How to Create an LLC in Virginia
An LLC represents the short form of the term Limited Liability Company. In the United States, it is a business structure in which the owners are not personally liable for the company's debts or liabilities.
This legal entity helps to protect business owners from the business's debts and liabilities.
Here is an overview of how to start an LLC in Virginia:
- Choose an original LLC name and make sure it is available
- Assign a Registered Agent
- File the Articles of Organization and pay the formation fee
- Get an EIN number if you plan to hire people
- Remember to pay the annual fees
Choose a Name for Your LLC
This is the most fundamental stage of forming an LLC in Virginia. Be sure that your LLC business name is unique and easily brandable. The State Corporation Commission of Virginia provides the following rules for the naming of an LLC:
- The name must include the phrase "Limited Liability Company", or "Limited Company", or its abbreviations (LLC, LC, L.L.C, or L.C.)
- The name must be distinctive from the names of other business entities which have been filed with the Virginia State Corporation Commission. In order to check for the availability of a name, it is important to check with the Virginia business name database.
- The name cannot include words that could result in the confusion of the LLC with a government agency for example the State Department, Treasury, etc.
- For licensed individuals such as doctors, lawyers, and institutions such as banks, universities, additional paperwork is required as these are considered restricted words.
Virginia Business Name Search
Before filing the LLC formation paperwork be sure to do a business name search for your chosen business name.
The Secretary of State in Virginia offers a free service that you can use to look up a company name online.
LLC Name Reservation
A distinguishable business entity name remains available for use on a first-come, first-served basis, but you can reserve your LLC name if needed.
An LLC name may be reserved for 120 days by filing an Application for Reservation or for Renewal of Reservation of a Business Name Entity Name. The filing fee is $10.
Virginia DBA (Trade Name)
It is not compulsory to use the LLC'S official legal name in the registered Articles of Organization when doing business in the real world.
Instead, it is acceptable to use a trade name also known as a fictitious business name, or DBA (abbreviation for "Doing Business As"), or trade name.
In the State of Virginia, it is compulsory to file for a certificate of assumed or fictitious business name with the Virginia State Corporation Commission as per the rules from January 1st, 2020.
Previously, the filling was done under the clerk's office of Previously the circuit court in the county or city where the LLC ordinarily conducts its business. The filing fee is $10.
Once the above procedure is completed the next step involves choosing a registered agent.
Nominate a Registered Agent
It is mandatory to appoint a Virginia Registered Agent for the LLC. A registered agent is an individual or business entity responsible for receiving important tax forms, legal documents, a notice of lawsuits, and official government correspondence on behalf of the company.
It is required that the registered agent must be a resident of Virginia, or a corporation, or a registered agent service with a physical address in Virginia and authorized to transact business in Virginia.
It is also acceptable to elect an individual within the company or act as your own registered agent.
The downside to this is that, once the Articles of Organization are filed with the State Corporation Commission and your LLC is officially formed, your personal information will be public record. This may not be ideal for you or your business.
Professional registered agent service is a convenient way to manage government filings for your Virginia LLC and keep your personal information private.
Benefits of a Registered Agent Service
There are certain benefits when using a professional Registered Agent service which includes:
- Convenience. Using a professional registered agent service is an affordable way to manage all government filings and legal notices for your Virginia LLC.
- Lower risk. This way you can also avoid any fees or further legal trouble caused by missing or misplacing an important document or notice.
- Privacy. If you were thinking of using your home address, but would rather keep it off public records, you can hire a Registered Agent that will allow you to use their address throughout your Articles of Organization.
A Registered Agent is an individual or a business entity that has been designated by the LLC to receive service of process notices, government correspondence, and compliance-related documents on behalf of the LLC. The registered agent must be residing in Virginia.
LLC's Formation Documents
The articles must include:
- the LLC's name;
- the name and address of the LLC's registered agent;
- the LLC's initial principal office address, and
- signatures of the LLC's organizers.
How to File the Articles of Organization
The Articles of Organization may be filed online at the Virginia Clerk's Information System webpage, or by regular mail.
As for in-person filing, you are required to download the Articles of Organization form, print it out, fill in and send to the office of the State Corporation Commission:
State Corporation Commission
P.O. Box 1197
Richmond, VA 23218-1197
Visit the Secretary of State website for the most recent information.
The filing fee of $100 is payable to the State Corporate Commission of Virginia.
Filing the Articles of Organization takes one week by mail and is immediate online following payment.
See how much it costs to form an LLC business entity in other US states.
There are still a few steps that are detailed below until the business is ready to operate at full capacity.
Create your Operating Agreement
An LLC Operating Agreement is not compulsory in Virginia but is highly recommended. This is an internal document that outlines how the LLC will be run.
It sets out the rights and responsibilities of all parties involved in the business, including procedural processes and how the LLC will be managed.
A well-made operating agreement ensures that all business founders are on the same page and reduces the risk of future conflicts.
Some of the areas that are likely to be covered under the agreement include:
This dictates how many members the LLC had during formation and how the ownership has been divided. The structure of ownership can either be equal or different members are assigned different levels of ownership.
Management & voting
This provides whether the LLC is managed by its members or appointed manager. The voting rights are also stipulated within which under normal circumstances, each member has one vote. However, the members can also decide to give other members more voting power.
The amount of money each member has invested in the business. This is also the starting point to establish an approach to raising additional funds in the future.
How profits or losses will be distributed among the owners.
Changes to membership structure
How roles and ownership will be transferred if a member leaves the company.
If at some point the founders of the LLC decide to terminate the company, you should officially dissolve it. Outlining the hypothetical process of dissolving your business can be very helpful.
What if I Don't Have an Operating Agreement?
In the absence of an operating agreement, state LLC law will govern how your LLC operates. If the LLC is subject to legal action, the court will rule according to the default Virginia LLC law.
This may not be what's best for you or the future of your business. It is good to keep that situation in mind and take preventative measures by drafting and finalizing an operating agreement for your LLC.
Obtain an EIN Number
An Employer Identification Number (EIN) is required to open a business banking account, hire employees, and grow your business.
An EIN is the abbreviation term for Employer Identification Number assigned by the Internal Revenue Service (IRS) to help identify businesses for tax purposes.
It is essentially a Social Security number for a business. Obtaining an EIN is easy, free, and can be done online from the IRS website.
If the LLC has more than one member, it must obtain its own EIN, even if it has no employees.
If the LLC only has one member, you must obtain an EIN for it only if it will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship.
The IRS also requires that sole proprietorships get a new EIN when converting to an LLC.
EIN stands for Employer Identification Number. EIN is a unique nine-digit number assigned by the IRS to help identify your businesses for tax and filing purposes. An EIN is sometimes referred to as a FEIN (Federal Employer Identification Number) or FTIN (Federal Tax Identification Number).
Annual Registration Fee
All domestic and foreign LLCs that have a certificate of authority to do business in Virginia are required, by law, to file an annual report with the State Corporation Commission each year after the year in which it was formed.
There is no fee associated with the filing of an annual report. However, the annual registration fee of $50 must also be paid to remain active.
Annual registration fee may be paid online at the State Corporation Commission website or by mail.