How to start a business in Virginia in 8 steps
Starting a business anywhere in the United States is an exciting venture, but for residents of Virginia, the prospect of becoming wildly successful is even more appealing. Studies have shown that this state, more than any other, offers a low cost of doing business coupled with a high quality of life, allowing entrepreneurs to truly thrive.
Business owners looking to make a name for themselves here will have a list of tasks ahead of them before they officially open their doors, but thankfully, starting a company in Virginia is fairly straightforward. If the entrepreneurial bug has bitten you and you just can’t wait to hit the ground running with your ideas, take a look at the 8 steps involved in turning your dreams into a reality.
1) Think about the type of business you want to start
Some small businesses aim to offer revolutionary services that no one has ever thought of before, while others like to reinvent the wheel a bit and provide goods at much lower prices than their competition. Whatever is driving you to become an entrepreneur, it’s a good idea to think about your business before proceeding with the steps below.
Consider your competition and spend some time doing a bit of market research, exploring other Virginia businesses in your desired industry. Try to find out what they’ve done well and how you think your company could do things better. Every startup will naturally encounter challenges along the way, so having a business plan written out ahead of time will pay off if and when things get complicated.
Above all else, business owners should be completely honest with themselves and consider if the entrepreneurial path is right for them. While the potential for monetary success and personal fulfillment is high, running your own company requires an immense amount of time and money. For some, the stress is too great, while others thrive under this type of pressure.
2) Set up your legal structure
Every existing business entity in Virginia has been created with a specific format in mind. Your business structure may dictate how you’re taxed and what happens to your profits in certain situations, so we advise that you take the time to weigh all of your options and select the legal structure that makes the most sense for your needs:
- Sole proprietorship: Sometimes, your business needs may not require employees, a storefront, or any other formal type of organizational structure. In this instance, a sole proprietorship might be right for you. These individuals have the most flexibility and aren’t required to file any paperwork Virginia State Corporation Commission. However, sole proprietors should note that their personal assets are not protected in the event they fall into business debt or if a client or customer sues them.
- General partnership: If you and your best friend have an amazing business idea, a general partnership might be the best legal structure for your company. Like a sole proprietorship, a general partnership doesn’t require you to file any documents with the SCC. Keep in mind that both you and your business partner will be equally responsible for business expenses and any losses that the company incurs. Unless you form a limited partnership, your personal assets will not be protected.
- Limited partnership: Small business owners in Virginia could decide that one partner is better positioned to take on risk than the other and may conclude that a limited partnership is the best business structure for them. One individual will hold more power as the general partner while the other will be named the limited partner. This structure can be beneficial as a limited partnership is recognized as a separate business entity from its owners.
- Limited liability company (LLC): A popular choice for many types of businesses, an LLC blends the convenience of minimal paperwork along with the reassurance that debt or a lawsuit cannot affect your assets. This kind of business formation requires you to file articles of organization with the Virginia SCC and appoint a registered agent to accept legal documents on the company’s behalf. While not legally mandatory, it’s also smart to develop an operating agreement for your LLC.
- Corporation: Those with big dreams for their new business may want to form a corporation but should know that this is perhaps the most complex business structure there is. To start your corporation, you need to file articles of incorporation with the SCC and appoint a registered agent. You’ll also be held responsible for selecting a board of directors, drafting bylaws, and holding regular meetings. Virginia business owners can be recognized as an S corporation or a C corporation depending on their tax goals.
Additional types of business structures may be an option depending on your company’s goals. Small businesses looking to formalize themselves as a nonprofit, professional LLC, registered LLP, or another choice will want to contact the SCC to learn more. Remember, as time goes on, you can change your business structure if needed, although it may be time-consuming to do so.
3) Name and register your business
Thought by many to be one of the most fun aspects of creating a business, selecting your business name shouldn’t be taken lightly. Not only does your name help to distinguish you from the competition, but it’s something that you can infuse some personal meaning into. Once you’ve decided on your new moniker, it’s best to ensure it hasn’t already been taken by performing a business entity search on the SCC website.
If you need time to think about it, you can fill out an Application for Reservation or for Renewal of Reservation of a Business Entity Name, pay a filing fee of $10, and hold the name for up to 120 days. Business owners ready to move forward will be using this alias when they fill out the paperwork associated with their preferred business structure.
You should note that sole proprietors often use their legal name when referring to their company or services; however, they don’t always have to. Should you want to use a DBA, or doing business as, you’ll need to complete a Certificate of Assumed or Fictitious Name and file it in the county you operate in.
4) Apply for licenses and permits
Each step on the path to forming a business in the state of Virginia will look slightly different depending on your company, and applying for licenses and permits is no different. While Virginia doesn’t issue a statewide business license, that doesn’t mean you can forego this process entirely.
Various state agencies may issue a range of options based on your needs, so when in doubt, check with the Virginia Department of Professional and Occupational Regulation to learn what’s needed so that your company is compliant. You may also need to explore obtaining a professional or occupational license as well.
Business owners who sell goods will also need to register with the Department of Taxes to collect sales tax, a notable part of your day-to-day income. Remember, most licenses and permits need to be renewed annually, so it’s wise to make a note on your calendar and keep some room in your budget for any fees you might need to pay.
5) Choose a location
Unless you’re working from home, you’ll probably need a brick-and-mortar spot for your small business. The hunt for real estate can be super exciting, so much so that business owners often try to put this step first in their process. Even if you’ve come across the perfect place to run your company, keep in mind that you won’t be able to legally open your doors until you’ve formalized your company and obtained all necessary licenses and permits.
Depending on the type of organization you’re about to operate, there may be specific zoning requirements. Along with making sure you can conduct business in your desired location, you’ll want to consider your surroundings as well. Are there many businesses in your desired area, or is this a largely residential part of town? What’s the foot traffic like? Is it affordable to stay in this neighborhood even if business dies down?
There’s far more to selecting your location than initially meets the eye, but with some careful planning and some patience, you’ll be able to secure the spot of your dreams.
6) Open a bank account and prepare for future taxes
Business owners who establish a business bank account can consider themselves in the home stretch as these final few logistical steps will set the foundation for a successful company. It’s advised that all entrepreneurs, even sole proprietors, apply for a Federal Employer Identification Number sooner rather than later, as it can help when applying for loans or business credit cards.
When it comes time to file your tax returns, this tax ID will inform both the IRS and the state of Virginia about the source of your profits and losses. Business taxes are inevitable, but it’s smart for business owners to work with a CPA to ensure they pay the correct federal and state taxes based on their business structure.
7) Purchase business insurance
After all of the hard work you’ve put into starting your own company, it would be devastating if an unexpected situation forced you to close your doors. For the ultimate peace of mind, you must enroll in small business insurance. A range of policies is available to meet your specific business needs, with general liability insurance or professional liability insurance often topping the to-do list.
If you hire employees now or in the future, you’ll also need to enroll in workers’ compensation insurance if a staff member becomes sick or injured on the job. Even ultra-successful businesses can become financially crippled due to a workers’ comp claim if they are uninsured, so it’s best to make this coverage a priority.
To learn more about the small business insurance options in Virginia, visit Huckleberry. Startups can get a free online quote in just a few minutes, and you can find the best policy options that meet your business needs. At the end of the day, you’ll rest easy knowing you’re protected no matter what happens.
8) Create a marketing plan, hire employees, and more
Hard work is never truly done when you’re an entrepreneur, but you’ve completed most of the heavy lifting by this final step. What you do next is largely based on your specific business goals, and if you’re not quite sure, various business resources, including the SBA, can help point you in the right direction.
At this stage, hiring employees might be next on your to-do list, or you may want to connect with other local business owners to create word of mouth. You could already have a robust marketing plan that’s ready to execute and might spend your time building your social media presence or developing a great website. As the leader of your company, you get to decide what’s next on the horizon.
Opening a business in Virginia is an incredibly rewarding endeavor that’s certainly not for the faint of heart. While each step in the process brings its own set of hurdles, there are always resources available to help you figure out what’s next.
As you’re fleshing out your list of action steps, don’t forget about small business insurance. Business owners can visit Huckleberry and explore a range of options, get a free quote, and even enroll in a new policy in just a few minutes, freeing up your time for other important business decisions.