifting for you?
We’ll form your LLC or corporation, run a business name check, get your EIN, and make sure you have all the licenses and permits needed to run your business. We can also advise you on the things you need to pay, such as LLC cost, Virginia state fees, and other payables.
Not to mention we offer a ton of free management and report tools to help make running your business as simple as possible. Please contact us or visit our website today to get started!
Incorporating is the most powerful thing you can do to legitimize your business. And at IncAuthority.com, our setup LLC services are 100% free. Always. So, don’t wait. Form your free LLC today and enjoy the protection due to you and your business under the law.