Are you looking to form a professional limited liability company (PLLC) in Virginia, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Virginia PLLC that is compliant and able to do business in the state.
What is a Virginia Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. In Virginia, a PLLC can be formed to render certain types of personal services to the public that require a license, certification, or other legal authorization, such as those services rendered by, among others, pharmacists, optometrists, nurse practitioners, veterinarians, surgeons, dentists, architects, professional engineers, public accountants, certified public accountants, and attorneys at law.
The Virginia PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Virginia have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in Virginia (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
In Virginia, a PLLC may, but is not required to, use at the end of its name the abbreviation “P.L.C.,” “PLC,” “P.L.L.C.” or “PLLC,” or the phrase “professional limited company,” “a professional limited company,” “professional limited liability company,” or “a professional limited liability company.” If the name does not include one of the foregoing phrases or abbreviations, it must contain one of the standard LLC endings: “limited company” or “limited liability company” or their abbreviations “L.C.,” “LC,” “L.L.C.,” or “LLC.” The name may not contain any word, abbreviation, or combination of characters that states or implies that the PLLC is a corporation or a limited partnership.
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. You can check if a name is available by conducting a search on Virginia’s State Corporation Commission’s website. If you’re not ready to file your PLLC’s Articles of Organization but would like to reserve a name for future use, you can file an Application for Reservation of a Business Entity Name with the State Corporation Commission. The filing fee is $10 and the reservation period lasts 120 days (renewable for additional 120-day periods during the 45-day period preceding the expiration of a reservation).
Step Two) Designate a Registered Agent
Every PLLC in Virginia is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
Your PLLC’s registered agent in Virginia can be an individual, so long as the individual is (i) a resident of Virginia, and (ii) a member of the Virginia State Bar or a part of your PLLC’s management (member or manager). The registered agent can also be a Virginia business entity or foreign business entity authorized to do business in Virginia. Whether an individual or a business entity, the registered agent must agree to serve as your PLLC’s registered agent. Your PLLC may not serve as its own registered agent.
Without a registered agent, you could lose your good standing with the state of Virginia, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your Virginia professional limited liability company, you will fill out the Articles of Organization.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of your PLLC
- Professional services to be rendered by your PLLC
- Name of your PLLC’s initial registered agent
- Type of registered agent
- Address of your PLLC’s initial registered office
- Street address of your PLLC’s principal office
- Name and signature of each organizer
To file your Articles of Organization, you can submit a PDF online using the SCC eFile system or by mail. Note that Articles of Organization for PLLCs are currently not eligible for the eFile Express filing option.
Cost to Form a PLLC
The filing fee for the Articles of Organization is $100. Expedited service fees are an additional $100-200.
Filings are typically processed in 1-3 weeks, though current processing times are posted online. Same day and next day expedited processing options are also available for an additional fee. Note that the processing time may be longer if your Articles of Organization are incomplete or contain errors.
Step Four) Create an Operating Agreement
After you register a PLLC in Virginia, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
In Virginia, your PLLC’s income may be subject to a corporate income or pass-through entity tax, depending on its tax classification status. Other state business taxes, such as sales & use tax or withholding tax, may also apply to your PLLC’s business activities. You can learn more about each type of tax on the Virginia Department of Taxation’s website.
If your PLLC does business in Virginia, it will need to register with the Department of Taxation. Registering automatically enrolls your PLLC in a business online services account as well, which allows you to file and pay state taxes online. Note that Virginia requires certain taxes to be filed electronically.
Depending on where in Virginia your business is located, you may also need to pay some local taxes. You should contact your local tax authorities to confirm whether your PLLC will have any additional tax obligations. If your PLLC is located in one of the four largest cities in Virginia, the following links may be helpful: Virginia Beach, Norfolk, Chesapeake, and Richmond.
Step Six) Obtain Business Licenses and Permits
Virginia does not have a general state business license that all businesses need to acquire. However, you will need to make sure that you have the appropriate licenses to render professional services through your PLLC. The Virginia Department of Professional and Occupational Regulation, or DPOR, issues licenses, certifications, and registrations for many regulated professions in the state. You can find a list of these professions on the DPOR website.
You should also check with your PLLC’s city and county to confirm whether any local licenses, permits, or registrations are required. You can obtain many of these professional, specialty, and local licenses through Virginia’s Business One Stop website.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in Virginia
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Virginia generally requires businesses that regularly employ three or more part-time or full-time employees to carry Virginia workers' compensation coverage. If you plan to hire three or more employees for your PLLC, you can meet this requirement by buying from a licensed insurance broker, through membership in a group self-insurance association licensed in Virginia, or in some cases through certification as an individual self-insurer. Additional information about workers’ compensation in Virginia is available on the Virginia Workers’ Compensation Commission’s website. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
You will need to report your income on a federal income tax return and a state income tax return. Which tax return form you use in Virginia will depend on your PLLC’s tax classification. You can find each of Virginia’s forms and related instructions on the Department of Taxation’s website.
Understand annual reporting
Virginia does not require PLLCs to file Annual Reports. However, your PLLC will still need to pay an annual registration fee of $50. The fee is due each year on or before the last day of the month in which your PLLC was formed and can be paid online through the SCC eFile website.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.