How to Start a Business in Virginia - 7 Steps to Get Started

Virginia's business-friendly laws, diverse economy, and highly skilled workforce make it an ideal place for entrepreneurs to launch small businesses.

CNBC ranked The state as the third best state for business in 2022, behind Washington state, with educators, capital access, and business friendliness as the top three factors.

Excited to start your own business venture? Make sure to follow these steps -

1. Choose Your Business Idea

Before starting a new venture, landing on a good idea is essential to boost your chances of success. So, thoroughly research the market, your ideal customer, and yourself.

Start with:

• Evaluating what you do best and like doing to find a concept that resonates with you.
• Settle on a popular niche with growth potential.
• Spend ample time in market research and study the small businesses in Virginia to uncover any shortcomings you can capitalize on.

2. Make a Business Plan

Once you have a lucrative idea, the next step is to make a business plan outlining your desired business goals and strategies for achieving them and providing a clear roadmap for success.

When writing a plan, make sure it has the following elements:

• A clear executive summary: Write an overview highlighting its key aspects and value proposition.
• Target markets: Determine and evaluate the market or markets where your business will operate, taking into account potential customer segments and expansion opportunities.
• SWOT Analysis: Conduct a detailed study of your firm by examining its Strengths, Weaknesses, Opportunities, and Threats.
• Write Down Your Offer: Describe the offerings of your business, emphasizing their distinctive features, benefits, and competitive advantage.
• Marketing Plan: Outline a clear marketing strategy that describes how your company will connect with and engage with its target market, taking into account the most important marketing channels, messages, and promotional activities.
• Financial Plan: Present a thorough financial plan that demonstrates your company's financial viability and potential profitability. This plan should include projections, budgeting, revenue models, and funding strategies.

3. Choose Your Business Name

• Register your business name: Your business name in Virginia should be unique. Make a list of potential company names, then check to see if they are available using the Virginia business entity search to see whether your preferred name is available in the state.
• Include specific words: You must include "Limited Liability Company" or "LLC" in your company name if you decide to structure your enterprise as an LLC. The terms "Corporation," "Company," "Incorporated," or "Limited" or their abbreviations must be used when referring to corporations.
• Check for federal trademarks: Search the US Patent and Trademark Office website to ensure the federal government has not already trademarked your company name.
• Register an online domain name and social media handles: If you plan to do business online, you must secure a domain name and social media handles. Select a social media handle similar to your domain, legal business name, or DBA, and reserve an online domain name that goes with it.

4. Decide Your Business Structure

Virginia businesses are set up like one of four popular business structures - sole proprietorships, general partnerships, limited liability companies, and corporations.

Sole Proprietorship

If you want to start a small local business with little risk and low overhead, a sole proprietorship structure is ideal.

A sole proprietorship is an informal structure; hence there is no legal separation between your business and you. As a result, if your company accrues debt, creditors may pursue your personal assets to recoup their losses. With this structure, you also won't be able to issue stocks and receive funding.

However, this structure also has benefits, including simple setting up without the requirement for registration and only one tax return since sole proprietorships are pass-through business entities and are only subject to taxation at the owner's personal income level.

How to Form

• Choose a business name.
• File a trade name.
• Obtain licenses, permits, and zoning clearance.
• Obtain a Federal Employer Identification Number.

Partnership

General partnerships (GP), limited partnerships (LP), and limited liability partnerships (LLP) are the three forms of partnerships.

In a GP, there are more owners than in a sole proprietorship. It is a loosely organized, unincorporated business structure that is taxed in a manner comparable to a sole proprietorship. Additionally, the owners have no liability protection.

One general partner and at least one limited partner make up an LP. The general partner manages the company and is liable for all its debts. Limited partners only have accountability for the amount they invested; they are not involved in day-to-day business activities.

Regarding liability protection, an LLP differs from other forms of partnership in that it shields all partners except the one at fault. In other words, if one partner makes a mistake, only they are responsible, not the others. An LLP, like other partnerships, is a pass-through entity for taxation purposes.

How to form

• Decide on a company name.
• Consider submitting your company name as a trademark (optional for GPs).
• Fill out the necessary paperwork: GPs do not require SOS registration; LPs: submit a Certificate of Limited Partnership to the SOS and pay any fees necessary; LLPs: Provide the State with a Certificate of Limited Liability Partnership.
• Acquire an EIN

Limited Liability Company (LLC)

Limited Liability Companies (LLCs) are a highly advantageous option for small business owners. This business structure provides a unique blend of benefits, including the flexible flow-through taxation of a sole proprietorship or partnership coupled with the limited liability protection of a corporation.

By establishing your enterprise as a Limited Liability Company (LLC), you can effectively safeguard yourself and your co-members from any potential personal liability arising from financial obligations or legal disputes that your company may encounter.

The safeguarding feature of Limited Liability Companies (LLCs) is a noteworthy aspect that appeals to numerous business owners, thereby making it a preferred choice of business structure.

How to form

• Define the name of your LLC.
• A registered agent should be found.
• Send the Virginia SOS a copy of your Articles of Organization.
• Make an operating contract.
• Acquire an EIN.
• Open up business accounts.

Corporation

The corporate structure introduces a strong legal barrier between the company and its owners. Although there is a chance of higher costs and more tax compliance, incorporating has many benefits.

A corporation is a separate business entity; hence, it has the same legal rights and obligations as an individual. It can enter into contracts, possess property, pay taxes, and even take part in legal proceedings in lawsuits.

The two primary types of corporations are C corporations and S corporations. C corporations are more common, but they are subject to double taxation, meaning that in addition to paying taxes on their profits, their owners must also pay taxes on any dividends they receive.

With multiple stock classes and limitless shareholders, C corps have more flexibility, even though they must follow strict corporate formalities.

S corps are pass-through entities as opposed to C corps. So, although there's a limit of 100 shareholders and only one class of stock, S corporations offer their owners significant tax benefits.

How to form

• Choose a name for your business entity.
• Appoint directors to manage the operations of the corporation.
• Hire a registered agent in Virginia to handle all official and legal correspondence.
• To formally establish your corporation, submit the Virginia Articles of Incorporation.
• To define internal governance and operational standards, create corporate bylaws.
• Create a shareholder agreement that spells out each shareholder's obligations and rights.
• Distribute and issue stock shares to the shareholders.
• Take all necessary actions to secure the necessary business licenses and permits.

5. Business License and Permits

Virginia does not require a statewide business license. However, there’s licensing or certification requirements for certain professions and occupations.

For example, real estate brokers, engineers, and home inspectors must obtain a state license and alcohol sales require an ABC license. These professional business licenses and permits are regulated and issued by different agencies.

For example, healthcare licenses are issued by the Department of Health Professions, while the Board of Accountancy issues CPA licenses.

6. Consider Buying Business Insurance

To protect your business in Virginia from unplanned disasters, you must have business insurance.

Consider the following -

Commercial general liability insurance

A CGL policy can assist in defending you against monetary demands resulting from accidents, property damage, deceptive advertising, libel, and slander.

Insurance for workers' compensation

Worker's compensation insurance is important because it provides essential coverage for medical costs associated with illnesses and injuries sustained at work. Additionally, it offers disability benefits to workers who have been hurt.

Businesses that employ people should strongly consider this insurance policy because it is an essential safety precaution.

Professionals should have professional liability insurance

Your companies are protected by professional liability insurance in the event of accusations of negligence or willful misconduct. You can defend yourself from potential legal claims resulting from mistakes or errors while performing your work.

Commercial property insurance

If a company's property is lost, stolen, or damaged, business property insurance shields it financially.

Cyber liability protection

Cyber liability insurance is essential for protecting businesses because it offers specialized coverage for various business costs, losses, disruptions, and penalties that may result from data breaches.

7. Open a Business Bank Account

It's crucial to keep your personal finances separate from your business finances, especially when creating a formal business legal structure that limits your personal liability. You can protect your assets from potential risks by avoiding mixing personal and business finances.

Apart from offering personal asset protection alone, separating your finances has several other useful benefits, like effective cash flow management, efficient monitoring of your income and expenses, and long-term planning for your company.