Transforming your idea into a legal business in Virginia involves taking care of several details. If you’re feeling uncertain about the first steps, you’re in the right place. This guide outlines the registration process in simple terms, helping you understand what’s needed to make your business official. From choosing between different company structures to identifying which permits apply for, you’ll be better equipped to launch your business.
Related: Starting A Business In Virginia Checklist
Step 1: Business Structure
The first step to look at when registering a business in Virginia is selecting a business structure.
A business structure (which is also called a business entity) is a legal structure that defines how a company operates, its ownership, taxation, and liability. Selecting the right structure impacts the way your business is taxed, the owner’s personal liability, and the ability to raise capital.
There are four common types of business entities, each with their unique characteristics. These include the sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).
Related: Comparison of Business Structures
Sole proprietorship: This is the simplest business structure, where the owner and the business are considered a single legal entity. It’s easy to establish and requires minimal paperwork.
- Pros: Easy to set up, low start-up costs, and complete control over the business.
- Cons: Unlimited personal liability for the small business owner, difficulty raising capital, and higher self-employment taxes.
Related: How to Start a Sole Proprietorship in Virginia
General partnership: A partnership is formed when two or more individuals agree to share the ownership, management, and profits of a business. Each partner is personally responsible for the company’s debts and obligations.
- Pros: Easy to set up, shared responsibilities, and pooled resources.
- Cons: Unlimited personal liability for all partners, potential disagreements, and difficulty raising capital.
Corporation: A corporation is a separate legal entity from its owners (shareholders) and is registered through the Virginia State Corporations Commission. It provides limited liability protection and can also issue shares of stock to raise capital. There are two types of corporations: C Corporations and S Corporations, each with different tax implications.
- Pros: Limited liability protection, additional access to capital, and increased credibility.
- Cons: More complex and costly to set up, double taxation for C Corporations, and increased regulatory requirements.
Related: How to Form a Virginia Corporation
Limited Liability Company (LLC): An LLC is a hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a sole proprietorship and partnership. Owners, referred to as members, are not personally liable for the company’s debts or liabilities.
- Pros: Limited liability protection, pass-through taxation, and flexibility in management.
- Cons: More complex and costly to set up than sole proprietorship or partnership, and potential challenges when raising capital.
Related: How to Form a Virginia LLC
Step 2: Business Name
After choosing a business structure, many entrepreneurs in Virginia turn their attention to selecting a business name.
For sole proprietors and general partnerships, this often involves registering a Virginia Fictitious Name, also known as a “doing business as” (DBA) name. By default, sole proprietorships and general partnerships operate under the owner’s legal name. However, if you want to use a specific business name, you’ll need to register it as a Fictitious Name.
For example, John Smith, a sole proprietor in Virginia, decides to open a bakery. He has two options:
- Using his legal name: John Smith can operate his bakery without additional name registration, simply as “John Smith.”
- Using a Fictitious Name: If John wants to call his bakery “Shenandoah Valley Breads,” he’ll need to register this Fictitious Name file with the clerk’s office in the county or city where his business is located.
For corporations and LLCs, the process is different. These entities typically don’t need to register a DBA since they already have a unique name established during formation. However, if they want to operate under an additional name, they can also register a Fictitious Name.
Step 3: Federal Employer Identification Number
The next step for many businesses is obtaining a Federal Employer Identification Number (FEIN), also known as an Employer Identification Number (EIN). This unique nine-digit number, issued by the Internal Revenue Service (IRS), serves as a federal tax ID for your business.
You’ll need an EIN if:
- Your business has employees
- You’re operating as a corporation, partnership, or multi-member LLC
While sole proprietorships or single-member LLCs without employees can use the owner’s Social Security number for tax purposes, many choose to get an EIN anyway.
Obtaining an EIN is a straightforward process that doesn’t cost anything. The quickest method is to apply online through the IRS website, which typically takes just a few minutes. For those who prefer traditional methods, applications can also be submitted by mail or fax.
Step 4: Professional & Industry Licensing
Many professions in Virginia require registration and licensing before legally being able to offer services in the state. Professional licenses are primarily overseen by the Virginia Department of Professional and Occupational Regulation (DPOR). Some common licensed professions include:
- Accountants
- Architects
- Contractors (general and specialty)
- Cosmetologists and barbers
- Engineers
- Insurance agents
- Veterinarians
Beyond professional licenses, some industries require specific licenses or permits. These include:
- Restaurants and food trucks need permits from the Virginia Department of Health.
- Childcare facilities require licensing from the Virginia Department of Social Services.
- Alcohol-related businesses need licenses from the Virginia Alcoholic Beverage Control Authority.
Each profession and industry may have unique requirements, so be sure to check with the relevant licensing board for specific details, fees, and application processes.
Step 5: Business Tax Number
Most businesses operating in Virginia must register with the Virginia Department of Taxation. This registration provides a Virginia Tax Account Number, which is necessary for various tax-related activities.
Who needs to register:
- Businesses with Virginia employees
- Retail businesses selling products (Sales Tax Certificate)
- Service providers offering taxable services
- Contractors
- Rental property owners
- Out-of-state businesses with nexus in Virginia
A sales tax certificate can be obtained by registering online through the Virginia Department of Taxation’s site, VATAX, or by mailing in Form R-1.
Step 6: Sales Tax Certificate
After registering for the Tax Account Number, most businesses will want a Virginia Sales Tax Certificate of Exemption, also known as a Resale Certificate, which allows businesses to purchase inventory for resale without paying sales tax at the time of purchase. Instead, the business will collect sales tax from the end customer when the product is sold.
Who needs a Resale Certificate:
- Retailers
- Wholesalers
- Manufacturers who resell finished products
- Online sellers with inventory in Virginia
- Service providers who resell products as part of their services
Step 7: Local Business Licensing
Many cities and counties in Virginia require local business licenses in addition to any state requirements. Here’s an overview of common license types:
- General Business License: Most localities require a general business license to operate within their jurisdiction. In Richmond, this is called a Business, Professional and Occupational License (BPOL), issued by the Department of Finance.
- Retail License: Retail businesses often need a specific license. In Norfolk, retail establishments must obtain a Retail Merchants License from the Commissioner of the Revenue’s office.
- Contractor License: Contractors typically need local licensing. In Alexandria, contractors must obtain a Business License from the Department of Finance.
- Food-based Business License: Food establishments require special licensing. In Virginia Beach, restaurants need a Health Permit from the Virginia Beach Department of Public Health.
- Other Specific Licenses: In some areas, licensing is required for certain types of businesses. In Fairfax County, massage establishments need a specific Massage Establishment License from the Department of Cable and Consumer Services.
It’s important to note that licensing requirements can vary significantly between different cities and counties in Virginia. Some may have more stringent requirements or additional specialized licenses, while others might have more relaxed regulations. Always check with the local government offices or websites for the most accurate and up-to-date information on local business licensing requirements.
Step 8: Local Building & Zoning Permits
When establishing a business location in Virginia, it’s important to consider building and zoning regulations before finalizing any property purchases or leases. These requirements ensure that your business operates in compliance with local laws..
Different types of permits and approvals you may need include:
Zoning Compliance: Zoning laws dictate where specific types of businesses can operate. Check with your local zoning office to confirm that your intended business use is allowed at your chosen location. This applies to both commercial properties and home-based businesses.
Building Permits: You’ll likely need building permits if you plan to construct a new building or make significant modifications to an existing one.
Certificate of Occupancy: Many Virginia municipalities require a Certificate of Occupancy before a business can begin operations in a building. This document certifies that the building is safe and complies with all relevant codes.
Sign Permits: If you plan to install business signage, you may need a separate permit. Sign regulations can vary widely between localities.
Home Occupation Permit: For home-based businesses, some localities require a specific permit to operate from a residential property.
The exact department names and processes can vary between the different cities and counties but are typically handled by local government departments such as Planning and Development, Community Development, or Building and Zoning offices.
For only $99, you can save a lot of time and know your business complies with local, state, and federal requirements.