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Editorial 6 MIN READ

Virginia in March 2017: the state run by a court that isn't one

A $100 filing fee, a $50 annual registration, and a State Corporation Commission that processes paperwork faster than most legislatures can name theirs

The Editors
Staff, Incorporator.org
6 min read Updated
Contents 6 sections
  1. The mechanics
  2. Maintenance is a single annual fee, not a report
  3. The State Corporation Commission, actually
  4. State taxes, briefly
  5. Who this state actually makes sense for
  6. Sources

Virginia LLC costs $100 to form and $50 a year to keep. The filing is done with the State Corporation Commission, a body that looks on paper like an agency and behaves in law like a court, and that has been taking online filings since most of its peers were still mailing rubber-stamped receipts.

This is a guide for someone forming in March 2017. It assumes you already have a reason to be in Virginia — a nexus, a landlord, a client list — and want to know what the mechanics look like without the marketing.

The mechanics

You file Articles of Organization, Form LLC-1011, with the Virginia State Corporation Commission. The form is short: the name of the LLC (ending in "Limited Liability Company," "LLC," "L.L.C.," or one of a handful of permitted variants under Va. Code § 13.1-1012), the registered office address in Virginia, the registered agent's name and qualifying basis, and the principal office address. One signature, one page on the back end.

The fee is $100, set by statute at Va. Code § 13.1-1004. You can file by mail, in person in Richmond, or through the SCC's online system at cis.scc.virginia.gov. The online filing is the default now — the SCC rebuilt its Clerk's Information System in the early 2010s and most domestic LLCs are formed that way. Processing on the online channel is routinely same-day or next-day; mailed filings take one to two weeks depending on the queue. There is no separate premium tier for expedited service on routine formations; the SCC simply processes the electronic queue ahead of the paper one.

You will then need an EIN from the IRS (Form SS-4, ten minutes online) and an operating agreement. Virginia does not require the operating agreement to be filed and does not require it to be written, but Va. Code § 13.1-1023 recognizes it as the governing document for member relations, and every member-managed LLC with more than one member should have one in writing. Federal tax classification defaults apply: single- member is disregarded, multi-member is a partnership, and an election on Form 8832 or Form 2553 gets you to C-corp or S-corp treatment if you want it.

The registered agent rule in Virginia is stricter than in most states. Under Va. Code § 13.1-1015, the agent must be either (i) a Virginia resident who is a member or manager of the LLC or an officer or director of a corporate member/manager, or (ii) a member of the Virginia State Bar, or (iii) a domestic or foreign business entity authorized to transact business in Virginia whose business office is identical with the registered office. The commodity mailbox services that work in Delaware or Wyoming do not automatically work here; a provider has to be a qualifying entity with a Virginia business office. This narrows the registered-agent market and pushes prices up slightly, though $100 to $200 a year is still the going rate.

Maintenance is a single annual fee, not a report

Virginia does not require Virginia LLCs to file an annual report. That is a surprise to founders used to the report-plus-fee model in Florida, Texas, or California. What Virginia requires is a flat $50 annual registration fee, due by the last day of the month in which the LLC was formed. Va. Code § 13.1-1062 is the statute; the SCC sends a notice roughly two months before the due date to the registered agent's address.

Miss it, and the SCC assesses no immediate late penalty, but the LLC is automatically canceled if the fee goes unpaid for three months past the due date. Reinstatement within five years is available under Va. Code § 13.1-1050.4 on payment of the back fees plus a reinstatement fee. After five years, the LLC is gone and you are forming a new one.

The fixed-fee, single-annual-event structure is the cleanest in the country for small LLCs. Delaware's $300 annual tax is three times as much; California's $800 minimum franchise tax is sixteen times as much before you have earned a dollar. For a small Virginia business that operates in Virginia, the recurring cost of maintenance is $50 and a calendar reminder.

The State Corporation Commission, actually

The SCC is the unusual part. It is a three-commissioner body created by Article IX of the Virginia Constitution in 1902, with original jurisdiction over corporate and public-utility matters and the powers of a court of record for those purposes. It issues orders, not just certificates. Its decisions are appealable directly to the Supreme Court of Virginia. For a routine LLC filer this is invisible — you submit a form and get a certificate — but when there is a dispute over a name, a revoked registration, or a contested filing, you are in front of a tribunal, not an agency desk.

The practical effect is that Virginia's filings system has more procedural rigor than a typical Secretary of State office and, because the SCC has been institutionally responsible for its own technology for decades, a better online system than most. The CIS portal handles formations, annual registration payments, registered-agent changes, amendments, and mergers without paper. If you are used to California's bizfile or New York's DOS portal, the Virginia system feels several years ahead.

State taxes, briefly

A Virginia LLC taxed as a partnership or disregarded entity does not pay entity-level income tax to the state; the income flows through to the members, who pay Virginia individual income tax at the 2017 rates of 2%, 3%, 5%, and a top bracket of 5.75% on taxable income over $17,000. A Virginia LLC that elects C-corp treatment federally is taxed at the Virginia corporate income tax rate of 6%, set by Va. Code § 58.1-400. Pass-through LLCs with Virginia-source income file Form 502 annually, which is informational plus a potential withholding obligation on nonresident members' shares.

There is no separate LLC franchise tax in Virginia and no gross-receipts tax at the state level. Localities assess a Business, Professional and Occupational License (BPOL) tax that varies by city and county; that one is worth checking against your operating address before you budget.

Who this state actually makes sense for

Three kinds of entities belong in Virginia in 2017.

The first is a business with Virginia operations, customers, employees, or real estate. If you would have to foreign-qualify in Virginia anyway, you are paying the $100 formation fee plus the $50 annual fee here regardless of where the parent sits; forming in Virginia directly saves a Delaware layer and its $300 annual tax.

The second is a small operating LLC whose owners live in Virginia and whose complexity is unlikely to trigger a fiduciary-duty dispute worth litigating in Chancery. The state tax rates are ordinary, the filing is cheap, the maintenance is a single $50 check, and the SCC's system does not waste your time.

The third is any entity whose principals want the filings done by a body that behaves like a court. For holding companies handling regulated assets, family-limited-partnership reorganizations, or professional LLCs with licensing questions, the SCC's procedural posture is an asset.

What Virginia is not is a tax-haven play. It is a middle-of-the-road state with clean mechanics and competent infrastructure. If you are shopping for zero state income tax, you are looking at Wyoming, Nevada, or South Dakota, and you are accepting the foreign-qualification overhead that comes with operating somewhere else.

If you are forming this quarter and the business operates in Virginia, file through the CIS portal this week, pick a registered agent that is actually a Virginia-qualified entity rather than the cheapest sticker, and put the anniversary-month reminder on a calendar that will survive the next two moves.

Sources

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