Hello, my name is Brandon Okes and I’m an attorney with General Counsel, P.C. in McLean, Virginia. I’m giving a presentation today on how to start a small business in Virginia and the particular required steps in the state. Obviously the number one thing is deciding the name of your business and what name you want to use. One thing that’s important to remember is that the name that you brand yourself to the public doesn’t actually have to be the same name for the company that you use, the entity that you register with the State of Virginia.

But once you’ve decided the name, the next step then is what business structure you want to use. The focus today on corporations and on limited liability companies since those are the two most popular. But be aware that there are a variety of entities out there that may fit the particular business that you’re forming.

Once you’ve decided corporation or LLC, the third step is to figure out how you want to be taxed. ‘Cause an LLC you can choose to be taxed either disregarded entity if you’re the only owner of the LLC, or as a partnership if there are multiple owners. Also be taxed as a corporation even though you have an LLC charter to make things even more confusing in the tax rules. On the corporation side, you don’t have quite as much flexibility. You basically have the choice between a C-Corp and an S-Corp. So just be aware as you’re picking that the charter that you select and the tax status are two separate things, each of which you need to decide whenever you’re getting started with your business.

The next step is to file for either a corporation or a limited liability company, file articles with the Virginia State Corporation Commission and file articles of organization for an LLC, file articles of incorporation for a corporation. And the State Corporation Commission will come back to you and issue a certificate. When the time that the state issues a certificate is when you officially have your charter recognized by the state. One thing to notice in Virginia is, and many other states, you can spend extra money to get faster processing, so you can cut the time from the two to three weeks without spending the extra money, to two to three days with the extra money.

Once the state has come back with the certificate, then you want to pick your employer identification number or apply to the IRS to get your employer identification number, the next important step since you’re gonna want to open a bank account and do other things in your company. Even if you don’t have any employees and don’t expect to have any employees, you still need to have an employer identification number. Now, once you have that, you need to follow through with additional state level registrations, in particular with the State Department of Taxation. They, depending on what kind of entity you have, you may need to pay income taxes, you may need to pay sales taxes, those kinds of things. And so it does require registration with the State of Virginia.

Next step then is to look at the local registrations that vary county by county in Virginia. So whichever county your business is located in you’ll have to discovery the exact specifics. But usually what you’re looking at is a business license. And formerly known as the Business Professional Occupational License. And what that really is, is a gross receipts tax that the county is going to collect on all of the income, all the gross receipts that are generated from your work in that particular county. The rate varies depending on what kind of business you have. You do need to file that prospectively, so to estimate what your gross receipts are gonna be for the first year and pay the tax based on that. For a particular small business you may fall under the threshold. In certain counties there is no gross receipts tax. So it’s gonna vary county by county, but it’s important to check out that requirement to get your business license.

Part and parcel with that is the business tangible personal property tax that the county will collect or ask you to file if you have a business license in that county. That is not paid prospectively, so you don’t have to worry about it when you first start your business, but be aware that after the first year you’re going to get a bill or a return in the mail from the county. So be aware of that local tax issue.

Finally once you’ve taken care of the federal, the state, the local, you’re really looking at industry specific issues for you as far as regulations that you may need to file with a particular agency in order to run your business. There are a few of those for the federal government, usually alcohol, tobacco, firearms kinds of things that have to be registered with the federal government. The state level, obviously there are many more. Attorneys have to be members of the bar and register their law firms with the state. But similarly, architects, engineers, hair dressers, the whole variety of regulations that are out there, your particular occupation may fall into that, particularly if you’re a licensed individual because you require an individual license to conduct your business. Frequently the state will want to see that the name of the business entity also that you’re conducting that under. So be aware of those requirements.

And similarly for a few of the smaller businesses that fall under the threshold of what the state cares about, the county sometimes cares about those. A good example is contractors where they are doing particularly small jobs. So even if you fall under the threshold, file with the state, again you want to check with the county to see if there are any regulatory agencies to look at in that jurisdiction.

But following those, that basic outline, you can end up, set up with a business that’s good to go legally in Virginia.

That concludes our tutorial on the initial steps to setting up a small business in Virginia. There are plenty of other documents, other things you may want to discuss particularly if you have business partners. But those are topics for another day. I do want to say if you have any questions, please email Questions@LegalRiver.com or if you prefer to email me directly BOkes@GeneralCounselLaw.com. And I do have to give our standard disclaimer which is that all the views expressed in this presentation are intended only as a general discussion of the issues. It shouldn’t be regarded as legal advice, particularly specifically to advice for you. For additional details or advice about a specific situation, please consult legal counsel directly.

Thanks for listening to this edition of the Legal River podcast. If you have a business law question you would like to see answered in a podcast, please email us at podcast@legalriver.com. To reiterate, all views expressed in this presentation are intended only as a general discussion of the issues and should not be regarded as legal advice. For additional details or advice about a specific situation, please consult legal counsel directly.