Virginia LLC Registration
A limited liability company, also called an LLC or L.L.C, is a distinct and separate legal entity. It operates under its own name regardless of what industry it’s in and the type of products and services offered. One of the main advantages of creating an LLC is that you, as an owner has “limited liability.”
Once you establish an LLC, you and any partners you have are called members. They also share the benefits of limited liability. This means that under most circumstances you and other members aren’t personally liable for debts and liabilities that occur under the LLC. For example, if an LLC goes into bankruptcy, its members aren’t required to pay the LLC’s debts.
Another benefit is that LLCs aren’t bound by the same tough rules corporations are. Whether you solely own the LLC or have hundreds of employees, your LLC continues to protect you while you grow and expand the company. Now that you’re ready to learn more about how to start an LLC in Virginia, here’s what you need to know.
How to Form an LLC in Virginia
Forming an LLC in Virginia requires completing five steps. The are the following steps:
1. Conduct an LLC Name Search
2. Pick a Registered Agent
3. Create Your Articles of Organization
4. Complete an Operating Agreement
5. Obtain an EIN for Your LLC
Conduct an LLC Name Search for Your Business
A business name is any type of name, other than your name, under which your company conducts business. Determining your business name is one of the first decisions you’ll make as a business owner. Although, you may simply conduct business under your own name, most people opt to create a distinctive business name. In both situations, Virginia requires you to have a distinct name not used by someone else when setting up an LLC.
To avoid picking a name that is already owned by another business, the Commonwealth suggests you conduct a Virginia LLC search. The search is a great idea because it helps you avoid getting your LLC rejected because your name is the same or similar than an existing business name.
This search is similar to conducting an online search on Yahoo or Google. However, you’ll use the Virginia business name database. Input your name into the search box, then hit “Check Name.” The results will show whether the name is available. If it is not available, you’ll see the name listed and its owner. Once you select a name that is available, you can go to the next step.
It’s important to note that when you are selecting a business name, it must end with an LLC or L.L.C. in the title. The Commonwealth requires you to indicate that your company is an LLC. You’re also limited in what you can include in your name. You can’t include titles such as bank, university or any type of government agencies such as the FBI. You’re also not allowed to use words such as “incorporation”, “corporation”, “corp.” or “inc.” in your LLC name.
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Create Your Articles of Organization
Articles of organization is a legal document used to establish your LLC in Virginia. Within the document is information describing the duties, powers, rights, liabilities and any other obligations for each LLC member and between each LLC member. The articles of organization should include:
1. Your LLC’s business name
2. Your LLC’s address
3. Each name and address of your LLC’s members
4. The names and addresses of all of your LLC managers, directors and organizers
5. Name of your LLC’s registered agent
6. The statement of purpose for your LLC
In Virginia, you’re required to pay a fee when submitting your articles of organization. You are also required to submit the document with original signatures. The Commonwealth doesn’t accept photocopies of your articles of organization. Once filed, your articles of organization it is reviewed by Virginia. If approved, your LLC is now active. Your LLC is now bound by the laws under which it was formed. Thus, the document is actually your LLC’s charter.
The Commonwealth will send you a certificate and receipt about 10 to 15 business days after the document is approved. The certificate is your confirmation of your LLC registration. Your receipt is proof of your payment. It also includes your LLC’s State Corporation ID number (SCC ID). It is your number and unique to your LLC. Thus, you’ll need this number every time you pay your annual registration fee and file your taxes. The annual registration fee is discussed later in this article.
You won’t receive the certificate and receipt unless you’re the registered agent. Virginia sends this information only to your registered agent. Make a copy of your articles of organization for your records before sending it to the Commonwealth. It doesn’t return the document to your registered agent.
However, your articles of organization can be rejected by the Commonwealth. If there is an issue with the legal document, the Commonwealth will send you a letter and instructions on how to resolve the issue. For example, your articles of organization can be rejected for not having the proper signatures or information in it.
Complete an Operating Agreement
An LLC operating agreement Virginia is a legal document which allows you to structure your working and financial relations with your LLC co-owners. You and your co-owners will outline how much each of the business you own (percentage of ownership), share of the profits and share of the losses. Also outlined in the operating agreement is each co-owners rights and responsibilities.
Another important detail in an operating agreement is how the LLC will be dissolved and what happens to a member’s share if they leave or die. You should include what happens if new co-owners buy into the LLC.
Virginia doesn’t require you to file or even have an operating agreement to form your LLC. However, it is a great idea to have one. It doesn’t matter if you are the sole owner of the business or you have co-owners. The reasons an operating agreement is needed are simple:
- Help you protect your LLC’s limited liability status. The main reason to create an operating agreement to make sure the courts keep your personal finances and LLC finances separate. This is more useful in a one-person LLC. Without an operating agreement, your LLC may appear to be more of a sole proprietorship. With a sole proprietorship, your finances can be co-mingled. This means the court can require you to pay your LLC’s debts if it appears to be a sole proprietorship.
Another issue is piercing the corporate veil. The term refers to using money from your LLC for personal reasons. This will end your LLC in Virginia because you can’t combine money in this way when you have an LLC. When the Commonwealth ends your LLC, you can no longer enjoy the benefits of having limited liability. Thus, having an operating agreement keeps the LCC separate from your personal finances.
- Ensure your business is following its own rules. Virginia has laws the outline basic operating rules for an LLC. Some of these rules are used by your business unless you have an operating agreement with different rules. Virginia’s basic operating rules are called default rules. When you have an operating agreement, you’re allowed to include and/or exclude default rules in your LLC. You have more latitude in what your LLC rules are.
- Prevents any management or financial and management misunderstandings that can arise. Co-owned LLCs must document their decision-making protocols, and profit-sharing decisions. They must document their procedures for acquiring new co-owners and any co-owner departures. Without an LLC Virginia operating agreement, you and your co-owners aren’t equipped to settle any misunderstandings that arise of management and finances. As a result, the Commonwealth’s operating rules must be followed.
Obtain an EIN for Your LLC
An Employer Identification Number (EIN) is issued by the Internal Revenue Service (IRS) to your LLC Virginia. The EIN is the same as a Social Security Number for an individual. It assists the IRS in identifying your LLC for tax and tax filing purposes.
An irs tax id is required for your LLC if you want to open a bank account under your LLC’s name, and handling employee payroll. If your LLC needs Commonwealth permits and licenses, you’ll need an LLC for that too.
The EIN allows you to obtain a business credit card and lines of credit for your LLC. You’ll use the number to file taxes at the local, state and federal levels.
Applying for an EIN is free and can be done online or via mail. You must go to the IRS website. You’re required to complete some questions about your LLC before the IRS gives you the number. The same questions are asked on the paper form of the EIN application.
Please note, if you decide to complete the application online you will get your EIN immediately. However, the IRS will only provide EINs during the weekdays and normal business hours. Thus, you and/or your employee should obtain your LLC’s EIN during the week.
Another thing for you to remember is that if you don’t have an SSN or ITIN, you can still obtain an EIN. You must complete the paper Form SS-4 to do so. The IRS won’t allow you to get one online.
You also want to wait to receive approval for your LLC prior to obtaining an EIN. If the Commonwealth rejects your LLC, the non-existent LLC will have an EIN you can’t use.
Other Steps You Should Take to Form Your LLC
Some additional steps you take to form your LLC will depend on your industry and type of business you have. If you are selling goods, collecting sales tax or have employees, you’ll need to register your LLC with the Virginia Department of Taxation. Register online via the VATAX online or the Form R-1 paper form.
Obtain the correct permits and business licenses needed for your LLC. The type of business licenses and/or permits will depend on the type of business you have like a restaurant or construction company. Check with the Commonwealth to determine the type of licenses and/or permits needed and the fee schedule.
Get business insurance for your LLC. Business insurance helps minimize the risk of devastating financial losses because of uncontrollable events. The most common types of business insurance are general liability insurance and professional liability insurance. General liability insurance is a type of insurance policy that protects your LLC from lawsuits.
Professional liability insurance is for professional service providers. Examples of professional service providers include accountants and consultants. The policy covers any claims of business errors and/or malpractice.
Setting up a Foreign LLC in the Commonwealth
An LLC formed outside the Commonwealth can operate in Virginia. However, it must register with the Virginia State Corporations Commission as a foregin LLC. Being a foreign LLC just means that your LLC was originally formed in another state or territory.
To form a foreign LLC, you follow the steps as a traditional LLC such as complete a Virginia LLC lookup to search for similar business names. Your registered agent must be a Virginia resident who is either a manager, member, director or general partner of the LLC. Also, the LLC is required to be a corporation authorized to conduct business in the Commonwealth.
The Commonwealth requires all foregin LLCs to file an Application for a Certificate of Registration to Transact Business in Virginia as a Foreign Limited Company. The application does have a
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Get Help Forming Your Virginia Limited Liability Company
After your LLC is active in the Commonwealth, you are obligated to pay an annual fee to keep the LLC going. The fee is due before or on the last day of the month in which you registered your LLC. Your registered agent will receive a mailed notice from the Virginia Corporations Commission regarding the fee. It is called a notice of the assessment. If the fee isn’t paid by the required date, your LLC will be assessed a penalty. The fee can be paid via postal mail or online.
In Virginia, an LLC is a legal structure which allows you to protect your personal assets such as your bank account, home or car in the event your company is sued. You can also use your LLC Virginia to solely operate a business or hold assets such as real estate. You can also do both of those things. The benefits of an LLC are great. However, forming the LLC can be a tough task without the help of a professional service.
One simple mistake can cause Virginia to reject your LLC during the formation process. This is a major setback when you’re trying to grow your business. Besides, you have too much on your list of things to do to worry about personally forming your Virginia LLC. Focus on your starting your business such as obtaining capital. Let a professional LLC formation service make the process stress free and easier for you. Our Washington LLC guide is another great resource to check out.