If you’re reading this article then it’s a safe bet that you’ve made the decision to form a Limited Liability Company or an LLC in Virginia.
Congratulations! This should be an exciting time in your life and on your business journey.
In this guide, I’ll give you a comprehensive look at each step involved in forming an LLC in Virginia. But before we get into that, I’m going to describe what an LLC is and some of the benefits of choosing to form an LLC in the state of Virginia rather than another entity type so that you can determine whether forming an LLC is the best move for your business in Virginia.
(If you want to skip to the ‘how to form an LLC’ section, click here)
Table of Contents
What Is A Virginia LLC?
A Virginia LLC is a Limited Liability Company formed in the state of Virginia that is governed by the laws, regulations, and statutes of the state of Virginia.
Why choose An LLC?
There are a few advantages you can benefit from if you choose to start an LLC in the state of Virginia instead of another type of business structure, like an S corporation, a C corporation, a sole trader or a sole proprietorship.
1. Limited Liability And Asset Protection
The first, and arguably the biggest benefit you’ll enjoy as part of a Limited Liability Company (LLC) is that if your company is sued or goes bankrupt, your debtors can only go after the assets of the LLC. This means you’re not personally responsible for the liabilities and debts of the company in the state of Virginia.
Creditors can’t come after your personal assets, like your car or your house. The only financial recourse they have is limited solely to the Virginia LLC.
We’ve all recently been made aware that even the most successful, most prepared business entities can fail due to an unexpected event (like a worldwide, viral pandemic), so any little bit of protection and assurance you can afford yourself is a major comfort. And this protection is especially important to those who value all the hard work they’ve put into their company.
Another benefit you get from deciding to form an LLC in the state of Virginia is the protection of your personal information.
Unfortunately, during the past decade hackers and scammers have become quite adept at what they do. Now they can steal your identity with the most seemingly insignificant bit of information and use it to run up thousands of dollars in debt in your name.
But if you choose to operate as a different type of business entity, like a sole proprietorship, for instance, you’ll have to put your home address down on the registration to be listed on the public record rather than a business address, and people can do a simple search on the Office of the Clerk’s website to find it. And because your personal information is listed on the public registry when you choose other business types, it’s left vulnerable to scammers and hackers.
But, LLCs in the state of Virginia don’t encounter this problem because there is a way to protect your personal information.
If you utilize an LLC formation service in Virginia, one of the services they offer is registering their name and business address with the Virginia State Corporation Commission. You not only retain ownership of your Virginia LLC, but your information remains safe and off the public record.
The last benefit that you’ll enjoy from forming a Virginia LLC is that LLCs get tax benefits that you wouldn’t get if you’d structured your business as another type of business entity.
If you choose to form a corporation instead of an LLC in Virginia, then you’ll experience what is known as “double taxation”.
Here’s why it’s called “double taxation”. Corporations are subject to corporate income taxes. Then the profits left over after corporate taxes are divided among the shareholders and each of them has to pay personal income taxes on top of that.
This means that you’ll be taxed twice as a corporation in the state of Virginia, which is why they call it “double taxation”.
With a Virginia LLC, you can avoid the “double taxation” phenomenon entirely. LLCs are subject to taxation at company rates instead of corporate rates and then the leftover profits are dispersed among the LLC owners. This means your Virginia LLC is only taxed once for its profits, rather than twice.
In addition to the fact that your LLC in Virginia won’t deal with the issue of “double taxation”, it’s worth noting that LLCs also enjoy tax benefits that other business types don’t receive. The 2017 Tax Cuts and Jobs Act included the Qualified Business Income Deduction (QBID), which is a tax benefit for LLCs. Your Virginia LLC can enjoy up to 20% in tax discounts, which is a perk that’s exclusive to LLCs.
How To Start An LLC In Virginia
Now that you’ve read about LLCs and you know more about what an LLC is, how it functions and what benefits an LLC can offer your business, it’s time to decide if an LLC is the right fit for your business. If you’re still confident that a Virginia LLC is the best business type for your company, then read the following sections for a detailed, step-by-step guide with steps and formation documents you will need to start your LLC in Virginia.
IMPORTANT NOTE: If you’ve never formed an LLC and you have no clue about what sort of red tape and hassle you’ll encounter, it’s highly advisable to choose an LLC formation service in the state of Virginia to help guide you through the process. Not only will they handle all of the formation documents on behalf of your business in Virginia, but they’ll also keep your information safe by registering their name and address instead of your residential address or the business address of your company.
LLC formation services have fees as low as $0 plus state filing fees. However, ZenBusiness is my favorite recommendation for LLC formation services and they charge $49 plus the filing fee.
If you’d like more information about how LLC formation services help guide LLCs through the formation process or if you’d like to find one for your Virginia LLC, check out my article about the best LLC services here.
1. Obtain Articles Of Organization Form
The first step on your journey to create a Limited Liability Company (LLC) in Virginia is obtaining your Virginia Articles of Organization.
You can get the Articles of Organization application in PDF form from the Virginia State Corporation Commission here.
You can either submit the completed PDF online on the site, or you can print it out and mail it to the Virginia State Corporation Commission at this address:
Virginia State Corporation Commission
P.O. Box 1197
Richmond, Virginia, 23218
All of the steps below relate to this first step and the Articles of Organization for your Limited Liability Company (LLC).
2. Choose Your Business Name
After you’ve received your Articles of Organization application the next step is to choose a company name for your Limited Liability Company (LLC) in Virginia.
This is something you’ll have to put some thought into. You can’t just write the first name you think of on the registration application.
Every business in the state of Virginia has to have a unique business name. So, you’ll have to check the database maintained by the Office Of the Clerk to make sure another LLC hasn’t already registered the name you want. You can search the business name database of the Office of the Clerk here.
If you do the business name search and someone does have the name you want, don’t fret. There are plenty of ways to give yourself a unique LLC name. You can use suffixes such as “Limited Liability Company”, “Ltd. Co.”, “LLC” and others in your LLC name.
If you aren’t crazy about your LLC name or it isn’t the name you want to present your business as to the world, you can always fill out an application for a trade name or DBA name (“Doing Business As”). This is the name you’ll put on your advertisements, signs, etc. You can fill out the DBA name application here.
3. Choose A Virginia Registered Agent
Every Virginia LLC (as well as LLCs in every other state) is required to have what is known as a “registered agent”, which has to be listed on the registration.
What on earth is a registered agent? A registered agent is a person or business service that is legally registered to receive any piece of mail or document that the government sends to your LLC or Limited Liability Company. The person or business service must also be available during normal business hours to assume this role.
Of course, you could take on the role of a registered agent for your LLC yourself without the bother of enlisting registered agent services or choose to appoint a registered agent service. This is a pretty important decision to make for your small business so careful consideration is needed. Here are the pros and cons of both choices:
Firstly, if you become your own registered agent your personal information will be in the public domain. You’ll also have to be available during business hours to accept any mail or document that the state sends your LLC and, as most LLCs also function during this time, that’s not ideal because you can’t be in two places at once to both run your LLC and watch for mail. It’s very possible to miss things like Service of Process this way, which could cause legal problems for your business in Virginia.
So, acting as the registered agent for your LLC can be time-consuming and could lead to lawsuits that you won’t know about or be able to defend yourself against because you missed a piece of mail or a document being sent during business hours while you weren’t on hand to receive it. On the upside, being the registered agent for your business means that you don’t have to pay the fees of a registered agent service.
Choosing to use a registered agent service will keep your personal information protected by registering their agent address with the Virginia State Corporation Commission (they even keep the address on your business license off the public record), but it’s a bit pricier than taking on the registered agent task yourself. Most registered agent services cost between $99-$299 per year.
Even if it is more expensive than trying to tackle the task yourself, the legal costs of NOT using a registered agent service far outweigh the financial costs of appointing a registered agent service. I advise ALL new LLCs to use a registered agent service.
If you’d like to sign up with a registered agent, protect your personal information and make sure that your company receives each piece of mail and document that the government sends your Virginia LLC, you can click here to read my article about the best Virginia registered agent service: Registered Agent Virginia
No matter which option you choose, make sure that you fill out the Statement of Change of Registered Office and/or Registered Agent of a Limited Liability Company form, which you can find here.
4. Choose Your LLC Address
The next important thing you need to consider is your business address. Your business name isn’t the only bit of information you have to register on the Articles of Organization application. Every business entity in Virginia has to list a mailing address on the registration forms to be listed publicly online.
If you don’t have a registered agent and your small business doesn’t have a street address that you can list on the registration, you’ll pretty much be forced to list your own home or office address.
However, if you appoint a registered agent, they provide your Virginia LLC with an address that isn’t traceable to it or you.
5. Sign And File Your Articles Of Organization
Once you’ve looked over your form and you’re certain that all of the information on it is correct, it’s time to sign and file the Articles of Organization for your LLC.
If you’ve decided to form your LLC yourself and forego the LLC formation services, then you’ll sign the registration form yourself and allow your information to be put onto the public record. If you’re using an LLC formation service, then they’ll sign and file the registration on behalf of your small business.
Then if you’re doing this yourself, you’ll have to submit the form. If you’re doing it online you simply submit the form here. You can also print the PDF out and send it in the mail to:
Virginia State Corporation Commission
P.O. Box 1197
Richmond, Virginia, 23218
The Virginia State Corporation Commission will notify you either by mail or by email when the registration process has been completed. This typically takes 3-5 days if you’ve submitted the articles online and 1-3 weeks or longer if you’ve filed by mail. If you use an LLC formation service, some charge a registration fee and offer expedited processing services that can cut the registration process down to about 72 hours.
Other LLC Activities
Once formed, there are still a few activities that LLCs have to participate in to remain in good standing. These activities don’t have anything to do with the LLC formation process, though.
Your business will need a Certificate of Good Standing, pay an annual registration fee and pay taxes, among other things. For instance, depending on what sort of business you run, you may be required to obtain a business license. The annual registration fee is due on the anniversary of the date your LLC was formed in the state of Virginia, and there is a $25 late fee if you don’t pay the annual registration for your business entity on time.
If you’d like to take some of the paperwork burden off your shoulder and not have to mail out a new form or document for your business every time you turn around, you could consider using a Virginia PEO Company, as well as subscribing to an online legal service for your business.
Virginia LLC Fee Summary
Whether you decide to form your LLC yourself or use an LLC formation service, there will be some filing fees you’ll have to pay. These are some of the costs of forming your LLC:
Articles of Organization filing fee: $100
Name Reservation filing fee: $10
Trade Name Or DBA filing fee: $10
Registered Agent Fee: $99- $299
Annual Registration Fee: $50 with a $25 late penalty fee
State Personal Income Tax: 2%-5.75%
State Corporate Income Tax: 6%
After Starting Your Virginia LLC
You took one of the biggest steps on your business journey when you formed your LLC, so take some time to relax and celebrate the occasion. But don’t relax for too long because there are still a few things to do before your LLC can become a fully-functional business entity.
Here are the three most important steps you need to take so that your business will have the proper foundations to run well.
Step 1. Create An Operating Agreement
If you were to think of business entities as an animal, the LLC is like the skin that holds it together and the LLC Operating Agreement can be likened to the nervous system that tells it what to do.
The State of Virginia does not require LLCs to have an Operating Agreement to do business in Virginia, but it is highly recommended.
The LLC Operating Agreement is essentially a contract between each business owner and LLC member that explains how the business will run. Your Operating Agreement should identify each LLC member, as well as the Board of Directors, and then proceed to provide the operational, managerial, financial and structural details about your business and each LLC member.
A good Operating Agreement should give a detailed account of which members can make high-level decisions and the ownership percentages that belong to each member. The Operating Agreement should also define the roles of each of the members, and explain the relationships that each member has with each other. It should detail the ownership percentages, as well as the shares of profits and losses that each member should receive.
The Operating Agreement must explain what. happens if a member leaves, as well as what should happen if a new member is accepted into the business. If you use this model for your Operating Agreement, you’ll provide your business with not only business operation instructions, but detailed information about what steps must take place if there is a disagreement between the members of the LLC.
The Operating Agreement is a pretty important document and its words can very much either aid or hinder the success of your business because of the outlined items in it that define how your business will be run.
As you can probably tell, your business is pretty much obligated to run in the manner described by your Operating Agreement so if you get it wrong your business growth could be stunted and its business progress could be slowed because of the faulty instructions you wrote in your agreement that didn’t provide for things like adaptation and innovation. If you get the Operating Agreement right, your business will succeed and flourish because it’s not confined to a flawed Operating Agreement.
If you’re a new LLC or haven’t written an Operating Agreement before and you’re worried about getting it right (and understandably so), then there are a couple of options available to you.
The first is that Northwest Registered Agent provides an Operating Agreement template for free here. If you’d like a guide to help you with the words that make up your agreement, then a lot of LLC formation services offer Operating Agreements with their services. If you want to form your LLC yourself without using an LLC formation service, there are several online legal services that can help guide you through the legalities of the agreement without actually writing and filing it for you.
Step 2. Apply For An Employer Identification Number
You’ll need to get an Employer Identification Number (EIN) if you plan to open a bank account specifically for your LLC in the state of Virginia, or if you plan to hire employees for your LLC. You don’t have to hire employees for your business in the state of Virginia in order to obtain an Employer Identification Number (EIN), however.
An EIN is a tax identification number for LLCs much like a Social Security Number works to identify individual people.
Many LLC formation services will apply for and file the application for your EIN on your behalf, but you can also choose to fill out the form to apply for an EIN yourself. You can apply for an Employer Identification Number (EIN) through the Internal Revenue Service (IRS) here. You’ll need to apply for your EIN between 7am and 10pm Monday-Friday on their site to submit your application for an EIN.
Step 3. Open A Business Bank Account
There’s one last step you need to take before your small business is ready to take off: setting up a business bank account for your LLC.
Many people either forget this step or overlook it when starting an LLC.
A lot of business owners choose to use their personal accounts for both personal and business expenses, thinking that they’ll be able to tell the difference between the two. But there are two reasons why this isn’t an advisable business tactic.
The first reason is that even though your personal information is protected when you form an LLC if you use a personal bank account for business expenses, that protection is essentially nullified. This can leave you vulnerable to personal lawsuits.
The other reason is that although you may be able to determine the difference between business and personal expenditures now, that becomes a lot more difficult several months later when tax season rolls around. This makes filing your taxes a lot more complicated than it needs to be.
In order to save yourself a lot of hassle and keep your private information private, just open a business bank account.
You’ll need a bank kit to start a business bank account. A bank kit includes things such as a copy of your Articles of Organization, your EIN, your initial resolution, and a copy of your Certificate of Good Standing.
LLC formation services in the state of Virginia can make this process a lot easier because many of them include bank kits that include all of the things you need to open a business bank account (EIN, Certificate of Good Standing and other formation documents).
The decision to form an LLC in the state of Virginia is a monumental business decision. This is the first step in taking control of your financial future, so well done!
If you’re choosing to forego an LLC formation service (which can cost as little as $0 plus state filing fees), then here are the 5 steps you need to take:
- Obtain the Articles of Organization form
- Name your LLC
- Choose your Registered Agent
- Choose your LLC address
- Sign and file your Articles of Organization
It can be very difficult and time-consuming to learn how to cut through all of the red tape and understand all of the jargon needed to form an LLC in the state of Virginia. But, if you push yourself and get through it, it can give you a really rewarding sense of accomplishment.
I hope this is only the first of many successful business steps, and congratulations again on your LLC!