Create an LLC in Vermont

Selecting a business entity is a crucial decision for founders when starting a new company. For businesses with multiple founders, creating an LLC is often the ideal choice for several reasons.

An LLC is a straightforward business structure that provides legal protection for business owners by separating personal assets from business debts.

Additionally, LLCs frequently benefit from a lower tax rate compared to corporations. However, the process of forming an LLC can be complex, depending on the location, with differences in the formation process, filing fees, and ongoing legal obligations from state to state.

In Vermont, the standard process used in most U.S. states is followed when forming an LLC. Once an LLC is registered in the state, it must submit annual reports each year.

To prevent errors during the filing process, follow the steps outlined to start an LLC in Vermont.

Before registering your LLC, you will need to select a name to include in your articles that complies with Vermont's naming requirements. Here are the most important requirements to keep in mind:

• Your business name must include the words Limited Liability Company, LLC, or L.L.C.
• Your name must be unique and different from any existing business in the state. You can conduct a search on the Secretary of State's website to check if a particular business name is already in use. For name availability in Vermont, please check this link.
• The business name cannot include words used to name a government agency such as State Department, CIA, FBI, Treasury, and others.
• Certain restricted words like bank, lawyer, attorney, credit union, etc., may require additional documentation and licensure paperwork.

Here is a comprehensive list of Vermont's LLC naming rules.

Next, it is required to choose a Vermont registered agent - an individual or business that accepts legal and state documents on behalf of your LLC. In Vermont, all LLCs are required to have a registered agent, and you must have their name and address before filing your Articles of Organization. Discover why professionals opt for a registered agent service.

What does a registered agent do?

Requirements for a registered agent in Vermont are stipulated in 11 V.S.A. § 4007, and at a minimum, your registered agent must:

• Have a physical address in Vermont, and P.O. boxes are not allowed.
• Maintain regular business hours.
• Accept legal mail and state documents on behalf of your LLC and deliver them to you promptly.

Can you serve as your own registered agent in Vermont?

Indeed. However, if you act as your registered agent, you must list your name and address on the Articles of Organization. Moreover, you will need to maintain regular business hours to accept critical mail in person.

Can I change my registered agent after forming my LLC?

Yes, you can change your registered agent in Vermont by filing a Change of Registered Agent form with the Secretary of State, Corporations Division. A $25 filing fee applies.

The next step in starting your Vermont LLC is to file your Articles of Organization (Form LLC-1(D)) with the Secretary of State, which costs $125.

To file your Articles of Organization, you'll need to provide some information, including:

• your chosen business name
• the name and contact information of your registered agent
• your LLC's address
• the type of LLC you're forming
• the end of your proposed fiscal year
• a business description using your NAICS code, and
• the names of the LLC members.

Member-managed or manager-managed?

When filing your Articles of Organization, you'll need to specify whether your LLC will be member-managed or manager-managed.

Member management is suitable for smaller businesses with only a few owners, while manager management can be helpful if some members prefer to be passive investors. Vermont allows both types of management, and you can always file Articles of Amendment in the future if you need to make changes.

Remember, no matter which management structure you choose, you only need to file your Articles of Organization once. If you do need to make changes later on, you can file Vermont Articles of Amendment with the state, along with a fee.

While not required by law to form an LLC in Vermont, it is highly advised to create a comprehensive operating agreement to avoid legal and operational issues in the future.

The operating agreement should outline the LLC's business structure, specify the individual duties and obligations of LLC members, and establish how the LLC will be managed.

Without an operating agreement in place, an LLC may face significant challenges in defining and enforcing the roles of its members.

To obtain an IRS Employer Identification Number (EIN) for your LLC, you must apply for one if your LLC has more than one member, even if it has no employees.

However, if you form a one-member LLC and it will not have employees, or you elect to have it taxed as a sole proprietorship (disregarded entity), you are not required to obtain an EIN.

You can apply for an EIN by completing an online application on the IRS website at no cost.

Vermont LLCs and Foreign LLCs authorized to do business in Vermont are required to file an annual report with the Vermont Secretary of State Corporations Division.

The due date for this report is three months after the end of the LLC's fiscal year. For example, if your fiscal year ends in December, your annual report must be filed between January 1 and March 31.

You may file the report online or by postal mail. To file by postal mail, you must complete the online filing process and choose this option. The filing fee for a Vermont LLC is $35, and for a foreign LLC, it's $140.