Forming a business in Virginia is a fairly straightforward administrative process, but it's easy to miss a step that causes problems later. Here's a general overview of what's involved.
1. Choose Your Entity Structure
Most new businesses in Virginia choose between an LLC and a corporation, depending on ownership structure, tax preferences, and plans for raising capital. This decision affects everything that follows, so it's worth making deliberately rather than by default.
2. Choose and Check Your Business Name
Your entity name must be distinguishable from other business names already on file with the Virginia State Corporation Commission (SCC), and typically must include an entity designator like "LLC" or "Inc." It's also worth checking trademark availability and domain name availability at this stage, not just SCC name availability.
3. File Formation Documents With the SCC
LLCs file Articles of Organization; corporations file Articles of Incorporation. These filings establish your business as a legal entity and are filed with, and approved by, the Virginia State Corporation Commission.
4. Appoint a Registered Agent
Virginia requires every LLC and corporation to maintain a registered agent, a person or company with a Virginia address who can accept legal documents on the business's behalf.
5. Create Governing Documents
An LLC should have an operating agreement; a corporation should have bylaws and hold an organizational meeting to appoint directors and officers and issue stock. These documents aren't filed with the state, but they govern how your business actually operates and are frequently requested by banks and investors.
6. Get an EIN and Handle Tax Registrations
An Employer Identification Number (EIN) from the IRS is generally needed to open a business bank account, hire employees, and file taxes. Depending on your business, you may also need to register with the Virginia Department of Taxation and obtain local business licenses.
7. Open a Business Bank Account and Keep Finances Separate
Commingling personal and business funds is one of the fastest ways to undermine the liability protection your entity is supposed to provide. A separate business account, used consistently, is a simple but important habit from day one.
8. Understand Ongoing Compliance
Virginia LLCs and corporations must file an annual report and pay an annual registration fee to remain in good standing. Missing these deadlines can result in the SCC administratively dissolving the entity.