The procedures for starting a business vary by type of business and location. The article outlines how to start a Virginia LLC or corporation if you are an active member of its management, but other scenarios exist.
If you want to avail a business license VA, here are the basic requirements for forming an LLC or a corporation in Virginia.
To form an LLC, you must file Articles of Organization with the Virginia State Corporation Commission (SCC), which will entitle you to do business in Virginia. The filing fee is $125. You may be required to post a surety bond if your company is a guarantor.
A corporation must file Articles of Incorporation with the Virginia SCC (there is no fee) and pay a franchise tax of $100. Franchise taxes are due on or before June 1 for the previous year’s income; however, your first renewal is due at the end of your first year.
You are required to keep an office in Virginia, but the state imposes no other formal requirements.
LLC Requirements for Management
You must have at least one person residing in Virginia who is active in the management of your LLC. The manager may be a sole member (owner). If they are not the owner, you must list them as “members.”
They will be responsible for the filing of articles and other documents, as well as any notices with the SCC. You must have a registered agent in Virginia who is available during regular business hours to accept papers on behalf of the LLC.
Virginia does not require managers or members to hold an actual meeting to take action. The LLC is set up under a “single-manager” ruleset similar to a sole proprietorship or general partnership where all authority is vested with one person.
The only way management can be changed would be by an amendment of the articles or operating agreement (if either exists), but many Virginia LLCs do not have either.
An LLC must file its articles of organization within 120 days to continue doing business in the state after two years.
Corporate Requirements for Management
A corporation must have one “director” (president, vice president, or secretary) who is an active member of its management. Directors are paid a salary that is not tied to the company’s profits.
They may be reimbursed for expenses related to their duties as a director and can be awarded stock options if approved by the board of directors.
A corporation must have at least one “officer” (president, vice president, treasurer, or secretary) who is an active member of its management. Officers are paid a salary not tied to the company’s profits. They may be reimbursed for expenses related to their duties as an officer and can be awarded stock options if approved by the board of directors.
Corporations Must Hold Director and Officer Meetings
Corporations must file their articles of incorporation within 120 days to continue doing business in the state after two years.
LLC Formation vs. Corporation Formation
In an LLC, all members have to be active managers and take active roles in the company’s day-to-day management (i.e., they do not need to hold a position as an officer or director) to get a business license in VA.
Members can make decisions by unanimous agreement or majority vote.
Corporations require one person to be an active director. The shareholder’s vote on all directors at its annual meeting (at least one person must be physically present).
Directors make decisions by majority vote. Officers are elected yearly and can set their salaries.
An LLC is usually taxed as a disregarded entity, meaning all members are recognized for tax purposes as individuals rather than corporations.
Generally, corporations are recognized as individuals (C corporations) for tax purposes. However, LLC can be taxed as an S corporation or pass-through entity (i.e., partnership).
An LLC is not allowed the same benefits of raising money through stock that a corporation would. For example, LLCs cannot quickly issue public or private stock and sell shares to popular investment platforms like most significant banks.
Corporations can raise money by issuing public and private shares (stock) on Wall Street and other major stock exchanges. They can also sell their shares directly to the public on these exchanges.
Corporations are typically seen as having more liability than LLC because they are considered separate legal entities under the law.
It means that if someone sues your company, their lawyers can make a claim against the corporation’s assets rather than making claims only against you personally.