How Much Does it Cost to Incorporate in Virginia
The answer is subject to the state's corporate net income tax rate of 6 percent of the company's net taxable income.3 min read
2. About Forming a Corporation in Virginia
3. About Virginia C Corporations
How much does it cost to incorporate in Virginia? The answer is subject to the state's corporate net income tax rate of 6 percent of the company's net taxable income. As a Virginia S corporation, business taxes are paid at the personal net income tax rate.
About Incorporating in Virginia
A corporation is a legal entity consisting of a board of directors and one or more officers. There are two types of corporations. Stock corporations issue its shareholders stock in the company and are usually in business to make a profit. The other type is non-stock corporations, which usually operate as a charitable organization.
Forming a corporation requires choosing the business structure that will work best with the type of business you plan to operate, such as a limited liability company or a partnership. You'll choose a name for your corporation. The name must adhere to the rules of the Commonwealth of Virginia for naming a corporation.
Do a search of the name at the State Corporation Commission (SCC) to make sure it's available. You have the option of reserving a name. To do this, you must fill out a reservation application at the SCC website. The reservation will hold the corporation name for 120 days.
The fee to reserve a name is $10. To extend the reservation for an additional 120 days costs another $10. If you choose not to do a name availability search nor reserve an available name and submit one that isn't available, your paperwork won't be accepted. You must fill out the Articles of Incorporation form for a new business. A template of the type of information to provide is available at the SCC website.
Include the names and addresses of the corporation's directors. Identify the incorporator(s) who completed the paperwork for the articles of incorporation. The incorporator name(s) must be printed on the form and be signed by each person.
A corporation will have a registered agent whose information is included in the articles. This is the person who accepts legal paperwork for the corporation. The corporation may also choose to name a professional company as the registered agent. When the articles of incorporation forms are complete, you can use the online filing service available at the SCC website.
About Forming a Corporation in Virginia
Forming a corporation will help protect your personal assets as a corporation's shareholders are, in most cases, not liable for any of the corporation's obligations. A corporation structure can help protect an owner in the event an employee or a business partner is accused of or involved with wrongdoing. A corporation is also beneficial since it may include opportunities to save on taxes, and the structure allows the transferring of shares between the corporation's owners.
About Virginia C Corporations
By law, a Virginia C corporation is recognized as an individual entity and treated separately from its owners/shareholders. As a shareholder, you'll enjoy limited liability for any obligations, liabilities, and debts incurred by the corporation and any liability that may stem from legal action against the corporation. A Virginia C corporation shareholder can't lose more than what was invested monetarily into the corporation.
The shareholders of a Virginia C corporation aren't required to report business income and expenses on their personal tax return. They're required to report and pay personal taxes on monies paid to them by the corporation. Tax returns are filed for the corporation and taxes are paid generally at lower tax rates than those filing personal tax returns.
Corporations operate under what's known as "double taxation." This means that although income taxes are paid by the C corporation, monies paid to shareholders via dividends will be taxed again on personal income tax returns.
The benefits of a Virginia C corporation include:
- Limited liability.
- A formal business structure.
- A reduction in income taxes.
- The accumulation of assets in the corporation.
- The ability to more easily raise capital. This is achieved through the issuance and sale of stock and other financial options.
- Owners of a Virginia C corporation are employees, which make them eligible for retirement, insurance, profit-sharing plans, stock options, and bonuses.
- Virginia C corporations don't cease to exist due to the death of a shareholder/owner, as is the case with other business structures.
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