Forming an LLC doesn’t have to be a difficult and mysterious process. Sure, there’s a lot of paperwork to do, but generally speaking, the formation of an LLC is simpler than starting a corporation. It’s faster in most cases, too! But exactly how long will you be waiting around for approval for your new Limited Liability Company? We’ll break it all down for you in our comprehensive guide.
Discovering Virginia
Virginia got its nickname, The Old Dominion State, because it was the first English colony, dominion, or territory in America. And the state is named after the Virgin Queen, Queen Elizabeth I.
It shares borders with Maryland, Washington D.C., North Carolina, Kentucky, Tennessee, the Atlantic Ocean, and of course, West Virginia. You’ll find the Appalachian Mountains, Shenandoah National Park, and Mount Rogers, which is the highest peak, all in Virginia.
Some of the types of geography you can find in Virginia include forests, rivers, plateaus, caves, natural bridges, sinkholes, mountains, ravines, salt marshes, swamps, and beaches.
One of Virginia’s biggest natural resources is the forests that cover around 62% of the state. The timber that Virginia produces and sells brings in approximately $17 billion every year. It’s also known for coal mining.
Economic Overview of Virginia
Virginia’s GSP (Gross State Product) is $498.8 billion, and it had a growth rate of 1.3% from 2017-2022.
The leading industries in the state by revenue are IT Consulting, New Car Dealers, Hospitals, Management Consulting and Health & Medical Insurance. The top employers in the state are Walmart Inc., Amazon.com, Inc., United States Postal Service, Target Corp, and Virginia Commonwealth University. And the sectors that make the biggest contributions to the state’s GDP are Professional, Scientific & Technical Services, Real Estate & Rental & Leasing, Manufacturing, Healthcare & Social Assistance, and Information.
Business Environment in Virginia
Virginia’s business environment was ranked #21 in the nation by usnews.com, #12 for employment, and #22 for growth. It’s rated #15 for long-term fiscal stability, and #13 for short-term fiscal stability.
It was rated #39 for affordability, which isn’t great, and #9 for economic opportunity. The state’s cost of living index is 102.3. For comparison the national cost of living index is 100.0. The median household income in Virginia is $80,963, whereas the national average is $69,717.
The state sort of has a North-South divide, which is interesting given its integral role in the Civil War. The further south you go in the state, the more likely you are to find rural regions, while the northern part of the state is home to suburban living that bleeds seamlessly into Washington D.C.
Some of the industries that you can find in the state are shipbuilding, tobacco-growing and farming, as well as a number of tech companies.
State Specific Regulations and Incentives for Forming an LLC in Virginia
Here are a few of the incentives provided by the state for forming a business in Virginia.
- Virginia Investment Partnership Grant (VIP): This incentive was created to promote manufacturers that have been in the state for a minimum of 3 years to continue making capital investments. Businesses must make an investment of at least $25 million, as well as maintain their existing employment levels. The grant award amount is distributed in 5 equal payments spread out over 5 years. These payments start two to three years after the investment and job creation requirements are met, depending on your location.
- Virginia Economic Development Incentive Grant (VEDIG): This is a discretionary grant for businesses who meet any of these criteria:
-Locate in a Metropolitan Statistical Area (MSA) that has a minimum population of 300,000, and either create at least 400 new full-time jobs that pay average salaries of 1.5 times or more the average local wage, or 300 new full-time jobs that pay a minimum of two times the local wage.
-Locate in a Metropolitan Statistical Area (MSA) that has a population of 300,000 or more, and either make an investment of $5 million, or $6,500 per job- whichever is the greatest.
-Locate in the state of Virginia, anywhere outside of a Metropolitan Statistical Area (MSA). and create a minimum of 200 full-time new jobs that pay salaries of 1.5 times the local average wage or more.
-Locate in the state of Virginia, anywhere outside of a Metropolitan Statistical Area (MSA)) and make a capital investment that equals at least $6,500 per job.
- Commonwealth’s Opportunity Fund (COF): This is a discretionary program where the governor can provide incentives for Virginia businesses who are in competition with other states for expansion projects and business attraction. The company must meet certain requirements to qualify, like job creation, capital investment and salary requirements and they vary according to county. If your company qualifies for the COF, then it also qualifies for the New Company Incentive Program, which is a state income tax exemption that lasts for six years.
- Major Business Facility Job Tax Credit: If your company expands or relocates to Virginia, it could be eligible for this tax credit, which equals $1,000 per every new full-time job that you create over the 50 job threshold. If your company is in an enterprise zone or in another area that the state has deemed to be economically distressed, the threshold is lowered to 25 new jobs. You can take the credit in two equal installments over two years.
- Port Volume Increase Tax Credit: This credit is designed to help companies in the manufacturing, distribution, mineral and gas or agriculture industries who use the port facilities in Virginia. If your company steps up the use of Virginia’s ports by 5% in a calendar year from its base year port cargo volume, you could claim a credit against corporate income tax up to $250,000.
- Green Job Creation Tax Credit: This is an annual corporate or individual income tax credit which is awarded for each new green job created that meets certain eligibility requirements. The credit for each qualifying job is $500 for each job that pays an annual salary of at least $50,000.
- Sales & Use Tax Exemptions: Certain things used during the manufacturing process, like machinery, replacement parts, materials and more, are exempt from sales tax. Other things that are exempt are purchases made for research and development, semiconductor clean rooms and other related equipment, and computers and various equipment used at data centers.
- Enterprise Zone Job Creation Grant: If a business locates or expands to one of the many enterprise zones in the state, it could qualify to receive a cash grant. Certain wage levels are required to be met. The grant award is as much as $1800 per job, and can be awarded for 5 years.
- Technology Zones: Cities, towns and counties in Virginia can create an ordinance to establish technology zones which help attract growth in certain industries. Businesses that move into these areas gould receive a local permit, as well as waivers for user fees, local tax exemptions or credits, special zoning perks, and even exemptions from certain ordinances.
Pros and Cons of Establishing an LLC in Virginia
Before we get into all of the nitty-gritty details of LLC formation and time frames, we’ll tell you all about the pros and cons of starting an LLC.
Pros:
- After you file for an LLC and get approved, the annual maintenance costs of running an LLC are usually lower than those of a corporation or other business entity type.
- LLCs provide personal asset protection, which means that your personal assets aren’t vulnerable if your LLC is involved in a lawsuit because the LLC’s assets are separate from your own.
- The business environment in Virginia is ideal, partially because of its low tax rates. It has a flat corporate income tax rate of 6%, personal income taxes range from 2%-5.75%, and sales taxes (both state and local) are around 5.75% on average.
Cons:
- The dividends that are dispersed by the LLC are hit with a self-employment tax. Corporate shareholders, on the other hand, only pay Social Security and Medicare taxes for their earnings.
- LLCs don’t sell stock, which makes it difficult to receive funding and gain investors.
- The LLC entity type typically has a simple management structure, but filing annual reports for LLCs usually costs more than filing annual reports for corporations.
Procedure of Establishing an LLC in Virginia
In this section, we’ll tell you how to form an LLC in Virginia and demystify the process.
Necessary Documentation for Filing an LLC in Virginia
Before you file for an LLC, you’ll want to gather all of the documents up. This will save you some time and effort during the formation process.
- Articles of Organization: The first step to forming an LLC is filling out an Articles of Organization form. It serves as your application to form an LLC with the Virginia State Corporation Commission. Some of the information required on the form includes: your business name, your business address, a list of LLC members and their contact information, as well as an explanation of ownership percentages, and information about your registered agent. It may also request your business purpose, its duration, and whether it’s member-managed or manager-managed.
- EIN: You’ll need an Employer Identification Number or EIN for many situations, such as hiring employees, opening a business bank account, or filling out tax forms. This crucial business identification number can be obtained on the IRS website for free.
- Operating Agreement: The Virginia State Corporation Commission doesn’t make an operating agreement a legal requirement for LLCs, but it does strongly recommend it. An operating agreement is a vital internal business document that will be invaluable during your first few years of operation. It spells out a lot of important information, such as the roles of each LLC member, their ownership shares and contributions to the company, an explanation of how profits and losses will be distributed, a list of managers and their contact information, and both information about each member’s voting rights and a schedule for meetings. Maybe most importantly, your operating agreement should also include instructions for how to add and remove an LLC member which will be a lifesaver if an LLC member dies because you’ll have plans already in place for the unthinkable.
- Name Reservation Application: You can’t just list any name you want on your Articles of Organization. There’s a legal process for choosing a name. First, you must find out whether the name is available. You can do so by searching the business name database on the State Corporation Commission Clerk’s Information System. Once you’ve found a business name you can use, you must file an Application for Reservation of Name using the Clerk’s Information System which will keep other businesses from being able to legally use the name.
- Initial and Annual Reports: Every LLC in the state must file an annual report. It’s essentially a form to ensure that your business information is up-to-date with the State Corporation Commission. The first one you file is called an initial report, and you’ll need it when you file your Articles of Organization.
- Tax Registration: You’ll need to register your business with the Department of Taxation to set up state and local taxes for your business, as well as to collect sales taxes.
- Business Licenses: The state of Virginia doesn’t require business licenses on a state level. However, there are some certification and licensing requirements for specific professions. Furthermore, you may be required to obtain business licenses from local and county agencies. To find out about business licenses, check in with the county and local clerks.
Legal Requirements for Starting an LLC in Virginia
Here are the steps to forming an LLC in Virginia:
- Get Your Articles of Organization Form: To get the formation process started, you must file an Articles of Organization Form with the Virginia State Corporation Commission. Coincidentally, that’s also where you acquire the form which is convenient.
- Choose a Business Name: After you’ve found a business name that you can use by performing a business name search on the Clerk’s Information System, you need to file what’s called an Application for Reservation of Name to legally use it.
- Choose a Registered Agent: A registered agent is a person or business who will receive mail from government agencies, as well as accept service of process on behalf of your business at their address during normal business hours. There are a few requirements for this position, such as having a physical address in the state and being over the age of 18, and PO boxes are prohibited. With that being said, you can choose anyone you want to fulfill this obligation, such as a friend, family member or employee. But keep in mind that this is a highly specialized role that can cost your business its good standing or even its permission to conduct business in the state, so choose carefully. Because of this, many business owners choose a professional registered agent service for added assurance.
- Choose Your Address: Your business address may seem obvious, but it’s something you should take some time to think about. Your company’s business address is listed on the public record. If you list your home address as your business address, then everyone has access to it, which can be a bad thing. Instead, you could ask to use your registered agent’s address, or find out about virtual addresses in your area.
- Sign and File Your Articles of Organization: The last step is signing and filing your Articles of Organization along with your other formation documents with the State Corporation Commission. You could opt to do this yourself, but signing the documents means your name will be listed on the public record. Or, you could hire an LLC formation service.
Time Frame for Establishing an LLC in Virginia
Once you’ve filed your paperwork, you’ll have to wait for the State Corporation
Commission to contact you. Here’s how long you can expect to wait.
How Long Does the Initial Paperwork Take in the State of Virginia?
Approval times (which include processing times and mail times) to file by mail in Virginia are approximately 2 weeks, or 2-5 business days if you file online.
Processing Times in the State of Virginia
Processing times (which is simply how long it takes the State Corporation Commission to enter the information listed on your documents into their computer system) to file by mail are 2-5 business days, or 2-5 business days if you file online.
Common Delays in the LLC Formation Process in Virginia
There are a few things that can slow the formation process down that you should be aware of.
- Filing Method: Because filing by mail can take longer than filing online, your best bet to receive approval for your LLC quickly is to file online.
- Filing Volume: The largest number of filings is usually at the beginning and the end of the year. You may not be able to wait to file your LLC after these periods are over, so you should expect delays.
- Document Issues: If there are any errors with your formation documents, your application could be denied. This will cost you some extra time as you work to amend them and re-file.
Expedited Processing for LLC Formation in Virginia
Expedited processing is a great choice to quickly form an LLC.
What are the Expedited Options Available?
There is a next-day expedited processing option available, which must be received by the State Corporation Commission by 1pm.
Additional Costs for Expedited Services in Virginia
The fee for next day processing is $100. This is in addition to the filing fee.
Comparing LLC Formation Time Frame in Virginia with Other States
To get a good idea of how fast or slow your state processes LLC filings, you need to look at the formation times of other states. From there, you can decide whether to form an LLC in your state, or in another state which is called a foreign LLC.
Brief Comparison with Key States
To recap, processing times to file by mail are 2-5 days, and 2-5 business days to file online in Virginia. And there’s a next-day expedited processing option.
There are faster options available. In California, expedited processing takes 4 hours, it’s 2-4 hours in Louisiana, 2 hours in New York, and Delaware, Michigan, Montana, Nevada, Pennsylvania and West Virginia all have 1 hour expedited processing. Processing online filings in 2-5 days is pretty middle-of-the-road. Alabama, Alaska, Colorado, Kansas, Kentucky, Minnesota, Missouri, New York, South Dakota, Tennessee, Wisconsin, and Wyoming all offer immediate processing for online filings. And when it comes to mail filing, both Ohio and Kentucky can get it done in just 1 day.
There are slower options, as well. Expedited processing takes 5 days in Arizona, and 7 in Maryland. Online processing takes 13-15 days in Texas, 12-14 days in Washington, 2 weeks in Maryland, and 14-16 days in Arizona. And mail filings take 2-4 weeks to process in D.C., 3-4 weeks in Missouri and Nevada, 4-6 weeks in Oregon, 6 weeks in Pennsylvania, 4-8 weeks in Texas, 5-6 weeks in Washington, and an astounding 8 whole months in New York.
Why is Virginia a Favorable Place For Forming an LLC?
Virginia can be a great location to form an LLC for a number of reasons. The workforce is highly educated, with around 39% of the workforce having a bachelor’s degree or higher. It’s considered a mecca for skilled tech workers because it has the highest concentration of them in the entire country. Tech isn’t the only industry that booms in Virginia. There’s a big manufacturing industry in the state and that’s supported by the fact that it’s so close to Washington, D.C. It’s also in a prime location, which makes it easy to reach both northern and southern regions of the country, as well as being home to a number of airports and shipping ports.
