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Vermont LLC For Beginners: No Attorney Required

Vermont LLC For Beginners: No Attorney Required

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Vermont LLC For Beginners: No Attorney Required

If you are looking to start a business in Vermont, you may be wondering about the process of forming a Limited Liability Company (LLC). An LLC is a type of business structure that is created with the state of Vermont and is legally separate from its owners.

Our guide simplifies starting your Vermont LLC, walking you through each step, from choosing a unique name to filing the necessary paperwork, ensuring a smooth launch for your new business.

Related: How to start a business in Vermont

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Steps to Form a Vermont LLC

Step 1: Choose a Name for the LLC

The first step in forming a Vermont Limited Liability Company is to make sure the name you want is available.  

It’s important to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of Vermont. The Vermont Secretary of State makes it easy to search and verify if your LLC name is available.  Here is more information on how to do a Vermont LLC name search.

In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:

  • Limited Liability Company
  • Limited Liability Co.
  • Ltd. Liability Company
  • Ltd. Liability Co.
  • LLC
  • L.L.C.
  • LC
  • L.C.

A comma may be used after the business name and before the designator.  “Green Mountain Crafts LLC” and “Green Mountain Crafts, LLC” are both acceptable.

Before settling on an LLC name, you may want to do a domain name search to try and match a URL to your business name.

Step 2: Appoint a Vermont Registered Agent

Every LLC in Vermont is required to have a registered agent, which is simply someone with a Vermont street address who will be responsible for any legal correspondence, most often if the business is served papers in the event of a lawsuit. Most LLC owners are their own registered agent, but it is possible to hire a registered agent service like Northwest Registered Agent. The reasons why someone would hire a registered agent service include when the owner lives in another state or if the owner prefers that their personal address not be on public record.

The basic requirements to be a registered agent in Vermont include:

  • The agent must be a Vermont resident at least 18 years of age or a commercial registered agent service with a registered office in the state.
  • The agent must have a physical address in the state (PO Boxes aren’t allowed).
  • The agent must generally be available during normal business hours at the address provided to receive service of process.

Related: Who can be a Vermont registered agent

Step 3: File the Vermont Articles of Organization

The paperwork to officially create an LLC in Vermont is called the Articles of Organization. Either file online through the  Vermont Secretary of State’s website. If you prefer to fill out and mail the application, download the Articles of Organization Form LLC-3(D) to submit the paperwork.

Related: How to fill out the Vermont LLC Articles of Organization

When filling out the Articles of Organization, there are a few sections that can be confusing. To help get your LLC started right, I’ll try and explain these sections.

Business description: This section asks for information regarding the activities of the business.  To answer, there is a number called NAICS (North American Industrial Classification System).  The NAICS is a six-digit number that classifies and categorizes the different business industries.  This information is used in reporting statistical data for each of the industries in the U.S.  Remember this number, as you will need it when filing annual tax returns.  You can do a more in-depth search for your NAICS number here.

Domestic jurisdiction: Vermont is automatically chosen as the domestic jurisdiction and can’t be changed in this section.

Physical address: In this section, enter the street address, city, state, and zip code of the initial principal office.  This address can be the LLC’s physical address or the address where the business records are stored.  You may not use a PO Box for the designated office.

Mailing address: A mailing address is required, and it can be the same as the Principal Address.  If the LLC records should be sent to a different address, enter that information in the Mailing Address Section.  If the address is the same as the principal office, click on the “Use this address as the Mailing Address also” box to copy the Principal Address address.

Any address is acceptable regardless of location or PO Box.

Fiscal year end (month) – Select the preferred ending month for the LLC’s fiscal year.  Single-member LLCs and LLCs taxed as a partnership should choose December.

The default end month is December by the state.

Manager/Member Information – This section asks about the management choice of the LLC.

  • Member-Managed LLCs have an active involvement in the management and have the authority to act on behalf of the LLC.
  • Manager-Managed LLCs are hired by the members to run the LLC, similar to a CEO of a corporation.  This is generally used when there are passive members in the LLC, and the LLC members do not actively manage or operate in the affairs of the business.

Most LLCs are member-managed.

If you are worried about making a mistake when forming your LLC, or just don't want to deal with filling out state paperwork, an LLC formation service will help guide you through the process. My top recommended services include:

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What To Do After Forming A Vermont LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a Vermont LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.

Vermont Statute 11 V.S.A. § 4003 states that every Vermont LLC may adopt an operating agreement, but it isn’t required by the Vermont Secretary of State, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: Vermont operating agreement template

Obtain an EIN

If the LLC will hire employees or is owned by more than one member, an EIN is required. 

The EIN or Employer Identification Number (also referred to as a Federal Employer Identification Number, FEIN, or Federal Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.

Related: How to apply for an EIN

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original LLC formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Occasionally, the bank will request a Vermont Certificate of Good Standing to prove the LLC is active and in good standing with the state.

Related: How to open a business bank account for your LLC

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting the business. Some common registrations include:

  • Business license: Some cities require businesses to obtain licensing before starting.
  • Professional license: Certain services, such as barbershops, accountants, salons, and others, must be licensed.
  • Sales tax permit: To sell products and certain services, a sales tax permit from the Vermont Department of Taxes will be necessary.

Related: What business licenses are needed in Vermont?

File the Vermont LLC Annual Report

LLCs are required to file an annual report with the Vermont Secretary of State.  The annual report filing fee is $35 each year, and the due date is based on the LLC’s fiscal year. Most LLCs choose their fiscal year as the calendar year, which means their tax period runs from January 1st – December 31st.  The annual report in Vermont is due within 3 months following the end of the fiscal year, so LLCs that use the fiscal year would have their reports due by March 31st.

Related: How to file a Vermont LLC annual report

File the Beneficial Owner Information Report

Beginning in 2024, any individual who owns at least 25% or has “substantial control” of an LLC or corporation in Vermont or any other state must file the Beneficial Ownership Information (BOI) form with the Financial Crimes Enforcement Network (FinCEN). BOI reports are filed electronically through FinCEN’s website.

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Vermont LLC FAQs

Is an LLC the right business structure for you?

The Limited Liability Company (LLC) is a popular business entity choice structure for many businesses starting in the state of Vermont.  The LLC provides its owners with personal asset protection and has the potential to save money on taxes.

Unlike a sole proprietorship or general partnership, where the small business owner can be personally liable for lawsuits against the business, the LLC protects your personal assets from business debts and lawsuits. It’s flexible with taxes, letting you choose how you’re taxed, which can save you money.

While an LLC (Limited Liability Company) offers many benefits, such as personal asset protection and tax flexibility, there are scenarios where it might not be the best choice for someone:

Raising capital: If you plan to raise a significant amount of capital through equity, investors might prefer the structure of a corporation, specifically a C-corp, because it allows for the issuance of different classes of shares. This flexibility can be more attractive to venture capitalists and angel investors.

Stock options: Corporations can offer stock options to employees, a valuable tool for attracting and retaining top talent. While LLCs can offer profit interests, the process is more complex and might not carry the same allure as stock options.

Complex management structure: An LLC is ideal for businesses that prefer a simpler, more flexible management structure. If your business requires a more traditional hierarchical structure, with a board of directors and corporate officers, a corporation might be a better fit.

Regulatory requirements: Certain professions might not be allowed to form an LLC in some states. For instance, lawyers, doctors, and accountants are often required to form professional corporations (PCs) or professional limited liability companies (PLLCs) depending on state laws.

Related: How to start a business in Vermont

How much does it cost to start an LLC in Vermont?

The cost to file the Articles of Organization with the Vermont Secretary of State and form an LLC in Vermont is $125.

How long does it take for an LLC to be approved in Vermont?

The paperwork to start a Vermont LLC will vary depending on how the Articles of Organization are filed. LLCs formed online are typically processed in one business day, while the mailed-in form can take 7-10 business days.

How much does it cost to file an annual report in Vermont?

Each year, an annual report and the filing fee of $35 must be submitted to the Vermont Secretary of State.

What is a Foreign Limited Liability Company?

A foreign LLC isn’t a special type of LLC. Instead, it’s an LLC that was formed in another state that wants to operate physically in Vermont. Physically operating means having a presence, such as having an office or hiring an employee.

Related: What is the difference between a domestic Vermont LLC and a foreign LLC?

What is a Professional Limited Liability Company?

Businesses that require occupational licensing in Vermont, such as accountants, architects, veterinarians, etc., will want to file for a Professional Limited Liability Company (PLLC) instead of an LLC. Filing for a PLLC is very similar to that of an LLC.

Learn more about a professional LLC.

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

Vermont LLC For Beginners: No Attorney Required

Vermont LLC For Beginners: No Attorney Required

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