At LLCBuddy, we don't just offer information; we provide a curated experience backed by extensive research and expertise. Led by Steve Goldstein, a seasoned expert in the LLC formation sector, our platform is built on years of hands-on experience and a deep understanding of the nuances involved in establishing and running an LLC. We've navigated the intricacies of the industry, sifted through the complexities, and packaged our knowledge into a comprehensive, user-friendly guide. Our commitment is to empower you with reliable, up-to-date, and actionable insights, ensuring you make informed decisions. With LLCBuddy, you're not just getting a tutorial; you're gaining a trustworthy partner for your entrepreneurial journey.
Virginia, popularly known as The Old Dominion, offers a bunch of benefits for business owners, especially the state capital Richmond has a lot to offer to the rising entrepreneurs in the state. If you want to start a business in Virginia, you must choose an appropriate corporate structure. You can have a corporation or a sole proprietorship or set up an LLC in Virginia. There are a few guidelines that you should be aware of when it comes to starting an S-Corporation. In Virginia, S-Corporation is businesses’ most common corporate structure, especially start-ups. It was developed in order to give companies limited liability protection while preserving the advantages of being a distinct legal organization.
In this article, you will learn about how to start an s-corporation in Virginia. You will also learn whether an s-corporate business structure suits your business. Please read all the points carefully before starting your business in Virginia.
An S corporation (S-corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other business structures. It’s a tax classification that might result in significant financial savings for both corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.
If you want an S corp status for your business, you can always form an LLC to protect your personal assets from business debts. It takes some basic steps to have a successful s-corporation in Virginia. S-Corps do pay corporate income taxes, but they are still treated as disregarded companies for federal tax purposes.
S-corps pay corporate taxes that LLCs do not have to pay. If you want to have an S-corp status, then we would recommend you have an LLC instead. This will protect your personal assets from your business liabilities and you don’t have to pay any corporate taxes.
As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-
Be a domestic corporation.
Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
Have just one type of stock.
Have a maximum of 100 shareholders or members.
Have only permitted individuals, certain trusts, and estates as stockholders or members.
If you are qualified for the limitations and requirements, you can apply for an S-Corp in Virginia.
How to Start an S-Corporation in Virginia?
To create S-Corp in Virginia, you must follow the below guidelines that include forming a business name, hiring a Registered Agent, filing your Articles of Organization, creating an operating agreement in Virginia, requesting an EIN, filing a form 2553.
Step 1: Register a Business Name in Virginia
After you have decided on the idea to start an S-Corp in Virginia, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.
If you want to set up an LLC, there is a complete guide on Virginia LLC name guidelines for a proper LLC name. Here are some guidelines you must follow while naming your S-corp.
The name should be available, and no other entity should have the same name in Virginia.
Limit of restricted words that need a license in Virginia, for example, doctors, attorneys, etc.
Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)
Step 2: Hiring the Virginia Registered Agent
The next step in starting an S-corp in Virginia is hiring a Virginia Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents (such as subpoenas), all notices of lawsuits, and other official government correspondence in Virginia. Forming an LLC and an S-corp will be easier if you have Registered Agent in Virginia.
Step 3: File Your Virginia Articles of Organization
The Articles of Organization is an important document to start your limited liability company (LLC). Virginia Articles of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. In order for the “Articles of Organization” to be filed, you need to pay a filing fee to the state. In Virginia, the filing fee is $100.
In California, along with the Articles of Organization, you must send the Statement of Information to file your company. The statement of information is a mandatory document in California, but other states do not have this document.
Step 4: Creating an Operating Agreement in Virginia
After you have filed your Articles of Organization in Virginia, the next step is to create an LLC operating agreement in Virginia. The Virginia LLC operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following-
Article I: Organization
Article II: Management and Voting
Article III: Capital Contributions
Article IV: Distributions
Article V: Membership Changes
Article VI: Dissolution
After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure. For more details about how an operating agreement works, please check Operating Agreement.
Step 5: Request for EIN in Virginia
After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.
The application of an EIN in Virginia can be through the following:
Apply Online- You can apply for EIN online, the most desirable and fastest method for users.
Apply by Fax- Another method of obtaining EIN is to fax Form SS-4 (PDF) after entering all the correct information to (855) 641-6935.
Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.
If you would like to be assisted in getting an EIN in the Internal Revenue Service, we can get your EIN for you. Our EIN service is quick and hassle-free. For more details about EIN for your business, check why you need EIN.
Step 6: File Form 2553 for Your S-Corp Business in Virginia
Once you have obtained your EIN and Articles of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or not more than 75 days after the beginning of the tax year in which the election is to take effect.
If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, in order to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS. In Virginia, you can send your form 2553 to the Department of the Treasury Internal Revenue Service Center – Kansas City, MO 64999 Fax: 855-887-7734.
Advantages of Starting an S-Corporation in Virginia
Filing an S-Corp in Virginia has numerous benefits and advantages.
Writing Off Losses: With S-corp, owners can deduct business losses from their individual income statements. If the company loses money in the first few years, it may balance its other sources of revenue. Even so, understand the shareholder loss limitations set by the IRS.
Pass-Through Taxation: Starting an S-Corp is the widely known advantage in forming this kind of business structure since an s-corp uses a pass-through taxation structure. The company does not pay twice the tax in this kind of taxation. Because of this structure, most start-ups and entrepreneurs in Virginia apply for an S-Corp LLC.
Qualified Business Income Deduction: A qualified business income, or QBI, is the total of all qualified items of income, gain, deduction, and loss from any qualified trade or business, including S-Corp. With this, S corp owners may deduct up to 20% of their eligible earnings under the Tax Cuts and Jobs Act.
What is an S-Corp in Virginia?
An S-Corp in Virginia is a type of corporation that is recognized by the IRS under Subchapter S of the Internal Revenue Code. This type of entity is distinct from other corporation types in that it is allowed to pass corporate income, losses, deductions, and credits through to shareholders for federal income tax purposes.
What are the requirements for forming an S-Corp in Virginia?
To form an S-Corp in Virginia, you will need to file Articles of Incorporation with the Virginia State Corporation Commission, obtain an employer identification number from the IRS, and adopt corporate bylaws. You will also need to hold an initial shareholders meeting to approve the bylaws and elect directors.
How much does it cost to form an S-Corp in Virginia?
The cost to form an S-Corp in Virginia is $100, which is the filing fee for the Articles of Incorporation. In addition, you may need to pay a fee to obtain an employer identification number from the IRS.
What are the tax benefits of forming an S-Corp in Virginia?
An S-Corp in Virginia is not subject to double taxation, which means that the corporation is not taxed on its income and the shareholders are not taxed on the same income. This type of entity also provides liability protection for shareholders and can help with estate planning.
What are the ongoing compliance requirements for maintaining an S-Corp in Virginia?
To maintain an S-Corp in Virginia, you will need to file an annual report with the Virginia State Corporation Commission and file a corporate tax return with the IRS. You may also need to hold annual shareholder meetings and keep minutes of all corporate actions.
Does an S-Corp in Virginia have to have a board of directors?
Yes, an S-Corp in Virginia must have a board of directors. The board is responsible for overseeing the management of the corporation and making decisions on major corporate actions.
Can foreign citizens form an S-Corp in Virginia?
Yes, foreign citizens are allowed to form an S-Corp in Virginia. However, they will need to provide proof of their residence and pay the relevant fees.
What is an S-corp?
An S-corp is a type of business structure, similar to a corporation, that offers certain tax benefits.
What are the benefits of forming an S-Corp in Virginia?
S-corps in Virginia are subject to the same federal tax benefits as other S-corps, but may qualify for additional state tax benefits. Additionally, the state of Virginia does not impose a corporate income tax on S-corporations.
What is the process for starting an S-Corp in Virginia?
The process for forming an S-Corp in Virginia includes
What documents do I need to form an S-Corp in Virginia?
You will need to file articles of incorporation, obtain an Employer Identification Number from the IRS, and file a Statement of Information with the State Corporation Commission.
How long does it take to form an S-Corp in Virginia?
The entire process of forming an S-Corp in Virginia typically takes around two weeks.
What is the corporate income tax rate for an S-Corp in Virginia?
S-corps in Virginia do not pay state corporate income taxes.
How do I file taxes for an S-Corp in Virginia?
You will need to file a federal corporate tax return (Form 1120-S) along with a Virginia corporate income tax return (Form 500C) with the Virginia Department of Taxation.
Is there any special paperwork I need to file for an S-Corp in Virginia?
Yes, you must file a Statement of Information with the State Corporation Commission, in addition to the required federal and state tax returns.
Who needs to be listed on the Articles of Incorporation for an S-Corp in Virginia?
The Articles of Incorporation must include the name of the corporation, the address of the principal office, the names and addresses of the incorporators, and the names and addresses of the directors.
What is an S-corporation?
An S-corporation is a business structure that allows a company to be taxed as a separate legal entity.
How do I start an S-corporation in Virginia?
To start an S-corporation in Virginia, you must file a Certificate of Incorporation with the Virginia State Corporation Commission.
How much does it cost to start an S-corporation in Virginia?
The cost to start an S-corporation in Virginia is $100 for the filing fee plus any additional fees for services such as registered agent fees.
What documents do I need to file to start an S-corporation in Virginia?
The documents you need to file to start an S-corporation in Virginia are the Certificate of Incorporation and the Articles of Incorporation. You may also need to file other documents such as the Registered Agent Appointment Form.
Who can start an S-corporation in Virginia?
Any person or business entity can start an S-corporation in Virginia as long as they meet the requirements of the Virginia State Corporation Commission.
What are the benefits of starting an S-corporation in Virginia?
The benefits of starting an S-corporation in Virginia include limited liability protection, tax savings, and the ability to have multiple shareholders.
How long does it take to start an S-corporation in Virginia?
It typically takes about two weeks to start an S-corporation in Virginia once all the necessary documents are filed.
What is the difference between an S-corporation and a C-corporation in Virginia?
The difference between an S-corporation and a C-corporation in Virginia is that an S-corporation is taxed as a pass-through entity, while a C-corporation is taxed as a separate legal entity and pays taxes on its profits.
Can I operate an S-corporation in Virginia without registering with the State Corporation Commission?
No, you must register your S-corporation with the Virginia State Corporation Commission in order to legally operate in the state.
What tax forms do I need to file for an S-corporation in Virginia?
The tax forms you need to file for an S-corporation in Virginia are the Virginia S-corporation Income Tax Return and the Virginia S-corporation Franchise Tax Return.
Can I register my S-corporation in Virginia online?
Yes, you can register your S-corporation in Virginia online with the Virginia State Corporation Commission.
What are the annual reporting requirements for an S-corporation in Virginia?
The annual reporting requirements for an S-corporation in Virginia include filing an annual report with the Virginia State Corporation Commission and filing an information statement with the Secretary of the Commonwealth.
What is the deadline for filing annual reports for an S-corporation in Virginia?
The deadline for filing annual reports for an S-corporation in Virginia is the last day of the sixth month after the end of the corporation’s fiscal year.
Do I need to obtain a business license to operate an S-corporation in Virginia?
Yes, all businesses operating in Virginia must obtain a business license from the Virginia Department of Taxation.
Do I need to obtain a federal tax ID number for an S-corporation in Virginia?
Yes, all businesses operating in Virginia must obtain a federal tax ID number from the Internal Revenue Service.
Do I need to obtain any special permits to operate an S-corporation in Virginia?
Depending on the type of business, you may need to obtain special permits or licenses from the Virginia Department of Professional and Occupational Regulation.
Do I need to appoint a registered agent for my S-corporation in Virginia?
Yes, all businesses operating in Virginia must appoint a registered agent in order to receive legal notices.
What is the minimum capital requirement to start an S-corporation in Virginia?
There is no minimum capital requirement to start an S-corporation in Virginia.
In conclusion, starting an S-corp in Virginia is a strategic choice for entrepreneurs seeking the benefits of limited liability and favorable tax treatment. One can successfully establish an S-corp by following the outlined steps, including selecting a unique name, filing the Articles of Incorporation, obtaining necessary licenses, and adhering to state-specific regulations. Ultimately, this corporate structure offers a strong foundation for business growth and protection, making it a worthwhile consideration for those looking to launch a venture in Virginia.
About Author & Editorial Staff
Steve Goldstein, founder of LLCBuddy, is a specialist in corporate formations, dedicated to guiding entrepreneurs and small business owners through the LLC process. LLCBuddy provides a wealth of streamlined resources such as guides, articles, and FAQs, making LLC establishment seamless. The diligent editorial staff makes sure content is accurate, up-to-date information on topics like state-specific requirements, registered agents, and compliance. Steve's enthusiasm for entrepreneurship makes LLCBuddy an essential and trustworthy resource for launching and running an LLC.