Many Virginia residents dream of starting their own business, but are often unsure about how or where to begin.
Thankfully, starting a business in Virginia is actually quite simple.
In fact, Virginia was recently named as America's top state for business in 2021, pulling ahead of both North Carolina (2nd) and Utah (3rd) by a decent margin with excellent scores in metrics such as Cost of Doing Business, Infrastructure, and Quality of Life.
However, while it's quite easy to start a business in Virginia, maintaining and growing that business can be a bit more difficult.
For this reason, you'll want to make sure you start off on the right foot when you begin the entrepreneurial process.
In this article, we'll briefly cover the ten steps you should follow in order to register and grow a strong business in Virginia.
We'll also provide several actionable tips you can take to put your best foot forward as you launch this new chapter in your life.
Before we begin, however, you should note that nothing in this article constitutes legal advice.
This article simply lists a few basic steps in the business formation process. Always speak with both an experienced attorney and an accountant before registering a new business in Virginia.
Contents:
Step 1: Choose an Idea
You may already have an idea in mind for what you want your business to be.
Whether that's a scented candle shop or a stiff and proper investment corporation, every business begins with the germ of a brilliant idea bouncing around an entrepreneurial mind.
However, it's important that you take a moment to sit down and consider all the implications of your business idea before you begin to plan out the overall shape of your business.
Just like how an ice dispensary may not be profitable in Alaska, you should take the time to gauge potential interest in the location where you want to start your business.
Spend an afternoon searching for comparable businesses or other potential problems that might arise as a result of your business idea.
What distribution channels are available in your area? Is there an over- or under-abundance of similar businesses in the region? What audiences are you planning to tailor your idea for?
You should take all of these issues into consideration before devoting significant time and resources into a new business.
Make Your Elevator Pitch
A useful solution to this problem can be summarized in one simple question:
If you had to pitch your business to someone you just met in an elevator, how would you convince them to buy or invest in your product or service?
This pitch should be a brief, concise, carefully planned overview of your business that you can deliver over the course of a single elevator ride.
For example:
"My name is Robert and I have a decade of experience in fixing faulty wiring in older homes. I'm starting a new business with my friend David, who has similar experience in plumbing. Our business offers a more comprehensive service package to clients on a budget than other comparable businesses in the area."
An elevator pitch can also be useful beyond your initial elevator ride, as you can often repurpose it as the hook of a longer business pitch or plan.
Basic Business Planning
Failing to properly plan out the basic elements of your business will only lead to disaster down the road.
At a bare minimum, you should have quality, detailed answers to all of the following questions before progressing any further towards starting your business:
- What problem does your business solve, and what Unique Selling Proposition (USP) sets you apart from the competition?
- Who is your audience, and how will you attract this audience to your business?
- Who will you need to pay as a part of doing business? For example, do you need a secretary, receptionist, or cashier? Factor their costs into your business plan.
- How will you break even? Make a basic spreadsheet and calculate an estimate for the number of clients or sales you'll need per month in order for your business to stay out of the red.
You'll have to answer these questions in your business plan later on, but defining them as early as possible is a great way to set up your business for success.
Step 2: Choose Your Legal Structure
Most new businesses choose to register as Limited Liability Companies (LLCs) due to the various tax advantages and general flexibility of this kind of legal structure.
After you've decided on the basic gist of your business, you should begin to think about the legal structure of your new company.
Despite what you may have heard, this step is actually incredibly easy. In fact, you may have already formalized a kind of legal structure without even realizing it.
An Introduction to Legal Structures for Small Businesses
In Virginia, your business gains an informal legal structure the moment you make your first official sale.
Specifically, as a direct result of "doing business" for the first time, your business become a sole proprietorship. If you have a partner (or multiple partners), your business instead automatically becomes a partnership.
These are specific, detailed legal terms which automatically provide certain protections and restrictions to your business:
- Sole Proprietorship — A legal structure assigned to any individual, who has yet to formally incorporate their business with the Virginia SCC, who is doing business under his/her own name, or under an assumed or fictitious name.
- Partnership — A legal structure assigned to any association of two or more people, who have yet to formally incorporate their business with the Virginia SCC, who are doing business under their own names, or under an assumed or fictitious name.
As simply one example, engineering firms that "do business" automatically gain one of these two definitions, and are thus bound by laws regarding engineering sole proprietorships and partnerships.
If that firm would like to follow a different set of laws (usually for tax and liability reasons), then they would have to register for a more formal business type (such as an LLC).
Similarly, as the owner of a sole proprietorship you, individually, are responsible for paying taxes on all earnings for your business.
Importantly, sole proprietorships and unregistered partnerships are actually relatively uncommon in the business world.
This is because the owner (or owners) are generally held personally liable for any debts, lawsuits, and other unwanted effects of a failed or failing business.
The (Usually) Correct Option: Registering an LLC
While the total number of S Corporations still outnumber LLCs at a rate of almost 2:1, new business owners registered LLCs at more than twice the rate of S Corporations in 2015, the most recent year the IRS has published Integrated Business Statistics via their Statistics of Income Business Tax Stats page.
In order to protect yourself from being liable for your company's dealings, you should strongly consider registering your business as a Limited Liability Corporation (LLC).
If you are the sole owner, or "member," of your business, you should consider making a Single Member LLC.
If you are operating a business with partners, you should instead set up a Multi-Member LLC.
LLCs are generally easier to set up and manage than more strict legal structures such as corporations, and offer broad protection to the owners, both in taxes and business liability.
Further, registering an LLC in Virginia can cost as little as a few hundred dollars if you're willing to put in some work towards registering it yourself.
While legal structures such as S Corporations are common for larger businesses, they're generally not the right fit for many small businesses.
If a different legal structure is advantageous for your business, your attorney will generally tell you so.
Otherwise, registering as an LLC is a safe and easy way to protect not only your business, but yourself.
Additional Legal Structure Considerations
Once you have a basic idea of how you'd like your business to be structured, you should perform a few housekeeping tasks to help prepare for the next steps.
As simply one example, you'll have to get a Federal Employer Identification Number (EIN) from the IRS in order to file your taxes.
This ID number is basically a Tax ID Number for your company, and serves to identify your business on most official documents.
Without an EIN, you cannot hire employees or open a business account at your bank.
Similarly, if you plan on hiring employees, you'll have to register with the Virginia Employment Commission (VEC).
This commission is responsible for collecting unemployment tax, and also manages other business-related tasks.
Step 3: Choose a Name
Business names should be unique and memorable, and should convey the values you wish to present to the world.
Picking a business name is easier said than done.
Having a name that's too generic can leave your business unnoticed, while having a name that's too specific can limit or ostracize your customer base.
Further, choosing the wrong name can open you up to significant legal complications down the line, such as if you accidentally infringe on another business's trademark.
For these reasons, you should sit down and have a full planning session to create a solid, legally stable name for your new business.
In this session, you should broadly consider (1) what you want your name to represent, (2) the impression you want your name to leave, and (3) the legal ramifications of choosing such a name.
For example, "Al's Discount Car Emporium" offers a different branding opportunity to "Penguin Imports," as the first would likely count as a "descriptive" mark while the second would count as arbitrary.
In this example, "Al's Discount Car Emporium" might have better brand recognition due to the owner's name.
However, "Penguin Imports" would carry stronger trademark protections, since it would fall under the "arbitrary" mark category (unless, of course, you're in the business of importing penguins).
As an aside, this is why many tech startups choose seemingly random and fanciful names for their businesses, as it's easier to gain legal protections for a name like "Buffer" than it is for "Social Media Posting Platform."
Create or Purchase a Thorough Trademark Search Report
The easiest way to determine the strength of your name is to consult with a lawyer about it.
Especially if you plan to grow your business at a later date, hiring a lawyer is almost essential to protecting your name and brand from infringement (and infringement lawsuits).
An attorney can advise you about when and how to pursue registering a trademark for your business.
They can explain the difference between intent-to-use and used-in-commerce trademarks, as well as give you practical advice for submitting a strong trademark application.
Why Do I Need a Trademark Search Report?
Trademark search reports are detailed documents that outline the availability of potential trademarks, the status of comparable or "confusingly similar" marks, and any other relevant information that will assist you in deciding on a particular brand name, logo, or other defining element of your business.
A detailed trademark search report will outline any potential problems that might arise as a result of using a particular name or mark "in commerce."
Put another way, performing a thorough trademark search can help you avoid expensive trademark litigation down the line should you accidentally infringe on another brand's name or mark.
For instance, a comprehensive trademark search will normally go through trademarks in all 50 states in addition to any federally registered marks.
It will then list any registered and unregistered marks that may have common law priority over your own.
For this reason, it's almost always advantageous to obtain a thorough trademark search report from an experienced business attorney or similar vendor.
If you choose to complete this step yourself, you should start by searching for your business name on the Virginia State Corporation Commission Business Entity Search.
Note that you can reserve an available name for 120 days by filing an Application for Reservation or for Renewal of Reservation of a Business Entity Name with the SCC.
Registering Your Name as a Trademark
Despite what other online guides may state, actually registering your business name as a trademark is not necessary for the success of your business.
In fact, you'll gain limited trademark protections simply by doing business in your local area.
However, if you want to do business online, or if you expect to expand your business outside of your local city or town, you'll want to at least consider the additional brand protections offered by a federal trademark.
This is generally a step you should consider after you get your business off the ground.
However, if you'd like to get a head start on this process, you should look into filing an "Intent-to-Use" application for your desired name or mark.
On a related note, remember to keep a record of the first transaction you make under a new brand name or logo.
This will determine the priority date for your trademark should you decide to formally register your branding in the future.
Step 4: Pick a Location and Follow Local Zoning Regulations
Screenshot taken from https://library.municode.com/va/richmond/codes/code_of_ordinances for the search term "barber."
While you don't need a new brick and mortar location to start a business in Virginia, establishing one certainly helps.
Especially if you work from home, you should take a moment to check out your local zoning laws to make sure you aren't breaking any regulations.
You can check out your local city or county's ordinances through an online database such as municode.com.
Step 5: Make a Plan for Your Business
Starting your business generally means solidifying your ideas on paper in a way that shows the potential for profitability.
You need to prepare a specific set of detailed documents in order to register a business in Virginia.
In general, your business registration packet should include all off the following, even if some of the components aren't formally required by Virginia law:
- A Detailed Business Plan – Write out a convincing executive summary, solidify your financial forecasts, define and analyze market perspectives, and generally have a plan for your business.
- Articles of Organization (When Forming an LLC) – You'll have to file these articles with the Virginia SCC. This includes a filing fee of $100. (When registering an LLC in Virginia, this is handled automatically when you file online)
- Articles of Incorporation (When Forming a Corporation) – Same process as when filing Articles of Organization. However, you'll have to submit a different form.
- Registered Agent Designation – Every Virginia business needs to have a registered agent with a physical street address in Virginia. Many businesses choose their attorney or accountant.
- A Detailed Operating Agreement – While not required by Virginia law, creating a detailed operating agreement is important for establishing a strong business.
Note that the documents we're linking to are merely examples, and may not apply in your particular situation.
Please consult the Virginia SCC Forms and Fees page for the current versions of any documents you plan on filing.
Step 6: Take Care of Your Finances
Make sure to account for all of the potential costs and fees related to starting your business, such as lease payments, inventory management software, and hidden costs such as unemployment insurance.
Strong businesses are supported by strong financial frameworks.
Before you open your doors, you should take some time to perform a few necessary tasks for preserving the financial (and legal) health of your business.
Generally speaking, you should complete all of the following tasks as soon as possible after you decide to start your business:
- Open a new bank account and take out new business credit cards.
- Register your business for taxes, and take steps to ensure compliance with all relevant tax laws.
- Set up a detailed accounting and billing framework to keep track of your income and expenses.
We'll detail each of these tasks below.
Open a New Bank Account
When starting a new business, it is necessary that you open a new and separate bank account for your business.
Having separate accounts is a must for both personal and business asset protection.
Failing to create a separate bank account for your business is a massive and totally unnecessary risk that you should avoid.
The legal term for this risk is "piercing the corporate veil," as a wide variety of situations can "pierce" the veil between your personal assets and those of your business.
Failing to maintain a formal separation between your business and personal assets may lead to a lawsuit against your business, for which you individually may be held liable.
For this reason, you should always open a separate bank account and apply for separate credit cards before you begin to do business with your new company.
Register for Taxes
We mentioned earlier in this guide that you'll need an Employer Identification Number (EIN) to register your federal taxes and perform other important business tasks.
However, in order to legally start up and operate your new business in Virginia, you'll also have to register your business with the Virginia Department of Taxes (DOT).
There are multiple levels for this registration. However, the two most important are:
- Virginia Pay Sales and Use Tax – If you are selling goods and services, the Virginia Department of Taxes will have to collect sales tax.
- Virginia Withholding Tax – If your business has employees, you'll have to register for employer withholding taxes.
You can register for both of these, as well as other business taxes, either online or on paper using Form R-1, Virginia Department of Taxation Business Registration Form.
An Additional Note on Business Taxation
Make sure to account for the taxes you'll have to pay throughout the year, both for your business and for yourself (if you choose to register as a pass-through tax entity).
Again, the tax impact can change depending what business form you have chosen.
Take the time to really learn about the tax code for your specific legal structure, or schedule a meeting with your attorney or accountant to discuss the issue.
For example, members of LLCs have to pay personal state taxes on their share of the business income.
Meanwhile, the LLC itself, while functioning as a pass-through tax entity, must still file an additional tax form on this income, as well as an annual financial report.
Set Up Accounting and Billing
Creating a professional accounting environment for your new business is just as essential as creating separate business accounts.
Protecting your personal property and your business assets should be your priority right from the start of your new venture.
As an added bonus, keeping track of your business's finances can help you make informed decisions by giving you important data about how your business operates.
In general, you should hire a professional accountant to help with this process.
If this isn’t feasible, downloading quality accounting software can make the transfer of your information to an account far less complicated should you choose to hire one at a later date.
Regardless of whether you choose to do it yourself or outsource, you must keep a detailed record of any and all business transactions.
As part of this process, you should also set up systems for paying your employees, keeping track of business expenses, and sending customers invoices or bills for your services and products.
Step 7: File for a Virginia Business License
All businesses need to apply for and receive a business license from their local government office before they can begin operations.
As a general rule, your business will need different permits and licenses based on (1) what you're selling, and (2) how you've structured your business.
Bear in mind that virtually all Virginia businesses will need some kind of business license to lawfully operate.
To begin, contact the Virginia Department of Professional and Occupational Regulation to talk about any licensing requirements you may have.
You can also view some basic information about this process on the VDPOR application website.
You should note that Virginia does not have a single license that pertains to all business types.
Instead, you may have to apply for a different permit or license depending on the product or service you're selling, the structure of your business, and the location you're operating in.
For example, Virginia barbers need to complete a training program and pass a written and practical exam.
Additionally, all businesses operating in Virginia, with the exception of sole proprietors and partnerships, must register with the SCC before opening their doors.
On top of that, many of these businesses must also renew this registration yearly.
Similarly, Richmond requires different permits based on the goods and services your business offers.
Because many local business licenses are set by city ordinances, these licenses and permits are often subject to change without notice.
Make sure to check with your local government for the most up to date information on the requirements your business needs to satisfy for that area.
Step 8: Purchase Business Insurance
Most businesses carry some form of business insurance to account for large, unexpected costs such as lawsuits, workers' compensation claims, and unemployment.
Business insurance is an optional but essential part of any new venture.
Insurance provides a safety net for your business, allowing you to manage potential risks and grow your business without having to worry about potentially catastrophic incidents.
When you start a new venture, you want to make sure that your investment is safe by purchasing the correct type(s) of insurance.
Business Insurance Basics
The most common types of business insurance in Virginia that you should keep in mind are:
- General Liability Insurance
- Workers Compensation Insurance
- Professional Liability Insurance
All small businesses, even home-based ones, should purchase a general liability policy. Businesses that own and operate company vehicles should also purchase commercial car insurance coverage.
Failing to do so only sets your business up for failure. Plus, general liability insurance is (relatively) cheap in the grand scheme of things.
In a similar fashion, all small businesses should purchase workers compensation insurance.
This type of insurance will protect you should you or one of your employees become injured while on the job.
Most importantly, Virginia businesses with two or more employees (excluding the owner) must purchase workers compensation insurance, as required by Virginia law.
Finally, businesses that offer professionally-based services (such as consulting or accounting) should also consider purchasing professional liability insurance.
This type of insurance offers protection against negligence claims made by current or former clients, and will pay out any damages awarded in such a civil lawsuit.
Step 9: Define Your Branding and Marketing Plan
Most small businesses spend somewhere between 3% and 8% of their gross annual revenue on marketing.
Developing and implementing a cohesive brand strategy can be one of the most difficult steps in marketing your small business.
However, it is by far one of the most effective ways to drive business to your new venture.
Your brand's identity is like the face of your company.
It affects how people perceive your business, as well as defines the likelihood that an otherwise unqualified lead will choose to purchase your goods and services.
As noted by marketing author Laura Lake:
"Your brand strategy identifies three core components of your business, which can then be used as a blueprint for developing your marketing strategy and tactics."
How to Develop Your Brand Strategy - The Balance Small Business
These three core components are purpose, consistency, and emotional impact.
First, your business must have a clear and well-defined purpose so that new clients immediately understand what you're about.
Second, your branding should be consistent so that there is no miscommunication or muddling of your core brand message.
Finally, your branding should carry emotional weight to help build relationships with customers.
Marketing is entirely about telling stories which pique your audience's interests, so making sure you clearly define your story is an important step in building, and maintaining, a brand that converts leads into clients.
The Marketing Plan
As defined by Clifford Chi from Hubspot:
"A marketing plan is a strategic roadmap that businesses use to organize, execute, and track their marketing strategy over a given period of time. Marketing plans can include separate marketing strategies for the various marketing teams across the company, but all of them work with the same business goals."
5 Marketing Plan Examples to Help You Write Your Own - Hubspot
One of the most important steps in building a strong business is building a targeted business.
By this, we mean a business that has clearly defined goals and a mapped-out plan for how to reach these goals.
Your marketing plan can be as simple as a few checkboxes on a Google Doc to as complicated as a whole series of detailed financial forecasts for targeted ad campaigns.
All that matters is that you have a marketing plan to help grow your business.
Step 10: Establish a Web Presence
All reputable businesses must have some form of a web presence. Generally, this means some combination of a website, social media pages, and a presence on Google My Business and local/industry directories.
Of all of the steps that we've listed in this guide, establishing a web presence is the most hit-or-miss.
On one hand, registering a domain name and creating a website can take as little as an hour or two of your time (provided you know what you're doing).
On the other, optimizing that website and broadening the reach of your brand can take years of continuous hard work.
Since this is a guide for "starting" your business, we'll simply explain a few ways to start building your online presence.
If you'd like more resources for growing that presence, please see the blogs we've linked at the end of this step.
Choose and Register a Domain Name
When choosing a domain name for your website, be sure to review trademark law principles we already discussed above.
The domain name you purchase should match your brand and steer clear of potential legal and branding problems.
It's a good idea to keep domain names short and memorable. Further, make sure to stick with familiar top level domains (TLDs) such as .com or .org unless you have an industry specific TLD such as .law for law firms.
Additionally, it's wise to only purchase domains from reputable domain registrars like NameCheap or Google Domains.
Be cautious as you purchase because domain registrars typically make every effort to stick additional products and services into your cart through the checkout process.
At this point, you only need the domain.
Create a Website
Once you have a domain you'll need to link it to your website. Most web hosting companies will have instructions on how to make this happen.
For example, Digital Ocean has documentation for how to update your DNS settings on a variety of common domain registrars.
First, however, you need to create a website for these DNS settings to point towards.
If you're a tech-savvy DIY entrepreneur, there are a variety of great tools to help you develop a persuasive business website.
Most of the time we recommend some form of self-hosted WordPress site for businesses that want to focus on building an online presence.
If you're uncomfortable learning how to create, edit, and maintain a website on your own we highly recommend that you hire out your website's design to a third party designer or SEO company.
"Easy" website builders offered by providers such as Wix, GoDaddy, and even WordPress.com are often unnecessary, expensive, and overly cumbersome to use in the long run when compared to simply hiring a professional to do it for you.
Remember, the potential benefits of having a high-quality web presence generally outweigh the startup costs of getting your website up and running at the start.
While services such as Wix and GoDaddy will overcharge you every month for premium services you don't really need, self-hosting a website can be an affordable long-term solution for growing your business online.
As a frame of reference, our self-hosted WordPress website (which includes over 6GB of media files and caters to thousands of visitors each day) costs less than $20 per month to run for performance and features that far outweigh plans found on sites such as GoDaddy.
Link Google Analytics to Your Website
Google Analytics is an industry standard for tracking your online traffic. Best of all, it's totally and entirely free.
You can get started with Google Analytics by reading Google's support page on the subject.
We would also recommend at least browsing through the free courses on Google Analytics provided by Google if you decide to use this service on your website.
Create an Account on Google My Business
Google My Business is an essential resource for any small business.
Not only does your GMB profile dictate how you show up in Google Maps and other similar listings, it also adds a great deal of metadata to your online "brand."
This data can include:
- Information and tags to improve local listings (such as if someone is searching "family law attorney near me" when your business is tagged as "family law attorney").
- Free, centralized review capabilities (as opposed to relying on services such as Yelp or the Better Business Bureau).
- Photo and video capabilities so that you can put a face to your business.
- And much, much more.
Just like in the Google Analytics section above, we would recommend taking the ~45 minute Google My Business Basics course on Google's Skillshop.
It's free, and provides a great groundwork for you to build your profile off of.
Establish a Presence in Local Directories
A screenshot of the SERPs for the search term "immigration attorney richmond va" taken on December 15th, 2021.
An increasingly large number of searches are landing on local directory pages rather than actual business pages.
While the effect of this trend is noticeably more pronounced in the legal sphere, it is true for all businesses regardless of their market.
This fact is especially important when you consider that:
- An increasing number of searchers are clicking on the Google Maps results at the top of local search results instead of the actual websites listed below.
- Roughly half of all clicks go to the first three results on the page.
For these reasons and more, not only is it important to optimize your website for local search, but also critical for you to devote a good amount of time to creating and nurturing listings in prominent local directories, in addition to fleshing out your GMB profile.
Other Resources
As mentioned above, there's no single article which outlines everything you need to know about establishing and growing your online presence.
For this reason, the best advice we can give is to find and follow certain industry blogs that frequently publish on the topics you're interested in.
As a quick resource, here's an annotated list of blogs that we personally follow to get you started:
- Ahrefs – We use Ahrefs to track important metrics for our various legal blogs and websites. Their blog is absolutely fantastic, and offers a great deal of insight into a variety of topics, especially keyword research and marketing strategies.
- The Moz Blog – Moz is a leading competitor to Ahrefs, and provides similar services and resources. Their blog is also phenomenal. They focus a great deal on content and SEO best practices, but also write frequently on other topics.
- MarketingProfs – Tens of thousands of excellent, indexed, and searchable guides written by marketing professionals. Their content is wonderful and their infographics and reports are essential.
- Mailchimp – Mailchimp is one of the leading service providers for sending out emails and newsletters to your contacts. Their blog is also a wonderful resource for getting started in the content marketing space.
- Backlinko – Backlinko has wonderful skyscraper guides to various essential SEO strategies. Several of their posts are gated behind their subscription, but the rest are amazing, concise, must-read guides to online marketing essentials.
- Marie Haynes Consulting – This is a bit of a personal pick, but Marie has the Google Search Algorithm space on lockdown, and is a wonderful resource if you're developing a content-focused strategy.
- Unbounce – If you're planning to create landing pages on your website (as you should) we would recommend reading their wonderful landing page-focused blog.
- Copyblogger – This blog is geared more towards copyeditors than entrepreneurs, but it's still a wonderful resource with excellent content.
- Hubspot – If we had to compare Hubspot to the other blogs on this list, they are decidedly more mainstream and beginner-friendly in both their content and focus. They do, however, have several nice downloadable templates which are worth your attention.
Conclusion
A well-planned business with positive cash flow can lead to a successful life for you and your family.
It's actually pretty easy to start a new business in Virginia, provided you know the basics of the process.
In fact, you only need to follow a few main steps to create a new legal entity, though setting that business up for success will take a bit more effort.
Further, due to several new tools from the Virginia SCC and Virginia Tax, you can now perform the majority of these steps online from the convenience of your own home.
However, regardless of where you are in the process, you must speak with both an accountant and an attorney before you open your doors.
No online guide can give you a complete rundown of what you should do in your particular situation, and this guide is no exception.
Always speak with an experienced business attorney before opening your business.
Failing to do so will only open you up to future liabilities down the line should you miss a critical step in the entrepreneurial process.
