Knowing the Virginia LLC tax rules will keep a company in good standing with the law. It will also make handling taxes easier. When forming an LLC, or limited liability company, there are certain steps that need to be taken on a continuous basis in order to keep the business compliant with the law. The steps will also give the owners of the company limited liability.

An Introduction to Virginia LLC Tax

How a business is structured plays a huge role in how taxes are handled. Every type of structure has both advantages and disadvantages regarding taxes. These all need to be taken into account when picking the right organization for a company. There are certain rules that Virginia has that are different from other states, such as the following:

  • LLCs do not need to file an annual report.
  • LLCs do need to pay the yearly registration fee that's due on the last day of the month the LLC was formed.
  • Permits and/or business licenses are required for the majority of businesses in Virginia.

There is some protection that business owners have from liability when they create a limited liability company. Many of the same rules exist for LLCs that are found in a sole proprietorship. The difference is the LLC needs to be registered with the state, and the business is recognized as a separate entity. The IRS normally treats LLC members as self-employed when it comes to taxes. This is due to the income and profits pass-through to the members.

Every member must report annual income on their individual tax return, and each is in charge of paying for quarterly taxes, including Medicare and social security. When the company is switching to an LLC, the business will need to go through changes and growth in order to reorganize. Since taxes will be filed differently, this should be considered before making a decision. It's best to contact a professional to have them help with any important questions. A CPA can evaluate if an LLC is the best business structure and look at the company's finances.

Sole Proprietorship

The most simple business structure in Virginia is a sole proprietorship, in which there is only one owner of an unincorporated business. This is a popular choice for small businesses to use, as it's not very complicated to set it up. Sole proprietors will assume any and all tax liability for their income and business. Since it's not a separate business entity, business taxes are filed on the owner's individual tax return. Many will need to file tax returns every quarter and pay installments of their estimated taxes throughout the year.

There isn't a payroll system that is in charge of tax deductions, so the estimated quarterly taxes make sure the right tax amount is paid on time. Figuring out taxes can be challenging at first, particularly in a market that fluctuates. A sole proprietor's goal is to pay a minimum of 90 percent of the total taxes they owe or an amount that's equal to the tax that was paid the previous year in quarterly payments. Hiring a CPA will help business owners more accurately calculate the payments so they can avoid penalties.


A partnership is a type of business structure where multiple people share the income and expenses of the company. A partnership is like a limited liability company in that it's considered a pass-through entity when it comes to tax purposes. This means that all partners who receive income from the company need to pay tax on it on their income tax filing. A separate return is not needed for a partnership in Virginia, but they do need to file Form 502 for informational purposes. Every partner will also be required to pay quarterly estimated taxes.

Partnerships will need to handle withholding and pay employer taxes. The partners in the business aren't considered employees. A partnership can be formed in a few ways, including a limited liability partnership and a general partnership. Each partnership will remain a pass-through entity. Again, an accountant is helpful when deciding what type of partnership is for the company.

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