How to start a business in Virginia [Updated 2024]
With a diverse economy and easy access to major US markets, the Commonwealth of Virginia is an ideal place for entrepreneurs to turn their business ideas into reality. Virginia boasts over 800,000 small businesses, making up a significant portion of the state's economic landscape.
Whether you’re planning to start a solo entrepreneur career or launch a new startup with a team, there are several items you need to check off your to-do list. You’ll want a business plan, market insights, and an estimation of your startup costs. Beyond that, you'll need to navigate Virginia’s regulatory landscape to ensure your business stays compliant with local and state laws.
It may sound like a lot but don't worry—our step-by-step guide will walk you through the process, from structuring your business to complying with Virginia’s filing and tax requirements.
1. Name your business
Your business name plays a key role in forming your brand identity and setting you apart from the competition. It’s especially important to make sure your business name complies with Virginia’s regulations:
- Your chosen name must not be used by another business entity registered in Virginia—check the Virginia business entity search to make sure it’s available.
- It must include the right abbreviations, like LLC if you have a limited liability company, or “Corp” if you run a corporation, in accordance with the Code of Virginia.
You can also create a “doing business as” (DBA) name if you plan to have multiple brands under your business name—doing so makes it easier to treat each brand individually without having to register a new business name for each brand.
Once you’ve set the name, register a domain name and relevant social media accounts. Even if you don’t launch your website right away, you want to reserve your business name so no one else claims it.
2. Explore your funding options
Even if your startup costs are low, it’s a good idea to find out what Virginia business grants and small business loans you’re eligible for. You can check out the full list of options at Virginia Business One Stop, but here’s a short breakdown:
- Virginia Small Business Financing Authority (VSBFA) Loans and Grants Program: This program helps Virginia's small businesses get the funds they need to start or expand their operations.
- The Small Business Administration (SBA) Loan and Grant Programs: These federal programs offer starter loans, investment capital, disaster relief, and more.
- Local Initiatives Support Corporation (LISC) Virginia: This non-profit supports community development organizations with a range of loans, grants, and equity investments.
3. Decide on your business structure
The next step is deciding on your business structure. There are a few common business entity types you can set up in Virginia, with sole proprietorship being the simplest and most popular type of business structure.
Here’s an overview of five common business structures—the right option for you depends on your unique business needs.
Business type
What is it?
Pros and cons
Sole proprietorship
Unincorporated business owned and run by one individual
✔ Low set-up and maintenance costs.
✔ No formal business structures or complicated rules to follow.
✔ Since you’re the sole owner, you have complete control over the business.
✘ You take full personal liability should anything go wrong.
✘ Less attractive to investors because you can’t sell stock in the business.
Limited liability company (LLC)
Hybrid legal structure that combines elements of corporations and partnerships, with one or more owners
✔ Personal liability protection.
✔ Easy to operate, with less registration paperwork than an S-Corporation.
✔ Members can distribute profits as they wish, with few restrictions.
✘ The entire net income of your LLC is subject to self-employment taxes.
✘ Limited life: You might need to dissolve your Virginia LLC if one member leaves, unless there’s a specific agreement in place.
Cooperative
Business organization owned and operated for the benefit of those using its services
✔ Many funding opportunities available.
✔ No “double taxation”—members are only taxed once on their income.
✔ Democratic: Regular members have voting power, and the amount of shares they hold does not affect the weight of their vote.
✘ Harder to get capital from investors: Larger investors might choose to invest elsewhere since shares don’t affect decision-making power.
✘ Business depends on membership and participation.
Corporation
Legal entity owned by shareholders
✔ Easier to raise funds.
✔ Attractive to potential employees, thanks to competitive benefits and the option to buy stock.
✔ Shareholders’ personal assets are protected.
✘ “Double taxation”—the corporation pays income taxes on its profit, and shareholders pay taxes on dividends they receive.
✘ Costly and time-consuming to set up and operate.
✘ Extra paperwork and record-keeping responsibilities.
S-Corporation
Special type of corporation created through an IRS tax election
✔ Tax savings: Profits pass directly through owners' personal income without being subject to corporate tax rates.
✔ Business expense tax credits for shareholders/employees.
✘ Strict filing and operational processes, like shareholder meetings and maintaining records.
4. Register your business in Virginia
When you have any business activity in Virginia, you need to:
- Register your business online, by mail, or by fax.
- Submit articles of organization (for LLCs) or articles of incorporation (for corporations) with the Virginia State Corporation Commission (SCC). They file your business formation documents in about one business day.
- Pay a filing fee, which varies depending on your entity type. For example, the fee for corporations is based on the number of authorized shares.
Virginia Tax has a step-by-step video guide on how to register your business, but here’s what you’ll need to get started:
- Your Employer Identification Number (EIN) (more on that below)
- Key business information like your legal business name, primary business address, and mailing address
- Your business entity type (as seen above)
- Your North American Industry Classification System (NAICS) code (you can look it up here)
- Your tax type and the date you’ll begin your business for tax purposes
5. Decide on a registered agent
When registering your Virginia business, one crucial task is designating a registered agent. You’ll need one whether you formed your business in Virginia, or just do business in the state. This person or service—whether it's you or a professional —is listed on your company’s statement of information and handles tax and legal documents on behalf of your business.
You can be your own registered agent if you’re a Virginia resident, but if not, you'll need to hire a professional. Their services come with an annual cost ranging from $100 to $300, depending on factors like the length of engagement and speed of service. For example, you can opt for same-day document access, live support, and other guiding resources. Many registered agents offer hefty discounts for your first year, so make sure you know what the full cost will be when you renew the service.
6. Apply for an Employer Identification Number
All businesses typically need an Employer Identification Number (EIN)—also known as a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number. This nine-digit code is like a Social Security number for businesses. You’ll need it to open a business bank account, get a business credit card, pay your taxes and employees, apply for loans, and other key tasks.
You can apply for an EIN online for free, and get it immediately.
7. Get up to speed with Business Tax Credits
Look into how you can reduce your tax liability by reviewing Virginia’s tax credits, deductions, and subtractions. For example, here are some common business research, development, and investment credits:
- Major Business Facility Job Credit: A credit of $1,000 per new job created beyond the qualifying threshold amount
- Major Research and Development Tax Credit: Income tax credit for businesses that had more than $5 million in qualified research and development expenses during the year.
- Worker Training Tax Credit: Tax credit that helps cover the costs of providing employee training.
8. Stay on top of filing requirements and taxes
Corporations in Virginia need to file annual reports with the SCC. These reports provide updated information about your company’s management and operations, including:
- Business name and address
- Registered agent information
- Number of authorized shares
- Director and officer information
Your company’s tax requirements depend on your business structure:
- Sole proprietors: Pay taxes on all business income through your personal income taxes (there’s no distinction between the business owner and the business itself).
- Corporations: File annual income tax returns and pay any tax due electronically.
- S-Corporations, partnerships, and LLCS: As a pass-through entity, you must file an annual Virginia income tax return on Form 502 or Form 502PTET.
Additionally, if you sell, lease, distribute, or rent tangible personal property to customers in Virginia, you need to collect and pay sales tax. The sales tax rate for most locations in Virginia is 5.3%, but some cities and counties have a different rate.
9. Find a payroll solution
Whether you plan to hire employees or contractors in Virginia, there's a lot to consider. First off, you want to make sure you're classifying workers correctly so you don't get hit with fines. You also have to watch out for overtime rules—if someone works over 40 hours a week, you have to pay them 1.5 times their normal wage. And don't forget, Virginia’s current minimum wage of $12 is higher than the federal rate.
When it comes to paying your people, automated payroll software is a must. A solution like Rippling can take out all the tedious manual work from payroll and help you stay compliant with state-specific laws. With Rippling Time & Attendance, you can automatically track how many hours people are working, and set up alerts for when someone's about to hit overtime. Once you approve the hours, just hit "Submit," and Rippling does the math, giving you net pay and tax figures in a snap.
Hiring globally? Rippling has you covered there, too:
- Pay everyone, no matter where they are or what currency they use, all in a single pay run.
- Include all types of workers, whether they're hourly, salaried, or contractors.
- Keep track of your global workforce, systems, and data in one central place.
10. Support and scale your growing business with Rippling
As your business takes off, you'll need a Human Resource Information System (HRIS): software that makes running your HR tasks a breeze, whether it's hiring new people, getting them onboarded, sorting out payroll, or managing benefits.
The sooner you start using an HRIS, the smoother your growth journey becomes, especially if you're thinking about expanding your business worldwide. And when that time comes, Rippling has all the tools you need to handle your global workforce, all within one system:
- Hire, pay, and manage your team, whether they're in Virginia Beach, Richmond, or halfway around the world.
- Stay on top of all local, state, and federal regulations.
- Bring together all your employee benefits, like health insurance and 401(k), and let the system do the heavy lifting, from enrolling new hires to managing COBRA.
- Keep all your recruiting info fresh and up to date, from job openings to new hires, and automate every aspect of the hiring process.
FAQs about setting up a business in Virginia
Do I need a business license in Virginia?
No, Virginia doesn’t legally require a statewide business license, but you might need certain licenses or permits depending on your industry. For example, medical professionals, lawyers, real estate agents, and architects need to apply for occupational licenses with the Virginia Department of Professional and Occupational Regulation.
Do I need a business bank account when launching a business in Virginia?
Virginia doesn't have a specific state law that mandates businesses to have a separate business bank account. But opening a business account is a wise choice to keep track of your finances and make filing taxes easier. Plus, you’ll need a business bank account to pay employees.
Do I need to get business insurance?
Businesses with two or more employees in Virginia must have workers’ compensation insurance, which provides coverage for medical expenses and lost wages for employees who are injured on the job. Unless you have employees, you aren’t legally required to get business insurance in Virginia.
That being said, getting different types of insurance will help you protect your business and assets—whether you have a Virginia corporation or sole proprietorship. Some examples of common insurance options in Virginia include professional liability insurance, general liability insurance, commercial property insurance, and cyber liability insurance.
What are Virginia’s state payroll taxes?
All Virginia businesses need to pay Unemployment Insurance taxes, and file the returns—Web Upload is a simple way to do so.
Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.
