The to-do list:
- January 27, 2010
‣ Choose an operating entity
Before you register a business you must select an operating entity. There are several types to choose from, each offering different taxation and liability conditions. A basic description is below, but the chart on the previous page offers more details. A tax lawyer and accountant can help you understand the implications of which business model would work best for you.
1) Sole proprietorship: This is the simplest form of business organization. In most cases, you may need only an occupational license or permit. You are responsible for any liabilities, and income is taxed on an individual’s return. Partnerships do not need to register with the State Corporation Commission.
2) Partnership: This arrangement includes two or more people. Partners are responsible for all liabilities. Income flows to partners through their individual tax forms based on their share of the partnership. A limited partnership is similar, but one owner is a general partner, while others are limited partners, reducing their liabilities.
3) Corporation: A corporation creates a new entity, which is taxed separately from its shareholders. This entity insulates business founders, because they are not responsible for the company’s liabilities. Corporations can sell shares to stockholders. The main disadvantage of this entity is that income is taxed twice, once as corporate earnings and a second time as income for the shareholders. Corporations must register with the State Corporation Commission.
4) Limited liability company (LLC): LLCs combine the flexibility of partnerships, but liability protection of corporations. LLCs are separate entities than the business owners, shielding the owner from liability. LLCs must file articles of organization with the State Corporation Commission.
‣ Access the Business One Stop
Need to find out which forms you must fill out for your specific business? The Virginia Department of Business Assistance’s Business One Stop system is a convenient way for business owners to navigate the many forms and registrations required to start a business in the commonwealth.
For a $20 fee, users can create an account for their business, which will populate required forms for agencies in the commonwealth. It will also develop customizable lists of which fees, forms and registrations are required for your type of business.
The Business One Stop system can be found at http://www.vdba.virginia.gov
‣ Naming your business
Know what you want to name your business? Check whether the name you want is available with the State Corporation Commission by calling (804) 371-9733. Avoid names that could be confused with national brands to avoid unwanted legal problems. Large companies aggressively protect their brands.
‣ Register with the State Corporation Commission
Most companies are required to register with the SCC. Contact the SCC if you plan to do business under your business name or a trade name (commonly called a “dba” or “doing business as”), to sell securities, to use a trademark or to operate a franchise. Visit http://www.scc.virginia.gov/division/clk for information, or call (804) 371-9967.
‣ Create a business plan
Putting together a detailed business plan is vital to organize and clarify your business’ missions, market, finances and the benefits you can provide to consumers. Businesses that do not create a detailed, well-thought business plan are more likely to fail. Include potential problems and how you plan to finance your company. Update this document when necessary.
‣ Find financing
Businesses will need to pay some sort of startup costs. Figure out how much money you need and how much you can provide to determine what you will require from other sources. A major failure of some businesses is not having enough capital. See page 10 for details.
‣ Check local requirements
Contact the locality where you want to base your business to learn what licenses are required. Also, contact the local planning/zoning department to make sure your property is zoned for specific business activities. For example, an at-home daycare business may require a zoning amendment and restricted hours.
‣ Register for Virginia taxes
All Virginia businesses must register with the Virginia Department of Taxation. Contact the department at http://www.tax.virginia.gov or by calling (804) 367-8037. You will need to have a federal tax employer identification number (EIN) from the Internal Revenue Service. Visit http://www.irs.gov to request a SS-4 form need to get an EIN number. More information on taxes is available on page 13.
‣ Virginia Unemployment Insurance
If you hire employees, you will need to pay unemployment insurance tax. The Virginia Employment Commission will assign your business an account and send you an Employee Handbook. This will explain reports, notices, requests for information and other communications you will receive from the VEC. For more information, visit http://www.vec.virginia.gov
‣ Labor regulations
All Virginia companies are required to comply with state and federal labor laws and safety regulations. For guidance, contact the Virginia Department of Labor and Industry at (804) 371-2327 or visit http://www.doli.virginia.gov