How to start a business in Virginia

Whether you’re already a Virginia resident or are interested in moving to Virginia to start a business, it can be challenging figuring out where and how to begin. But starting your own business can be a rewarding and (hopefully) profitable venture. This guide will help you through the most critical steps to starting your Virginia business.

What do you need to start a Virginia business?

To start a Virginia business, you’ll need to follow a series of steps, working with local and state government entities. First, you’ll need to choose a business idea and name. Then you’ll need to decide on the legal structure of your new business. After registering your Virginia business entity, you must apply for Virginia licenses and permits, choose a business location and check zoning laws. You’ll also need to file and report taxes, obtain business insurance and open a business bank account. Let’s take a closer look at each of these nine steps:

Step 1: Choose a business idea

During this initial step, you’ll come up with your business idea. Maybe you’ve always had one — many small businesses and startups grow out of a passion or interest. Therefore, following your passions can pay off. No matter your idea, you’ll need to perform some research, identifying your target audience and conducting market research to identify your biggest competitors.

This is also the time to start constructing a business plan. A business plan provides answers to the most critical questions about your business. Lenders, partners, investors and clients will use this information to determine your company’s potential success. A business plan helps small business owners obtain Small Business Administration (SBA) or bank loans.

Here are the main sections:

Step 2: Select a business name

After you’ve chosen your business idea and started thinking about your business plan, you’ll need to come up with a business name. You want a name that stands out from the competition and tells a customer what your business does. Research possible names, then use the Virginia State Corporation Commission Clerk's Information System to check business name availability.

Step 3: Decide on your legal structure

Your legal structure can have a significant impact on how you run your business, its tax liabilities, personal liabilities and access to funding. Here are the most common business structures in the Commonwealth of Virginia.

Sole proprietorship

A sole proprietor is an individual who owns and operates a business. Therefore, a sole proprietorship is just a single-person-owned business. In many cases, a sole proprietorship is named after the individual. However, some sole proprietorships operate under a different name. An example of a doing business as (DBA) name would be a hot-dog business owner named Frank who wants to make his fictitious name Frank’s Franks.

To do this, you must file an individual Certificate of Assumed or Fictitious Name form with the State Corporation Commission and pay the $10 filing fee. There are no other formation documents for sole proprietors. The government taxes sole proprietorship business income through the proprietor’s tax return.

Limited partnership (LP)

A limited partnership is an agreement between two or more people forming a business. Limited partnerships have at least one general partner and at least one limited partner. General partners are liable for all the debts and obligations of the company, while limited partners have limited liability in relation to their contributions. To form a limited partnership in Virginia, you’ll need to file a Certificate of Limited Partnership with the State Corporation Commission. Because limited partnerships are pass-through entities, each partner is liable for their share of the business’ income on their personal income tax return.

General partnership (GP)

In a general partnership, two or more partners go into business together for profit. Personal liability for general partners is both joint and individual. You do not need to register a general partnership at the state level, although you may file a Statement of Partnership Authority. A general partnership is also a pass-through entity, so each partner assumes responsibility for tax obligations through their personal tax returns.

Limited liability company (LLC)

An LLC provides advantages and liability protections similar to a corporation while having different tax requirements. To form a Virginia LLC, you’ll need to file Articles of Organization with the State Corporation Commission. You can file online or submit Form LLC-1011. In addition, you’ll need to pay the $100 filing fee. It may be necessary to file a Certificate of Assumed Name within your LLC's county and designate a registered agent. This could be you, an employee, a lawyer or a company that provides registered agent services. Unlike the previously mentioned business structures, an LLC offers limited personal liability. And while you don’t need to file an operating agreement, you should have one on file.

Corporation

According to the state of Virginia, a “corporation is an artificial person or legal entity managed by a board of directors, consisting of one or more individuals, who collectively elect officers to run the corporation’s day-to-day business activities.” This structure has advantages and disadvantages, as corporations have limited liability but increased taxes for the corporation and its shareholders. Virginia has two types of corporations: stock corporations and nonstock corporations. Generally, nonstock corporations are not-for-profit entities, while stock corporations are for profit.

To register a corporation in Virginia, you must file Articles of Incorporation with the State Corporation Commission. You should also do the following:

• Designate a registered agent

• Write corporation bylaws

• Appoint directors

• Hold directors’ meetings

Contact a local professional for more specific information about registering a corporation in Virginia.

Step 4: Register your Virginia business entity

After you’ve chosen your business type, you’ll need to register your business for tax purposes. You’ll be responsible for local, state and federal taxes. You must apply to the Internal Revenue Service (IRS) for a federal employer identification number (EIN) to pay these taxes. This unique tax ID number helps identify your business entity for federal tax purposes, including income and payroll taxes. You’ll also use an EIN to open a business bank account, apply for licensing and permits and hire and pay employees. You may obtain an EIN or use your social security number if you're a sole proprietor.

Regarding state taxes, you’ll need to register your business with the Virginia Department of Taxation. If you plan to hire employees, register with the Virginia Employment Commission (VEC). The VEC is responsible for collecting unemployment tax in the state. Depending on your business, you may also need to register for certain tax types (sales tax, for instance). It’s best to consult a local professional to ensure you’re registered for the correct taxes.

Step 5: Apply for Virginia licenses and permits

Next, you’ll need to identify which licenses and permits you’ll need for your Virginia business. These can vary based on your industry and your location. For example, if you plan to serve alcohol, you will need an ABC license. Some certifications are required for certain professions and occupations, such as home inspectors, engineers, and contractors. See the Virginia Department of Professional and Occupational Regulation for a complete list of regulated professions. You may also need local permits, so contact your local city and county officials to inquire about the necessary permits.

Step 6: Choose a business location and check zoning laws

After applying for all the necessary licenses and permits, you’ll need to choose your business location. For some small businesses, you may run the company out of your home, while others need physical retail or warehouse space. Consider your specific business needs as you begin looking for a suitable space for your new business. You’ll also want to consider your monthly business expenses, location and accessibility. Be sure that your business location is correctly zoned to run a business in that location, too. Contact your local city or county clerk for more information regarding zoning laws, which tend to be very specific.

Step 7: File and report business taxes

As a new business, you’ll need to file business taxes and report business income. You’ll have certain federal, state and local tax obligations depending on your business entity. At the state level, you must ensure you register for the correct tax types by visiting the Virginia Department of Taxation’s website. There may also be city and county taxes, so be sure to contact the local government to learn more about these obligations. As always, seek the help of a local professional who can further guide you through this process.

Step 8: Obtain business insurance

Depending on your type of business, you may need (or want) certain types of business insurance. Here are a few to consider:

• General liability insurance: This covers losses to other companies, clients or vendors that your business may cause. Consider general liability insurance no matter the size of your business.

• Worker’s compensation insurance: For businesses with more than one employee, you’ll need worker’s compensation insurance. This covers claims from work-related injuries or accidents.

• Professional liability insurance: If you provide professional advice, consulting or accounting services, you’ll want to consider personal liability. This type of insurance covers financial losses due to your business’ malpractice or negligence.

Step 9: Open a business bank account and credit card

As a startup business, you’ll want to open a business bank account. Having a dedicated account for your business funds will help keep your business finances and assets separate. Additionally, business bank accounts help streamline bookkeeping and simplify payroll and bill pay.

Opening a business bank account is simple: Compare local and national credit unions and banks, then visit the one that matches your needs. Most banks require an EIN for business bank accounts. Therefore, make sure you’ve registered for one before applying to open a business bank account.

Business credit cards are another helpful tool for small businesses. You’ll apply for one just like you would as an individual, but the credit line is dedicated to your business.

Frequently asked questions (FAQs)

Get inspired to take the next step

We won’t lie: Starting a business is a lot of work — illustrated by everything you just read! And when you’re knee-deep in paperwork and legalities, it’s easy for that spark — that passion that made you want to start a business in the first place — to fizzle a bit. So if you find yourself in a slump, take a step back and have a listen to The Entrepreneur’s Studio podcast. With tales from entrepreneurs who have been in your shoes, you’re all but guaranteed to walk away feeling inspired and ready to get back to what you do best.

Looking for more inspiration and resources for aspiring entrepreneurs? Check out the Start-Up Path for Entrepreneurs: a free course that will help you get from idea to opening day with confidence.

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