Virginia LLC Act: Everything You Need to Know
The Virginia LLC act is a legal document put in place by the state of Virginia that lays out the requirements and provisions for Limited Liability Companies (LLCs) in the state.3 min read
The Virginia LLC act is a legal document put in place by the state of Virginia that lays out the requirements and provisions for Limited Liability Companies (LLCs) in the state.
Introduction to Virginia LLCs
An LLC is a business structure type that the state of Virginia only recently legally recognized in 1991.
The taxation benefits along with the liability protection for members provided by the LLC entity type make this structure attractive to many business owners.
Virginia LLC Act
The Virginia LLC act was restructured by the House Bill 955 on July 1 of 2016 when a new article was created and provisions for LLC formations and conversions were moved to the new article. Other changes covered in the bill include the allowance for LLCs to reorganize in the case of bankruptcy, LLC merger provisions, and more.
Articles of Organization
The LLC can choose any member to sign as the company's organizer on the articles. In the case of a professional LLC like a law firm or doctor's office, the organizer must be a licensed professional.
Once the articles are approved, the SCC will issue the business a Certificate of Organization that officially recognizes the legal existence of the company.
An operating agreement is not required in the state of Virginia but is a smart way to start any business. The members of the LLC (term equivalent to the shareholders of a corporation) will outline the structure of the LLC, management duties, goals and purpose of the company, and the planned lifespan of the LLC in the operating agreement. This operates similarly to the bylaws of a corporation.
This written agreement among the members will help prevent future disputes.
There's a lot of freedom for LLCs when it comes to the management and operational decisions. Members can play active or inactive roles in the company, or an LLC can run like a sole proprietorship with only one member.
The members of an LLC enjoy the limited liability protection provided to the shareholders of a corporation. In the case that an LLC goes under or faces legal trouble, the members' personal assets are not at stake. Some cases do call for the legal responsibility of members however if a member is personally negligent or participates in illegal activity.
Annual Reports in Virginia
Virginia does not require LLCs to file annual reports as some other states do, but the company will have to pay a renewal fee of $50 each year to remain in good standing with the state.
If the owner does not pay the annual fee, the state of Virginia SCC will send a notice, if payment is still not sent, the LLC's registration will be canceled.
Members are still protected from liability, even if the business registration is canceled due to a delinquent amount.
How to Form an LLC in Virginia
Follow these steps to form an LLC in the state of Virginia:
- Create and file articles of organization with the SCC for the LLC and pay the $100 initial filing fee.
- Choose a name for the company that includes the words limited liability company, limited company, or the designators LC or LLC as required by the state.
- The following information must be included in the articles of organization:
- Registered agent name and address.
- LLC name and address (where the company mainly does business).
- Signatures of the LLC's organizers (owners decided to sign on behalf of the company).
- Get an EIN for the LLC from the IRS.
- Draft an operating agreement to be reviewed and agreed on by all members including crucial information like:
- The planned structure for the company.
- Outlines of member duties and responsibilities.
- Voting rules and percentages.
- Profit allocations for members.
- Plans for adding members and member resignation.
- Rights and responsibilities of all employees, including non-members.
If an LLC chooses not to write an operating agreement, that state of Virginia has provisions that any LLC filed with the state may follow, but it's best to write your own rules to make sure all members are on the same page at the start.
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