How to Form a Corporation in Virginia
Many Virginia residents dream of the day they can start their own business, but the process for forming a legal business entity can be confusing. Many entrepreneurs are unsure where they should start or what type of business entity they should use to start their business. Forming a corporation in Virginia may not be as difficult as many people think, however. Virginia recently received an award for being America’s best state for businesses in 2019, beating North Carolina and Texas.
One of the best things you can do for your new business is to start your business off on the right foot. Correctly forming a corporation is essential to your business’s future. Below, we will discuss all of the steps new business owners need to follow to form a Virginia corporation. It is possible to form a corporation in Virginia by yourself. We recommend working with an experienced business lawyer. Your lawyer will ensure that you have submitted all of the correct paperwork and that it is accurate. Spending the time to create a valid Virginia corporation now will help you in the long run because it will protect your business and personal assets.
Formulate Your Business Plan
The first step in forming a Virginia corporation is to form a business plan. You likely have an idea as to what goods or services you would like your Virginia corporation to provide. Now it is time to consider your business model. Creating a business plan involves asking yourself the hard questions about how your business will operate and how you plan to succeed.
What location would you like to use to operate your business? How do comparable businesses in your geographic location operate? What are your sales goals for the first year, the fifth year, and the 10th year of business? What distribution channels can you use to provide your goods or services to a broader customer base? Considering all these factors will help you determine which type of legal structure you need.
Pick a Name for Your Corporation
Next, you will need to choose a name for your corporation that does not infringe upon anyone else’s trademark rights. In other words, the name of your corporation has to be different than the names of any other LLCs, corporations, or sole proprietorships in Virginia. Keep in mind that your company’s name must include Incorporation, Incorporated, Company, Limited, or an abbreviation of one of these words. You can search the Virginia State Corporation Commission records to ensure that your corporation’s name is available.
Should the state Corporation Commission approve your name, you will not automatically receive a legal trademark. Accordingly, you should conduct your own search of your corporation’s name to ensure it does not infringe on anyone else’s trademark rights. We also recommend looking into a domain name for your corporation. You do not want to choose a name for your corporation when you cannot purchase the rights to an internet domain using your corporation’s name. You will also need to nominate a Virginia registered agent on behalf of your corporation. The registered agent will act as the recipient of all official communications for your corporation.
Draft Your Bylaws
Once you have chosen a name for a corporation, you can begin drafting the bylaws. It is possible to draft your bylaws as a business person, but it is not recommended. Your bylaws are fundamental as they will determine how your operation will run. Additionally, Virginia law requires that corporate bylaws include certain types of provisions, and all Virginia corporations must have bylaws that meet these standards.
An experienced business lawyer will be able to ensure that your bylaws meet your goals and are valid in terms of Virginia law. You will also need to prepare offers for shareholders to purchase stock in your corporation. As part of this process, you will need to set the price and number of shares that shareholders can purchase.
Have an Organizational Meeting
You will need to host an organizational meeting for your corporation and prepare meeting minutes. After you received the certificate of incorporation from the Virginia State Corporation Commission, your shareholders must participate in an organizational meeting to adopt the bylaws. During this meeting, the shareholders will also approve the Articles of Incorporation and nominate and elect directors and officers. The shareholders will also need to approve any other important actions, such as purchasing insurance or settling banking resolutions.
You will need to prepare detailed minutes of the meeting. These meeting minutes will become vital if you are ever involved in a lawsuit, and you need to prove that you properly formed your corporation. Maintaining a copy of detailed meeting minutes could protect the corporation itself or the shareholders personally from liability in the future.
Obtain an Employer Identification Number
You will need to decide whether you would like to be considered an S corporation or a C corporation. There are important distinctions between these types of corporations for taxation purposes. Many corporations choose the double taxation structure of C corporations. In this structure, the IRS taxes corporate revenue to the corporation. Any distributions taken by shareholders are taxed again on the personal level. Most startup businesses prefer to become S corps for tax status, however.
We recommend meeting with a lawyer and an accountant who will review your financial situation and advise you on your company’s best tax structure. Once you select an S or C status, you need to obtain an Employer Identification Number (EIN) from the IRS. You need to obtain this number before you begin hiring employees.
Contact a Virginia Business Lawyer
Forming a corporation in Virginia is a serious matter. Working with an experienced business lawyer will help you start your business off right by ensuring you have properly and legally formed your corporation. Contact Fox & Moghul, Attorneys at Law today to schedule an initial consultation to learn how we can help you form a Virginia corporation.