How to start a business in Virginia

If you're looking to launch your startup in the Old Dominion State, read this first
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Edward Kost @EdwardKost
Technical Co-pilot
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Everything you need to know to start your business in Virginia

Starting a business is one of the most exciting and challenging tasks you'll ever undertake. Unfortunately, many brilliant entrepreneurs are confused about which business structure to launch with. But don't worry. We'll walk you through the different structures, and give step-by-step instructions on each.

Startup ecosystem in Virginia 

To give you an understanding of the startup ecosystem in Virginia we've aggregated some important statistics in the infographic below:

Virginia Startup Stats inforgraphic

 

As you can see, Virginia is very accommodating to ambitious startups!

Planning your business in Virginia 

After validating demand for you business with high quality market research, the next step is to create a business plan.

It's important for you to create your business plan prior to setting up your business. Not only will a business plan help you logically plan the formation of your business, but it may also help you secure investor funding before you spend any of your own money!  

Here's how to structure a business plan:

  • Value proposition

  • Market opportunity

  • Target market

  • Competitor analysis

  • Funding required

  • Sales and marketing

  • Financial projections

  • Milestones

  • Your team

Thankfully, we've written an in-depth guide to crafting a winning business plan.

Structuring and registering your business in Virginia

There are 7 main business structures, and all are applicable to both brick and mortar businesses and e-commerce businesses:

  1. Sole Proprietorships

  2. Partnerships

  3. C-Corporation

  4. S-Corporation 

  5. B-Corporation

  6. Limited Liability Company (LLC)

  7. Nonprofit

If you're uncertain about which structure best suits you, read our in-depth guide on structuring your business for success.

Procedures for all business types in Virginia 

Regardless of which the business structure you choose, you'll need to follow a few key steps:

  1. Get your EIN

Sole Proprietors and Partnerships that don't plan on hiring employees don't need an Employer Identification Number (EIN), but it is mandatory if you hire employees and also if you choose a business structure such as an LLC, Corporation or Nonprofit).

You can apply for an EIN online.

  1. Register a business name with the state of Virginia

If you want your business to have a different name than your given name, you'll need to register an "Assumed Business Name" in the county where your business is located.

Before registering a business name, you should check its availability.

  1. Get your licenses and zoning permits

Certain business in Virginia require a license in order to operate legally. Certain business locations also require a special Zoning Permit for commercial. This is especially important if you plan to run your business from home.

Check with your local county office to see if your business locations requires a permit to operate.

  1. Open business banking accounts

This isn't necessarily a requirement, but it's important to keep business transactions separate from personal transactions.

  1. Submit New Hire Reports

All new employees need to be reported to both the IRS and the state of Virginia.

Tax details for all businesses in Virginia

 

There are two different tax registrations all new businesses in Virginia must complete:

 

Some businesses require further registrations. For more details, refer to Virginia Tax.

All of the federal tax forms pertaining to every business type can be accessed from the IRS website.

Domestic vs Foreign business in Virginia

Virginia businesses headquartered outside of the state are classified as "foreign." A domestic business is one that is headquartered in Virginia.

Now let's discuss the processes of establishing each individual business structure.

How to start a Sole Proprietorship in Virginia

A Sole Proprietorship is the simplest business structure. Most "solopreneurs" choose this structure because it requires very few steps and very little money.

If you've followed all of the general steps we outlined above, there's nothing more you need to do to launch a Sole Proprietorship in Virginia.

It's important to note that Sole Proprietors integrate their personal assets with the business, which makes them personally liable if the business fails or gets sued. This is why it's essential for all Sole Proprietors to insure themselves.

If your customers risk financial loss while transacting with your business, it might be better for you to choose a business structure with a higher level of personal asset protection, such as an LLC or Corporation.

How to start a Partnership in Virginia 

A Partnership is the simplest business structure that accommodates two or more business owners. Just like Sole Proprietors, Partnership members are personally liable for all business debts.

There are three different forms of partnerships in Virginia:

General Partnership (GP)

This is the standard form of partnership. All general partners share the profits as well as all business debts. All general partners also take a role in the day-to-day business operations.

To form a General Partnership, you need to file a Statement of Partnership Authority to the Commonwealth of Virginia State Corporation Commision

Limited Partnership (LP)

A Limited Partnership is a structure including at least one general partner and one limited partner. Limited partners, as the name suggests, limit their personal liability for the business. They also don't take a role in the day-to-day operations of the business, but operate more as investors.

To form a Limited Partnership, you need to submit a Certificate of Limited Partnership.

Foriegn Limited Partnership should submit this form.

Limited Liability Partnership (LLP)

In a Limited Liability Partnership structure, each member is not held responsible for any negligence or fraud committed by other members.

Limited Liability Partnerships need to submit a Statement of Registration.

Foreign LLPs should submit this form.

No matter which partnership structure you choose, you'll also need to follow these steps:

Create a Partnership Agreement 

Though this isn't a state requirement, it is highly recommended to keep all Partnership members aligned with the vision of the business.

A partnership agreement outlines all the responsibilities of each member and the rules and procedures that will govern the business.

You can create this agreement yourself or save time by using a pre-made template.

How to form an LLC in Virginia

An LLC provides superior protection to the personal assets of its members. An LLC is also not limited to individual ownership. Any person or company globally could launch an LLC in Virginia.

LLCs can either be run by managed by members or a designated manager.

Naming an LLC in Virginia 

All LLCs in Virginia need to end their business name in any of the following suffixes:

  • LC

  • LLC

  • L.L.C

  • L.C

You can check the availability of your proposed business name on the Virginia business name database.

Appoint a registered agent 

All LLCs in Virginia need to appoint a registered agent.

A registered agent is responsible for accepting all mail on behalf of a business and then forwarding it to each business owner in a timely manner.

All registered agents in Virginia must meet the following criteria:

  • Be located in the state of Virginia

  • Accept mail via a residential or business address (not via a PO BOX).

  • Guarantee availability during business hours.

  • Guarantee the timely forwarding of all accepted mail to respective business owners. 

Should you be your own Registered Agent in Virginia?

You can legally appoint yourself or a cofounder as a registered agent; however, this is not recommended because as busy business owners, you can't guarantee your availability during business hours to accept mail.

Alternatively you could appoint a friend, relative or any of the following professional registered agents in Virginia:

Submit LLC Articles of Organization in Virginia 

LLCs are officially formed in Virgina upon the Approval of their Articles of Organization form. 

You can either submit your Articles of Organization online or download the form and mail it to:

Clerk of the State

Corporation Commission

PO Box 1197

Richmond, Virginia 23218-1197

Create an operating agreement

An operating agreement sets out all of the rules of operations of the business. You can either create one yourself or use an online template.

You're not required to submit your LLC operating agreement with the State of Virginia. This is an internal document purposed to keep all of the members of your LLC united in their business development pursuits.

Host initial Corporate meeting

This is an opportunity for all members to create bylaws, appoint first term directors and issue stock certificates to members.

Meeting minutes should be recorded during this meeting, as well as all subsequent corporate meetings, and stored in a Corporate Records Book.

A Corporate Records Book aggregates all important company documentation. It should be readily accessible to all members in your principal office location.

Foreign LLCs in Virginia 

All foreign businesses that wish to establish an LLC in Virginia need to submit this form to the Secretary of State, via the following mailing address:

State Corporation Commission

Clerk's Office

P.O. Box 1197

Richmond, VA 23218

Foreign LLCs need to also include a Certificate of Good Standing from their home-based Secretary of State in order to verify their legal formation and acceptable business operations.

Virginia businesses that wish to establish a foreign LLC in another state can request a Certificate of Good Standing online

Pay annual LCC registration in Virginia  

LLCs in Virginia need to pay an annual registration online in order to keep their business active.

How to form a Corporation in Virginia

The most advanced business structure you can choose in Virginia is a Corporation structure. It provides its members with a superior level of personal asset protection.

A Corporation can be very challenging to establish, and you might want to seek out a qualified attorney to help establish your Corporation effectively.  

There are three different types of Corporation structures in Virginia:

C-Corporation

This is the default form of a Corporation structure. C-Corporations can have unlimited members and issue all classes of stock. They are, however, subject to a double taxation process at both the corporate and the personal income level of their members.

S-Corporation

To choose an S-Corporation status, you need to submit Form 2553 with the IRS.

S-Corporation can only distribute one class of stock and are limited to 100 shareholders (members).

B-Corporation

B-Corporations (or Benefit Corporations) are a relatively new form of Corporation in Virginia. B-Corporations incorporate the community focus of a nonprofit without the obligation of its members having to relinquish company profits.

For more details on how to establish a B-Corporation in Virginia refer to this document.

Naming your Corporation in Virginia 

Corporation names in Virginia must end with any of the following suffixes:

  • Corporation 

  • Company

  • Incorporated

  • Limited

  • Corp

  • Co

  • Inc

  • Ltd

Submit Corporation Articles of Incorporation in Virginia 

The approval of the Articles of Incorporation by the Virginia State Corporation Commission officially registers your Corporation.

This document can also be submitted online.

Appoint a registered agent for your Corporation in Virginia 

The process of appointing a registered agent for Corporations is the same as the process for LLCs.

Host initial Corporate meeting

The following procedures should be completed during this meeting:

  • Initial directors that will serve during the first term should be appointed

  • All members should agree upon a set of laws that will govern the Corporation (bylaws) 

  • Stock certificates should be distributed to members

  • Finalization of important business purchases

  • Meeting minutes should be recorded and stored in a Corporate Records Book alongside all other important business documentation.

Submit annual Corporation reports

Corporations in Virginia need to ensure that all of their business information is kept up to date with the state by disclosing its most current contact records in an annual report.

Annual reports can be submitted online via the SCC eFIle portal or by mail by requesting a pre-printed annual report.

Foreign Corporation in Virginia 

Out of state businesses wishing to establish a Corporation in Virginia must appoint a Virgnia registered agent and also file an Application for a Certificate or Authority to Transact Business in Virginia. This application can be submitted online.

How to form a Nonprofit in Virginia

If your passion for helping others exceeds your passion for collecting company profits, a nonprofit structure is a great business structure to choose.

Before launching your nonprofit you should do some research to find out whether your prospective community solution is currently being implemented in Virginia by another nonprofit. If this is the case, you might want to consider partnering with them rather than establishing yourself as a competitor.

Naming your Nonprofit in Virginia 

Nonprofits in Virginia don't need to add a particular suffix to their name. Just be sure your nonprofit's name is available by searching the Virginia State COrporation business name database.

Appoint a registered agent in Virginia 

The process of appointing a registered agent for nonprofits is the same as the process for LLCs above.

Submit Nonprofit Articles of Incorporation in Virginia 

In order to register your nonprofit with the state of  Virginia you'll need to submit the Nonprofit Articles of Incorporation. If you plan to also apply for Federal tax exempt 501(c)(3) status, you must include specific IRS standard statements in your Articles of Incorporation. For more guidance, refer to the section "Articles of Organization" on page 25 of this IRS document.

Host initial Corporate Meeting

The initial Corporate meeting is an opportunity for all nonprofit members to discuss any important topics prior to launching the business.

During this meeting all members should work together to create the bylaws that will govern the business and appoint initial term directors.

Apply for nonprofit tax exemption in Virginia 

To obtain a 501(c) tax exemption with the IRS, nonprofits in Virginia need to file Form 1023 with the IRS. Smaller nonprofits may be eligible to submit the simpler Form 1023-EZ.

Sales and Use Tax exemption with the State of Virginia can be filed for by submitting form NP-1

Register for fundraising activities in Virginia

Prior to commencing any fundraising activities, nonprofits need to register with the State of Virginia to demonstrate their continual nonprofit compliance in all financial operations. 

Certain nonprofit organizations are exempt from this registration process. 

Protecting your business in Virginia 

Some recommended insurance policies for your startup in Virginia are:

Business owners policy (BOP)

Business owners policy insurance is a combination of both business liability insurance and business property insurance. It protects your business from any loss of income that may result from disasters, theft, fire, etc.

Commercial property insurance 

An important policy that protects all of your business inventory and other business belongings.

General liability insurance 

This policy protects your business from any advertising copyright infringements, property damage, personal injuries and more.

Business income insurance 

This insurance policy supplements any lost income while your business recovers from disruptive damage.

Workers compensation insurance

This policy offers compensation to any employees injured at work.

Helpful resources for businesses in Virginia

Virginia Tax

Online portal for filing State tax forms and also a library of helpful business resources

Commonwealth of Virginia 

Virginia business news and startup resources

Small Business Development Center

This is a great resource for small business news, tips and advice, market research and industry-specific links.

Small Business Administration

The US Small Business Administration offers advice, advocacy and instruction for small businesses across the country.

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