How to Start an LLC in Virginia? | 10 Steps Needed

Jon Morgan
Published by Jon Morgan | Co-Founder & Chief Editor
Last updated: June 19, 2024
FACT CHECKED by Lou Viveros, Growth & Transition Advisor
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Forming an LLC is a great way to limit your liability and protect your personal assets.

Since I’ve been in the industry for over a decade, I've helped countless clients establish their limited liability companies and provided guidance on how their businesses stay compliant with the law.

I will walk you through the steps of forming a business entity in Virginia and explain the benefits and drawbacks to help you decide if this business structure suits your company's needs.

Moreover, if you'd rather have an expert set up your LLC, we recommend exploring these Virginia LLC formation services.

Quick Summary:

  • To start an LLC in Virginia, choose a business name, appoint a registered agent, file articles of organization, draft an LLC operating agreement, acquire an EIN, and obtain the necessary licenses and permits.
  • The article provides detailed steps for each stage of LLC formation, from name selection to compliance with state-specific requirements.
  • Virginia's corporate tax rate is 6%, reflecting the state's business-friendly environment.
  • Forming an LLC in Virginia is, in my opinion, a strategic move for entrepreneurs seeking personal asset protection and operational flexibility.


How to Form a Virginia LLC?

Thick collection of folders and documents

To form a Virginia LLC, it's essential that you do your research and comply with statutory requirements.

1. Choose the Type of Your Virginia LLC (Mandatory)

When forming an LLC in Virginia, selecting the right type is crucial. Here are common structures, along with their advantages and disadvantages:

  1. Single-Member LLC: Ideal for solo entrepreneurs, this type offers simplicity in management and decision-making. However, it may be viewed as less credible by investors and financial institutions compared to multi-member LLCs.
  2. Multi-Member LLC: Suitable for businesses with multiple owners, providing a collaborative management structure. The downside is potential conflicts between members and more complex decision-making processes.
  3. Manager-Managed LLC: In this structure, one or more designated managers (who may or may not be members) run the LLC. This is beneficial for investors or members not involved in day-to-day operations. The con is that it might lead to less member involvement in business decisions.
  4. Member-Managed LLC: Here, all members participate in managing the LLC, fostering transparency and collective decision-making. However, it can result in slower decision-making and potential conflicts.

Drawing from my experience, choosing the right LLC structure is crucial. Each type has its own tax implications and operational complexities. Your choice should align with your business needs, management style, and growth aspirations.

2. Choose a Name for Your Virginia LLC (Mandatory)

Finding the perfect name for your LLC can be a creative journey. I recall assisting a client in using the Virginia Corporation Commission Business Name Search Tool to ensure their chosen name was unique and compliant with state guidelines. It's a straightforward process, but crucial for establishing your LLC's identity.

The Virginia Corporation Commission Business Name Search Tool will let you know if the proposed entity names are available for registration with the state corporation commission in Virginia or not.

Keep in mind that this search tool only works within the limits of standard legal rules.

In order for the business name to be approved, you have to follow the state naming guidelines, which include the following:

  • Your business name must be distinguishable from other entities registered in the state.
  • It should include the terms “Limited Liability Company, ” “LLC” or “L.L.C”.
  • It cannot contain certain words, such as "Federal," "State Department," or any derivative forms of the words associated with government agencies.
  • Additional licenses and paperwork are required when you intend to use restricted words such as “attorney,” "insurance,” or “bank” in your LLC name [1].

For a detailed step-by-step guide about naming requirements, make sure to visit the State Corporation Commission website.

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3. Select a Registered Agent (Mandatory)

An office worker looking through clipped files

A registered agent is an individual or company responsible for receiving legal documents on behalf of your entity.

You should note that Virginia does not require that a physical person act as your registered agent, so it can be any company or individual who meets all requirements set by Virginia law.

The cost of a Virginia registered agent service varies mainly depending on the location of your business in Virginia. In all probability, you will pay as little as $40 per year up to over $500 for this service. Still, in most cases, it is much lower than that (less than $200).

LLC members could also appoint an owner to act as a registered agent instead of employing the services of a professional. However, the individual should be available during business hours.

The requirements for a reliable registered agent service include the following:

  • Provide a physical address in Virginia to receive service of process
  • Having a registered agent available during normal business hours

4. File Articles of Organization (Mandatory)

An Articles of Organization is a legal document an LLC has to file with the Virginia State Corporation Commission for the company to be recognized as a legitimate business in the state.

The articles should include the following:

  • Contact information 
  • The purpose of the business 
  • Members’ name and address
  • LLC’s management structure
  • The duration of the business
  • Registered office address, agent's name, and physical street address for service of process

The state will not accept incomplete filings, so make sure to include all necessary forms with accurate information regarding your LLC's name, location, and EIN (if applicable), as well as current contact details for at least two founders or members.

Virginia Articles of Organization are filed through Form LLC1011 at a $100 filing fee. You can file Virginia articles online or by mail. Consider asking your registered agent for more information if you're unsure.

Steps to Take After Forming an LLC in Virginia

After successfully establishing your Limited Liability Company (LLC) in Virginia, the journey towards building a thriving business has just begun. This next phase is crucial, as it involves a series of important steps to ensure your LLC is fully operational, compliant with state laws, and poised for success.

Stamping an approved agreement

Drafting an operating agreement is not just a formality. I've seen firsthand how a well-crafted agreement can prevent misunderstandings and clarify member roles and responsibilities.

Every Virginia limited liability company should draft an operating agreement. This document regulates the operating procedures of a business and establishes its internal structure.

All LLC members should sign it, and each member must keep their own copy for reference purposes.

An LLC operating agreement ensures that the rights and responsibilities of all owners are clearly stated with regard to any issues or decisions concerning the management.

The operating agreement should include the following clauses:

  • Name of LLC, its purpose, and structure
  • Time of formation
  • Rights and duties of members
  • Distribution of profits and losses
  • Voting requirements and procedures
Holding a white card

EINs (employer identification number, federal employer identification number, or federal tax identification number) are 9-digit numbers assigned by the IRS to newly formed businesses.

EINs are required to open a business bank account, file a tax return, receive federal benefits, acquire loans, or conduct certain business transactions.

You can request an EIN for your Virginia LLC by downloading an application form from the IRS website and then faxing or mailing it.

You can simply file online through their electronic application form. Both services require no filing fee.

Opening a bank account specifically for your LLC is a step towards professionalism. I always remind my clients about the importance of this step in segregating personal and business finances. The process involves some paperwork, but it’s a crucial move for financial clarity.

Creating a clear financial distinction between your personal and business finances is essential for legal and tax purposes. This distinction not only maintains legal compliance but also elevates your business's professional image, as all transactions are conducted in the company's name, enhancing trust with clients and vendors.

To establish a bank account for your LLC in Virginia, you'll need to compile key documents such as your LLC's Articles of Organization, EIN, and Operating Agreement.

Selecting the right bank involves considering factors like service offerings, fee structures, and location convenience. Additionally, decide which type of account—whether a checking, savings, or merchant account—best aligns with your business objectives.

The opening process generally includes completing an application, making an initial deposit, and arranging online banking for streamlined management. Regular oversight of your account is crucial for precise financial tracking and safeguarding against fraudulent activities.

8. File your Virginia LLC Annual Report (Mandatory)

For LLCs in Virginia, submitting an annual report is a crucial compliance requirement. Unlike the varying requirements in other states, Virginia has its own specific guidelines for this process.

The annual report is essential for keeping the Commonwealth updated with your business's latest information, including changes in management, registered agent details, and the principal office address.

To successfully file your Virginia LLC annual report, follow these steps:

  1. Check the Due Date: Determine the specific annual deadline for submission in Virginia. This information is available through the Virginia State Corporation Commission.
  2. Prepare Required Information: Compile key details such as your LLC’s name, any changes in membership or management, registered agent information, and the principal office location.
  3. Submit the Report: File your report either online via the Virginia State Corporation Commission’s website or through mail, if preferred. Be aware of any applicable filing fees.
  4. Stay Informed: Regularly check for any updates or changes in filing requirements or deadlines with the Virginia State Corporation Commission.

Timely filing of your annual report is vital to maintaining your LLC’s good standing in Virginia.

Neglecting this requirement can lead to penalties or even the dissolution of your LLC, so ensure it is completed accurately and on time.

9. Obtain Business Licenses and Permits

If you want to set up a professional limited liability company in Virginia, you will need to acquire certain business licenses.

Businesses must apply for their Virginia business license with both the State Corporation Commission and the local government where they will be operating.

You may also need additional state-specific licenses, such as General Business License (city), Contractor License, or other business licenses imposed by the county or city where your LLC is registered.

Keep in mind that all members of your PLLC need to be professionally licensed.

However, certain professional LLCs that cover the engineering, landscape, architecture, or design industry only need two-thirds of their members to own a professional license, while some may even need a certificate of authority too.

If you are not sure what type of business license your LLC needs, consult the U.S. Small Business Administration for information about the licenses at the federal level.

You may also contact the Virginia Department of Professional and Occupational Regulations to obtain information about the licenses at the state level.

10. Choosing Your Tax Structure

Top view taxes

LLCs in Virginia are taxed based on the classification that the company opts for.

Limited liability companies are known for their pass-through taxation, meaning profits and losses are not taxed at the federal level but are taxed on their individual returns.

This applies to LLCs taxed as sole proprietorships, partnerships, and S-corporations.

“As a small business owner, you want to avoid double taxation in the early stages. The LLC structure prevents that and makes sure you’re not taxed as a company, but as an individual.”

- Jon Morgan, CEO, Co-Founder & Editor-in-Chief of Venture Smarter

However, if you choose to file your taxes as a C corporation, you are subject to double taxation, meaning corporate profits as well as individual income would be taxed.

The form of tax you will have to apply for will vary depending on the type of LLC.

State taxes include state business tax and state employer tax. State taxes (income taxes) are paid by LLCs that conduct business in a state.

LLCs are required to file Form 2553 with the Virginia State Tax Department—an annual report of income and expenses—if the LLC chooses to be taxed as a corporation.

The corporate tax rate for business entities in Virginia is 6%, as stated in the Virginia Department of Taxation [2].

When it comes to your tax obligations as an employer, you need to pay attention to both federal and state taxes.

Federal taxes include the following:

  • Federal self-employment taxes 
  • Federal unemployment tax (FUTA) 
  • Federal income taxes 
  • Federal excise taxes on regulated products

LLC owners must also withhold Social Security and Medicare taxes from their employee's paychecks and report them to the federal government if they have any.

You must also register with the Virginia Department of Taxation if you are an LLC that sells taxable items or services.

You must report sales tax to the state on a monthly or quarterly basis, and the sales tax will vary according to the transactions your LLC makes.

Benefits and Drawbacks of an LLC in Virginia

Benefits:

  1. Limited Liability Protection: Virginia LLCs provide personal asset protection, safeguarding owners from business debts and liabilities.
  2. Pass-Through Taxation: Earnings are taxed only at the member level, avoiding double taxation.
  3. Management Flexibility: Virginia allows for flexibility in structuring the management of the LLC.
  4. Ease of Formation and Maintenance: Compared to other business structures, LLCs in Virginia have simpler formation and maintenance requirements.
  5. Credibility with Financial Institutions: LLCs often enjoy greater credibility with banks and investors.
  6. Educated Employees: Virginia boasts one of the nation's most highly educated workforces, with nearly 42% of residents holding at least a bachelor's degree [3].

Drawbacks:

  1. Self-Employment Taxes: LLC members might be subject to self-employment taxes on their share of profits.
  2. Limited Growth Potential: Raising capital can be more challenging for LLCs compared to corporations.
  3. State-Specific Regulations: Navigating Virginia’s specific legal and tax obligations can be complex for new business owners.

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DIY vs. Professional LLC Formation

DIY LLC Formation:

Pros:

  1. Cost-Effective: Typically less expensive than hiring professionals.
  2. Personal Control: Complete autonomy over the formation process.
  3. Learning Experience: Gain a deeper understanding of the legal and business aspects of your LLC.

Cons:

  1. Time-Consuming: Requires substantial personal time investment.
  2. Potential for Errors: Risk of mistakes due to a lack of legal expertise.
  3. No Legal Guidance: Lack of professional advice can lead to long-term issues.

Professional LLC Formation:

Pros:

  1. Expertise and Accuracy: Professionals offer legal expertise, reducing the risk of errors.
  2. Time-Saving: Delegating to experts frees up your time for other business activities.
  3. Compliance and Peace of Mind: Professionals ensure compliance with state laws and regulations.

Cons:

  1. Cost: Generally more expensive than DIY.
  2. Less Personal Involvement: Some may prefer a hands-on approach to understand every detail of the formation process.

When choosing between DIY and professional LLC formation, consider factors like cost, time, legal knowledge, and the need for customized solutions.

The right choice depends on your specific requirements, expertise, and the complexity of your business needs.

While DIY may be suitable for straightforward cases and cost-conscious entrepreneurs, professional services offer peace of mind through expert compliance and time efficiency.

FAQs

Do I Need to Register as a Foreign LLC in Virginia?

You need to register as a Foreign LLC in Virginia by filing Form 1052 with the Virginia State Corporation Commission.

Does Virginia Allow Domestication of an LLC?

Virginia allows domestication of an LLC. You need to file Articles of Domestication and Articles of Organization and file both documents with Virginia State Corporation Commission.

At the same time, you have to take LLC dissolution steps in your home state.

Does Virginia Require Workers’ Compensation Insurance?

Yes, Virginia requires most businesses with three or more employees, including the owners, to have workers' compensation insurance. This insurance provides coverage for medical care and wage replacement for employees who are injured on the job or who develop a work-related illness.

References:

  1. https://scc.virginia.gov/pages/Business-Entity-Names
  2. https://www.tax.virginia.gov/corporation-income-tax
  3. https://statisticalatlas.com/state/Virginia/Educational-Attainment

About The Author

Co-Founder & Chief Editor
Jon Morgan, MBA, LLM, has over ten years of experience growing startups and currently serves as CEO and Editor-in-Chief of Venture Smarter. Educated at UC Davis and Harvard, he offers deeply informed guidance. Beyond work, he enjoys spending time with family, his poodle Sophie, and learning Spanish.
Learn more about our editorial policy
Growth & Transition Advisor
LJ Viveros has 40 years of experience in founding and scaling businesses, including a significant sale to Logitech. He has led Market Solutions LLC since 1999, focusing on strategic transitions for global brands. A graduate of Saint Mary’s College in Communications, LJ is also a distinguished Matsushita Executive alumnus.
Learn more about our editorial policy

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