How to Start a Business in Richmond, VA?
Are you thinking of starting a business in Richmond, VA? Anyone who's ever wanted to start their own business knows that it's not as easy as it seems. There are so many details to think about, from the initial planning stages to the day-to-day operations. If you're looking to start a business in Richmond, Virginia, here are some tips to help make things a little bit easier.
Steps to start a business in Richmond, Virginia
As a business coach located in Richmond, I get asked this question often by my local clients. Therefore, I have decided to share a comprehensive guide of steps I advise my clients. Following these steps will help you avoid pitfalls later on. If you need help with any (or all) of the steps mentioned or the paperwork involved, schedule a consultation with me. I would be happy to help you!
1. Create a Business Plan
A business plan is a roadmap or blueprint for your company, forecasting how it will make money, expand, and factor for unforeseen events. Most entrepreneurs need help in this department, and hiring a business coach can help propel this most important process. Working with a business coach can help accelerate various areas of the business, such as helping with creating a business plan, brand building, establishing a marketing and sales strategy, consultant recommendations, growth strategies, financial savvy, hiring employees, taxation, and more.
2. Decide on a Legal Structure
The most common legal structures are sole proprietorship, limited liability company (LLC), and corporations. Here is a breakdown of each:
Sole Proprietorship is the easiest legal entity to structure as it is tied to the business owner's personal social security number. This is an ideal business structure for hobbyists getting started and who are not quite sure what the business will grow into. I recommend this as a temporary business formation for entrepreneurs just getting started.
For example, sole proprietorship formations are great for sharing-economy businesses such as Uber, Airbnb, TaskRabbit, and Upwork. The business owner benefits in this business formation as registration paperwork and fees are significantly reduced (or nonexistent in some states). More importantly, the time to launch is much faster. Sole proprietors can file their business income with their personal taxes.
However, the drawback here is that any legal liability falls on the business owner. For example, if a general contractor uses a sole proprietorship business formation and is found negligent for expensive damages on a job site, they can be held personally liable for any legal actions. With the below-recommended formations, the legal liability falls onto the company entity and not the business owner.
Limited Liability Company (LLC) is a business entity formation where one or more business owners can form a business. LLC business owners are legally protected from legal liabilities as the responsibility falls onto the company.
A Corporation is a legal business entity where one or more business owners can form a business. There are two more common variations in the formation status, including S Corp and C Corp. According to Nav, "the biggest difference between C and S corporations is taxes. C corporations pay tax on their income, plus you pay tax on whatever income you receive as an owner or employee. An S corporation doesn't pay tax. Instead, you and the other owners report the company revenue as personal income."
Schedule a consultation with me to determine which legal formation is best for your company.
3. Choose a Business Name
Now that you know more about which business formation to go with. It's time to pick a business name. The key is to aim for a unique name! First, search to see whether the legal business name is already registered on the Virginia State Corporation Commission (SCC) website.
4. Create an EIN (Employer Identification Number)
An employer identification number (EIN) is like a social security number for your business. You can obtain this nine-digit number for free with the IRS here. You would need your legal structure, business name, and business address to set this up.
5. Open a Business Bank Account
The minimum criteria for opening a business account in Virginia are:
Legal formation letter from Virginia SCC; i.e., Articles of Incorporation, Articles of Organization, etc.
EIN letter from the IRS
Legal business name
Key business owner(s) information
Minimum deposit (varies by bank)
This is a broad answer. However, for my one-on-one clients, I personally recommend the best banks to establish a business bank account. Schedule a consultation with me to gain access to this exclusive list.
6. Establish a Virtual Address
I personally recommend setting up a virtual address if you don't (or won't) have a physical address. For safety and professional reasons, update your business formation documentation with your business address.
Why? By law, your business address can be published on the Virginia SCC website. There are other "web scrapers" that scrape the internet and post to their websites without your permission. (Of course, you can request they take them down, but finding them all is a cumbersome endeavor.) More importantly, if you register your business with your home address, it can potentially have harmful effects. See this case in Chicago where sole proprietors who applied for PPP loans had their home addresses exposed by the Small Business Administration (SBA).
Schedule a consultation with me for the best virtual address providers.
7. Apply for Virginia Licenses and Permits
What licenses are needed to start a business in Virginia? If your business plans to sell goods in Virginia, you must register with the Department of Taxes (DOT) and collect state sales taxes. Additionally, if your company has employees, you must register with DOT and withhold state taxes. You can register with DOT here.
For businesses in health & safety, the environment, building & construction, visit here for regulatory licenses and permits.
For businesses seeking professional and occupational licenses, visit the Virginia Department of Professional and Occupational Regulation (DPOR) website here.
Licenses and permits are generally not required for online-only businesses based in Virginia.
8. Secure a Business Location
If you plan to have a physical location, ensure you check the zoning laws for your business. Schedule a consultation with me to gain access to zoning information, including for home-based businesses.
If you established a virtual address, be sure to switch your physical business address on all important documents.
9. Report and File Taxes
Now that your business is properly set up, prepare for reporting taxes. Based on your legal structure, your company will have to file taxes in different ways. Schedule a consultation with me to learn how to save on filing taxes at the state and federal levels.
Frequently Asked Questions
Here are more questions my clients ask...
How much does it cost to register a business in Virginia?
If you are asking how much does it cost to start a small business in Virginia, fees vary based on your legal structure. For example, annual fees for LLCs in Virginia are $50. Fee details can be found here.
How much is a business license in Richmond?
Businesses generating gross receipts between $5,000 through $100,000 pay a $30 annual license fee. Businesses generating less than $5,000 in gross receipts do not pay a license fee. Fee details can be found here.
How do I start my own business in Virginia?
In summary, follow these strategic steps to start a business in Virginia:
What else is needed after starting my business in Virginia?
There are other important things needed, such as establishing a business phone number, getting listed in 411 directories, establishing business credit, and much more. Consulting with a business coach gives you a roadmap of these unforeseen endeavors, and they help you accomplish those goals.
If you're thinking of starting a business in Richmond, VA, it's important to do your research first. There are a lot of resources available to help you get started, and I'm happy to help guide you through the process. Schedule a consultation with me today so we can discuss your business idea and how I can help make it a reality.