Virginia Tax ID (EIN) Number & Business Registration
If you’ve decided to start a business in Virginia, you’re probably fixated on thoughts of hiring your first employee, celebrating your first sale, or imagining a life of retirement when you finally sell the business. But before you can reach any of those landmarks, you need to create your business from scratch, and make sure it’s legally recognized.
Virginia is an attractive state for entrepreneurs, for many good reasons. For more than a decade, per capita income in Virginia has exceeded the national average, and economic growth remains high. Virginia’s GDP also ranks it 12th in the United States. The state of Virginia is also very welcoming to entrepreneurs and small business owners. Nearly 98 percent of businesses in Virginia are small businesses, and they collectively employ more than 1.5 million people, or roughly 47 percent of all employed Virginians. Employment has been improving steadily in Virginia, and business owners continue working together to create strong economic environments ripe with opportunities.
Steps to Obtain a Virginia Tax ID & Business Registration:
- Legal Formation of your Virginia Business
- Obtain your Federal Tax ID (EIN) Number
- Virginia State Tax ID Number
- Virginia Licenses & Permits
One of the biggest choices you’ll make is how to structure your business. There are many factors to consider here, including how you want your company to be limit liability and how simple you want the process to be, but the main influencer in your decision should be taxes.
On the liability front, the best protection you can get is from a corporation. Corporations exist as separate legal entities, so they shield their owners and shareholders from liability in most cases. This is true both for C-corporations and S-corporations (which are limited to 100 shareholders). Limited liability companies (LLCs) also offer their owners some degree of liability protection, though not as much as a corporation; they’re treated as pass-through entities in a similar way. Partnerships and sole proprietorships, though simple and easy to understand, offer almost no protection to their owners.
As far as taxes go, LLCs, sole proprietorships and partnerships are straightforward and in some cases, advantageous; all you have to do is report your income as individuals. On a federal level, corporations keep track of their own income, and shareholders are responsible for paying taxes on any profits or salary they withdraw from corporations (sometimes resulting in double taxation).
In Virginia, specifically, LLCs are required to pay an annual registration fee of $50. Aside from that, Virginia charges a flat corporate tax rate of 6 percent on both LLCs and corporations on any net income that was made in the state.
Just as you need a social security number (SSN) to confirm your individual identity with the United States government, you’ll need a unique, unalterable ID number for your business. This is called the federal Tax ID or employer identification number (EIN).
Almost every business will require an EIN for one purpose or another. LLCs and corporations need their Tax ID to file taxes appropriately. All business structures will need an EIN Number to open a business bank account, hire employees, or apply for credit with another business. Basically, any interaction you have with the government, another business, an employee, or a major client or partner is going to require you to have this number.
If you’re confused about the obtainment process, the online Tax ID Number Obtainment Service makes things simple. You can get your business set up with an EIN in less than an hour.
In Virginia, you’ll also need to register your business with the state, for things like sales taxes and employment requirements. In many ways, it works just like a federal tax ID—except it works at the state level, rather than at the federal level. It’s a good idea to get both, even if you aren’t sure whether you’ll need a Virginia state tax ID number.
Virginia imposes what they call a “license tax” on most businesses, though that license tax’s nature will depend on the nature of your business. For example, some companies are required to pay a fixed fee, while others are required to pay a percentage of their total profits. In addition, like many states, Virginia requires certain types of businesses to have special licenses and permits to operate legally in the state.
For the most part, however, licenses and permits apply and are obtained at a local level. You’ll need to check with your city to determine which licenses are necessary, rather than with Virginia overall. Talk with other entrepreneurs in your area, and review your city’s list of required licenses and permits before you get much further in the planning process. Obtaining these licenses ranges from easy to difficult, and from cheap to expensive—it all depends on what you’re doing.
Navigating the world of entrepreneurship can be at once intimidating and exciting—but it doesn’t have to be difficult or overwhelming. If you want to get started as quickly as possible without the hassle of doing all the paperwork on your own, make sure to use our tax ID (EIN) and Virginia state tax ID obtainment services.