How to Incorporate in Virginia vs. How to Start a Virginia LLC

A Guide to Choosing the Best Business Entity in Virginia

Thinking of starting a business in Virginia, but not sure if you should form an LLC or start a corporation? Active Filings has the guide for you! We’ll walk you through the advantages and disadvantages of incorporating or forming an LLC in Virginia. Throughout this Virginia-specific corporation and LLC formation guide, you’ll discover exactly how to form either an LLC or corporation in Virginia, and learn the disadvantages and advantages of each business type.

After you’ve read through our guide, you’ll probably find out that starting your own business, be it an LLC or a corporation, involves a lot of moving parts. Hiring Active Filings is the easiest and most affordable way forward. Hire us to incorporate your business in Virginia. We’ll streamline the process and make it painless. Our starter package begins at only $25 (plus Virginia fees), and we’re sure that you’ll find out in no time why Active Filings is America’s most reliable business incorporation service.

Hire us to form your LLC or Corporation in Virginia!

Virginia LLCs vs. Virginia Corporations (Which is Better)

People looking to start a business often ask whether they should set up an LLC or incorporate for their new venture. Like everything else in life, the answer depends. Below you’ll find the three factors we think will help you make an informed decision.

  • Ease of maintenance
    LLCs are pretty easy to maintain. An LLC can opt to be managed by its members, which allows all owners to share in the business’s day-to-day decision-making, or by managers, who can be either members or outside managers. This is helpful if members aren’t experienced in running a business and want to hire people who are. Corporations have to hold meetings, keep minutes, record votes, and generally file more paperwork compared to an LLC. However, corporations are perpetual, which means they can exist as their own entity forever, whereas an LLC will generally dissolve and cease to exist upon the resignation, death, or bankruptcy of the member or members.
  • Desired tax structure
    LLCs offers pass-through taxation, where a company’s profits (or losses) aren’t assigned to the LLC, but rather to the tax liabiliy of the LLC members. For example, “Bass Drum Emporium, LLC” has two members and has made net profits of $100,000 during the most recent fiscal year. These reported net profits will be divided into two and this amount will be taxed as their personal income depending upon their overall tax liability. LLC members who actively work in the business are able to deduct the business’s operating losses on their personal tax return to offset other income. C corporation shareholders are not able to deduct these losses.
  • Investors
    If you plan to raise capital for your business, then incorporation probably makes the most sense. Investors prefer the favorable taxation rules of a corporations, and unlike LLCs, a corporation’s shareholders are not taxed on company profits unless profits are distributed. This means the dividends paid from the corporation can be structured to take advantage of the best tax scenario for the shareholders. LLCs If you plan to grow your small business into a larger entity and attract investors, forming a corporation is your best bet.

Don’t sleep on the idea of prestige either. While “Sweet Nicole’s Gun Range, LLC” is a fine upstanding company, it just doesn’t sound as fancy as Nike, Inc. When you hear the word corporation, many people think of Amazon, Apple, and Walmart. While the LLC is perfect for the small to medium-sized business, it doesn’t carry the same cache as the corporation. The corporation is the oldest recognized business entity in the US (LLCs first came into being in the late 1970s), and thus they carry with them an aura of prestige.

Advantages and Disadvantages of Virginia LLCs and Corporations

While we’ve already broken down the differences between an LLC and a corporation, we’re going to dig a bit deeper into the pros and cons of forming an Virginia LLC or corporation. Take a look below to see what makes Virginia LLCs and corporations unique.

 

 

Virginia LLC or Virginia Corporation? Final Answer.

How to Incorporate in Virginia

To start a corporation in Virginia, you must file Articles of Incorporation with the State Corporation Commission. You can file the document online or by mail. Currently their online filing system is unavailable. The Articles of Incorporation cost a minimum of $75 to file ($25 for the Articles and an added $50 per 25,000 authorized shares, eventually topping out at $2,500 for over a million shares).

Your name must include “Corporation,” “Incorporated,” “Company,” “Limited” or an abbreviation for one of these words. Most corporations use the abbreviations “Inc.,” or “Corp.” Example: Walmart, Inc.

List how many shares you’re creating. Remember that the fees for both the Articles of Incorporation and your Annual Report are based on the number of shares you authorize. If you have multiple classes or series of shares, you’ll also need to attach a description with the name, number, rights and limitations of each share type.

The registered agent receives all of your important mail and service of process from the state. You can act as your own registered agent or you can hire a professional agent. We recommend Active Filings.

Your registered office is where your agent will accept all legal notifications for your business. Keep it simple and hire us.

Your principal office is your main business address. This is optional, so we recommend you skip it to avoid offering up any unnecessary information.

List the names and addresses of your initial directors. This information will be public, so instead of personal addresses, you can list a business address or registered agent address. Hire Active Filings and list us.

Your incorporator signs your Articles of Incorporation. You must have at least one incorporator, and all incorporators must include their names, addresses and signatures. We’ll be your incorporator.

This is optional. If you like telemarketers having your number and calling you all day, definitely put you number here. Otherwise we’d recommend you leave this section blank.

How to Start an LLC in Virginia

To form a Virginia LLC, you must complete and file the Articles of Organization with the State Corporation Commission. The Articles cost $100 to file. For $25 plus state fees (total $125) we’ll fill out and file your Articles for you.

You must include “Limited Liability Company,” “Limited Company” or an abbreviation. Most businesses keep it simple with “LLC.”

The registered agent receives all of your important mail and service of process from the state. You can act as your own registered agent or you can hire a professional agent. We recommend Active Filings.

This is the address where Virginia will send all legal notifications and updates. Hire us, and our address goes here.

This must be a physical address and will be part of the public record. Hire us as your registered agent and you can use our Virginia address as your principal address.

Your organizer is just the person who signs and submits your Virginia LLC Articles of Organization. It doesn’t have to be a member or manager.

Virginia Annual Report Requirements

Each Virginia corporation and LLC that is authorized to transact business in the state is required to file an annual report every year. The annual report form contains pertinent business information and any changes the entity made during the year. It does not contain shareholder data, financial data or other information that relates to the financial performance or status of the corporation. Corporations must list of the names and addresses of the corporate officers and registered agent on the annual report. The corporate annual registration fee assessment is based on the number of authorized shares. Both the report and registration fee are filed together and may be filed online or delivered by mail or in person.

How do I file my Virginia Annual Report? 
VA Corporations and LLCs can file the annual report and pay the registration fee using Virginia’s SCC eFile system. The online system is easy. You need your corporate ID number to get started. VA Corps and LLCs may also go to the same SCC webpage and request to have the pre-populated form sent to you, if you would rather mail it in with a check.

Mail your annual report to:

State Corporation Commission

Office of the Clerk

PO Box 1197

Richmond, VA 23218-1197

When is the Annual Report due? 
Virginia’s annual report filing deadline for Corporations and LLCs will be the last day of their anniversary month. If you organized your LLC in on the 5th of July, your Virginia report will be due on the last business day of July.

How much is this report going to cost me? 
Here’s the rub. LLCs pay an annual registration fee of $50. Nonprofits pay half that, $25. Corporations are charged $50 per 25,000 shares of stock, for a minimum of $100 and a maximum of $1,700.

Virginia Business Taxes

Taxes, not everyone likes them, in fact most people don’t, but they are an integral part to owning and operating a business. While we’re not tax professionals, we can give you a little insight into how your corporation or LLC might be taxed.

Corporations: The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This is what we mean when we say corporations face “double taxation.” If you are forming a corporation, you’ll want to pay attention to not only the state’s corporate tax, but also it’s income tax rate, as you will be on the hook for both.

LLCs: For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity. One of the most significant benefits of an LLC is that of pass-through taxes. LLC owners don’t have to file a corporate tax return. An owner simply reports their share of profit and loss on their individual tax return. This prevents double taxation, your business paying taxes and you paying taxes.

What’s the Virginia corporate tax income rate? 
Flat tax rate of 6%.

What’s Virginia’s personal income tax?
$0 – $3,000 2.00%
$3,000 – $5,000 3.00%
$5,000 – $17,000 5.00%
$17,000+ 5.75%

When are my business tax returns due? 
April 15th.

What if I need an extension? 
Virginia grants an automatic filing extension for corporate income tax returns. Corporations have an automatic 7-month extension, and all calendar year filers have an extended due date of November 15th.

Hire us to form your LLC or Corporation in Virginia!