How to Start an LLC in Virginia: Steps, Annual Fee and Tax

How do I start an LLC in Virginia online?

File articles of organization with the Virginia State Corporation Commission (SCC) in its online Clerk's Information System and pay $100 (Code of Virginia 13.1-1005). Create an account there first; the online tool then builds the articles from your answers. With nothing uploaded, a receipt email and an acceptance email follow checkout. Uploading your own articles adds about five business days of review, and the SCC asks you not to upload an operating agreement (SCC LLC FAQs).

No route is free. The SCC lists one fee whether you file online or on paper. You avoid other costs if you qualify to be your own agent and get the EIN directly from the IRS. Licensed professionals such as lawyers, accountants and medical providers may need a professional LLC instead.

A one-owner LLC that keeps its default tax status is the simple case. It stops being simple when the LLC has two or more members, a married couple included (a partnership return, Virginia Form 502 and a Schedule VK-1 for each member), when you weigh an S corporation or the Virginia pass-through entity tax, when your locality taxes your gross receipts, or when an owner lives outside Virginia or the United States.

Gather: the city, county or town where you will work, each member's name and share, an agent who qualifies, your formation month, and rough estimates of profit and gross receipts. The steps every state shares are in how to form an LLC. For the EIN, see EIN for a single-member LLC; whether the LLC files a beneficial ownership report is in who still files a BOI report.

Who can be the registered agent for an LLC in Virginia?

Virginia allows two kinds of registered agent when you form an LLC. One is a Virginia resident who is a member or manager of the LLC (or holds a qualifying role in an entity that is one) or who is a member of the Virginia State Bar. The other is a corporation, LLC or registered limited liability partnership authorized to do business in Virginia, such as a law firm or a registered agent service company; the LLC cannot be its own agent (Code of Virginia 13.1-1011; 13.1-1015; SCC registered agent FAQs).

At formation, a friend or relative who is not a member, a manager or a Virginia lawyer cannot be named, even if they live in Virginia. After formation, the LLC may also name a Virginia-resident employee it designates in writing (Code of Virginia 13.1-1015).

• Address: the agent's business office must be the registered office. A post office box is accepted only in a city or town of under 2,000 people where the location has no street address (SCC registered agent FAQs).
• Hours: the agent must be available at the registered office during normal business hours (SCC registered agent FAQs), which matters if you serve from home but work elsewhere.
• Public record: the registered office address is public. If you serve as your own agent from home, your home address is on the record.
• Notices: the SCC mails the annual fee assessment to the agent at the registered office, so an outdated agent or address means missed notices.
• Changes: changing the agent or registered office has no SCC fee. If an agent resigns and the LLC names no new one within 31 days, the SCC starts the path to automatic cancellation (Code of Virginia 13.1-1050.2).

Agent rules in other states and how to switch agents are in registered agents.

When is the Virginia LLC annual registration fee due, and how much is it?

Every Virginia LLC pays $50 a year to the SCC, due by the last day of the twelfth month after the month it was formed, then by that date each year (Code of Virginia 13.1-1062). In practice, that is the last day of your formation month, starting the year after you form.

• The SCC assesses the fee at the start of the second month before your due month and mails the notice to the registered agent. You cannot pay before the assessment (Code of Virginia 13.1-1062; SCC annual registration fee FAQs).
• Pay online in the Clerk's Information System by credit card, or by check or money order by mail.
• The fee applies to every Virginia LLC, including one that has not started business.
• A Virginia LLC files no annual report. The SCC's annual report is for corporations.

Every state's yearly fee and report are compared in LLC annual fees and reports by state.

What happens if a Virginia LLC does not pay the annual fee?

Paying late adds a $25 penalty. Leaving the fee unpaid cancels the LLC automatically on the last day of the third month after the due date, whether or not a notice reached you (Code of Virginia 13.1-1064; 13.1-1050.2).

A canceled LLC's managers or members hold its property only to wind it up. Reinstatement treats the LLC as if it had never been canceled. The steps are in reinstating your company.

Which Virginia tax return does the LLC file?

A single-member LLC with default tax status files no Virginia return of its own: its profit goes on the owner's returns. An LLC taxed as a partnership or S corporation files Virginia Form 502, or Form 502PTET if it elects the pass-through entity tax; one that elects C corporation status files Form 500 (Virginia Tax: pass-through entities).

The federal treatment follows the IRS rules for LLC classification, single-member LLCs and LLCs filing as a partnership or corporation. To leave the default, the LLC files Form 2553 for S corporation status no later than 2 months and 15 days after the tax year it is to start begins, signed by an officer with every member's consent (Form 2553 instructions), or Form 8832 for C corporation status. The C corporation return is described on Virginia Tax's corporation page.

Form 502 is due by the 15th day of the 4th month after the tax year ends (April 15 for a calendar year), with an automatic 6-month extension to file. The extension does not cover withholding: an LLC with members who live outside Virginia generally must pay Virginia tax for them by the original due date (Form 502 instructions). Filing after the extension ends costs a $1,200 penalty even when no tax is due, and the law can raise it to 6% of the owners' Virginia taxable income from the LLC, less tax the owners paid on that income (Code of Virginia 58.1-394.1). Limited liability does not cover Virginia taxes the LLC must pay or withhold: a member, manager or employee who had that duty, knew of the failure, could have prevented it and willfully did not pay can be charged the amount personally (Code of Virginia 58.1-1813). How a partnership return works is in how partnerships are taxed.

Can a Virginia LLC elect the pass-through entity tax (PTET)?

Yes, if it is taxed as a partnership or S corporation. It may elect each year, by the return's due date including extensions, to pay 5.75% Virginia tax at the entity level on its eligible owners' share of income; those owners then claim a refundable credit (Code of Virginia 58.1-390.3). A single-member LLC with default status is not a pass-through entity for Virginia, so it cannot elect (Virginia Tax). Whether the election helps depends on each owner's federal return; Form 502PTET, estimated payments and deadlines are in pass-through entity tax by state.

Does my Virginia city or county charge a business license (BPOL) tax?

It may. Virginia counties, cities and towns can charge a business, professional and occupational license (BPOL) tax on gross receipts, not profit, and a license fee (Code of Virginia 58.1-3703). BPOL is local: forming the LLC with the SCC does not cover it.

• Where: you need a license where you have a definite place of business, meaning a location with regular business for 30 consecutive days or more. Your home counts if you have no business location elsewhere (Code of Virginia 58.1-3700.1).
• When: a new business applies before it begins business. Renewals are due March 1, or a later local date no later than May 1 (Code of Virginia 58.1-3703.1).
• How much: a locality of more than 50,000 people cannot charge the tax to a business whose gross receipts are below $100,000; one of 25,000 to 50,000 people, to a business below $50,000. Below those amounts only the license fee may apply, at most $50 in a locality of 25,000 people or more and $30 in a smaller one; a locality of more than 50,000 people may also waive the license for a business with receipts of $200,000 or less. State law sets no receipts floor for localities under 25,000 people (Code of Virginia 58.1-3703; 58.1-3703.1; 58.1-3706).

Above the floor, state law caps the rate for most business classes; wholesalers, direct sellers, photographers, itinerant merchants and a few others follow separate rules:

A locality whose rate was higher on January 1, 1978 may keep that older rate. Ask your locality's commissioner of revenue or finance office for its rate, fee and application. Contractor rules for work in other Virginia localities are in the Virginia BPOL part of gross receipts taxes for out-of-state sellers.

Do I need an operating agreement for a Virginia LLC?

Virginia does not require it to be written, and you do not file it with the SCC. An operating agreement must first be agreed to by all members and need not be in writing unless the articles or a written agreement require it (Code of Virginia 13.1-1023). For a single-member LLC, any writing the member signs about the LLC's affairs counts as part of it.

The SCC keeps no record of members (SCC LLC FAQs), so the agreement is often the clearest proof of who owns what. With two or more members, write down how profit, losses, capital and tax distributions are shared; operating agreement tax terms covers what to include.

Example

These examples are illustrative; figures are in US dollars.

A Richmond freelancer forms in June

• First year, June: she files online and pays $100. She is the only member and lives in Virginia, so she serves as her own agent; her home address becomes public record.
• Second year: the SCC mails the $50 assessment to her as agent around the start of April. She pays by June 30. Had she missed it, a $25 penalty would apply from July, and unpaid on September 30 the LLC would be canceled.
• Each tax year: her $55,000 profit goes on her federal Schedule C and her Virginia Form 760. The LLC files no Form 502. She asks the city's commissioner of revenue whether her receipts need a business license.

Two members in Fairfax County

The LLC earns $90,000 profit, split 50/50, on $300,000 of gross receipts. It files federal Form 1065 by March 15 and Virginia Form 502 by April 15, or by October 15 under Virginia's automatic extension, and gives each member a K-1 and a Schedule VK-1 showing a $45,000 share. Both members live in Virginia, so the LLC owes no Virginia withholding on their shares. Assume its work falls in the business services class. If the county taxes that class, the BPOL tax is measured on the $300,000 of receipts, not the $90,000 profit; at the state's $0.36 per $100 cap for business services, that would be $1,080, and the county's own rate may differ.

An Arlington owner asks a friend to be agent

Her friend lives in Virginia but is not a member, a manager or a member of the Virginia State Bar, so the friend cannot be named as agent when the LLC is formed. She can serve herself, since she is a member and a Virginia resident, or name a corporation or LLC authorized in Virginia that acts as an agent. If she switches later, the SCC charges no fee for the change.

Different for you?

• Your LLC has two or more members, including you and your spouse: Form 502, Schedules VK-1 and withholding for members outside Virginia follow; see how partnerships are taxed and spouse and family LLCs, then get business formation help for the setup and business tax return help for the yearly returns.
• You are weighing an S corporation or the PTET: see should you elect S corporation status, S corporation from day one and pass-through entity tax by state, then plan it with business formation help.
• Your locality taxes your gross receipts, or you contract in other Virginia localities: see the Virginia BPOL part of gross receipts taxes for out-of-state sellers and get business formation help.
• The annual fee was missed and the LLC was canceled: see reinstating your company; if returns were also missed, get business tax return help.
• You formed the LLC but never used it: see keep or close an unused LLC.
• You want books set up from the first transaction: see setting up books for a new LLC and bookkeeping.
• You or a co-owner live outside Virginia or outside the United States: only a Virginia resident can be an individual agent, and a one-member LLC owned by a non-US person files Form 5472 with a pro forma Form 1120; see foreign-owned single-member LLC filing and get cross-border tax help. Still choosing a state, or formed elsewhere: see which state to form in and registering in another state.