Are you looking to form a limited liability company (LLC) in the state of Virginia, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Virginia LLC that is compliant and able to do business in the state.
To get started, please reference our 6-step guide below or hire an affordable online LLC formation service.
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What is a Virginia LLC?
The Virginia LLC is one of the most popular business structures in state. It's a more casual and flexible type of business than a corporation, but includes personal asset protection that's lacking from sole proprietorships and general partnerships.
LLCs in Virginia have simple formation and maintenance requirements, several options for how they can be taxed, and flexible management. From one-person businesses to multi-member LLCs with several owners, the LLC is a popular choice for a reason.
Forming an LLC in Virginia (in 6 Steps)
Step One) Choose an LLC Name
Your LLC’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 the state of Virginia, every limited liability company is required to have either the initials “LLC” or the phrase “limited liability company” in the name. In addition, you cannot include any words that refer to other business types (like “corporation” or “incorporated”), and you also can’t use words that are typically used to refer to specific kinds of businesses (like “bank” or “law office”).
Another aspect to consider is including language that explains what your business does ― for example, if you’re a plumber, put the word “plumber” or “plumbing” in your LLC 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 LLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming an LLC is to not get too attached to any one business name until you have either reserved the name with the state of Virginia, or you’ve officially formed your business. Virginia makes this process rather easy, as you can search their entire database of business names at this link. If you’re not yet ready to form your LLC, you can reserve your desired name. You can file by downloading the Application for Reservation or for Renewal of Reservation of a Business Entity Name and mailing it in to the state. Reserving your name gives you an extra 120 days to get your business affairs in order; please note that there is a $10 fee to reserve a name.
Step Two) Designate a Registered Agent
Every LLC in Virginia is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
According to the Virginia Secretary of State,
Every Virginia and foreign business entity authorized to transact business in Virginia is required by law to continuously maintain in the Commonwealth a registered office and a registered agent. The sole statutory duty of the registered agent is to forward to the business entity at its last known address any process, notice or demand that is served on the registered agent. A business entity may not have, at any given time, more than one person serving as its registered agent in Virginia.”
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 LLC 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.
Step Three) File Formation Documents with State
Once you are ready to form your Virginia limited liability company, you will fill out the articles of organization.
This is THE document that will register your LLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Your chosen business name
- Name and address of your registered agent
- Management style (member-managed or manager-managed)
- Name(s) and address(es) of the LLC’s manager
- Name and address of the LLC’s organizer
- Signature of organizer and registered agent
- Effective date
Cost to Form an LLC: The state of Virginia charges a $100 fee to form an LLC.
Processing Time: It can take 1-3 business days for the state to process your mailed-in Virginia formation paperwork and have your filings back to you. You can also file online and have your documents back within 1-2 business days. Please note that the estimate of business days begins once ALL required paperwork is in order and filed correctly.
Step Four) Create an Operating Agreement
After you register an LLC 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 this document in order to open an account. 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 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 LLC
- 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 LLCs 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 LLC 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.
When it comes to state-level LLC taxes, Virginia levies these taxes based on the nature of your business. If your LLC is considered a pass-through entity—usually a sole proprietorship or partnership—you’ll need to use form 502W to file and pay your taxes. You can learn more and get started on your filings here. In contrast, LLCs which choose to be taxed as corporations will be subject to the state’s corporate income taxes. The corporate tax ranges from 6% depending on your business income. You can learn all about Virginia’s corporate income taxes here.
LLCs involved in retail sales are also responsible for the state’s streamlined sales tax. The current rate is 4.3%; you can read an in-depth guide for the tax here.
LLC owners with employees are also required to pay a number of taxes. First, employers are responsible to pay withholding taxes on employee wages. Essentially, you’ll keep back a portion of an employee’s wages and forward that tax to the state. You can learn more about Virginia’s withholding taxes here. Similarly, Virginia employers are also required to make payments to the state’s unemployment insurance. While it’s not technically a tax, you do need to pay it on a regular basis, so we’ve included it in this section. You can learn more about this fund at the Virginia Employment Commission.
In addition to these general taxes, Virginia also requires taxes specific to particular industries. For example, there are taxes on corn assessments, egg excise taxes, and more. You can learn more about the state’s business taxes and file them online here.
Depending on where in Virginia your business is located, you could also need to pay some local taxes. For example, Virginia counties are permitted to levy additional taxes for local road maintenance and more; as a result, the actual tax you’ll often pay in certain areas is 6%. You can learn more about local tax rates here. We also recommend that you contact your local government office to be sure you don’t overlook any local obligations.
Step Six) Obtain Business Licenses and Permits
The state of Virginia does not have a statewide general business license that each LLC needs to acquire in order to do business.
However, Virginia does uphold the licensure required by the federal government for certain occupations, including agriculture, aviation, and more. Please consult the Small Business Association’s listings for federally-regulated industries requiring licensure.
And much like the state has industry-specific tax requirements, it also has licenses and permits that are required for businesses in certain industries. Virginia has a wide variety of these licenses, so there’s a good chance at least one of them applies to your LLC. We recommend that every LLC owner search through the state database of licenses for businesses with OneStop, and don’t forget that your local government may require licenses or permits as well.
Next Steps: What to do After Creating a Virginia LLC
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.
Get Business Insurance
Every Virginia business with employees is strictly required to acquire workers’ compensation insurance. For more information on this policy, check out the Virginia Workers' Compensation Commission. Essentially, this policy helps to pay your employees when a work injury or illness keeps them from working. After you obtain these legally required policies, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies.
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. The state of Virginia offers resources to explain rules and fees for your business’s income reports here.
Understand annual reporting
Virginia requires that all LLCs file an annual report. You can file it online or request a paper copy of the form here. It is due each year before your LLC’s anniversary of formation. Please note that there is a $25 fee. Your annual report will essentially serve to update the state on any pertinent information regarding your business that has changed over the course of the year.
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 best to 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.