Getting Started

Make a list of things to do before you open a business
Before opening a business, it's important to note that not all businesses must complete every step that is listed. For example, a one-person, home-based consultant might only need to obtain a local business license and home occupancy permit. A convenience store selling prepared food, gasoline and alcoholic beverages will have several local and state permits and registrations. Every business is different, depending on the type of business, location and structure.

The Business Information Center of the Virginia Department of Business Assistance is available to help entrepreneurs customize a list of "things to do" specific to their individual situation. Call toll-free at (866) 248-8814. The Virginia Business Portal, www.business.virginia.gov, is a good "do-it-yourself" tool. The Business Registration Guide is a complete reference guide to the forms needed to establish businesses in Virginia, although most businesses only need a few of the forms and instructions.

Registering your business
To register your business you must select an operating entity. There are several types of entities to choose from.

1) Sole proprietorship: This is the simplest method of operation. In most cases, you will only need an occupational license or permit to operate. If you are a member of a profession that is licensed by the state, you will need a state license no matter which entity you choose. In this entity, you are personally responsible for the business and any liabilities incurred. The firm does not pay taxes. All income flows directly to the proprietor and is taxed on an individual basis.

2) Partnership: A general partnership is the least complicated to form. Two or more individuals work together in this arrangement. In a general partnership, you are still responsible for any liabilities incurred by you and your partners. As with a sole proprietorship, all income flows directly to the partners and is taxed on an individual basis.

3) Limited partnership: This arrangement is similar to a general partnership, but in this case one of the partners is designated the general partner and the other (or others) are limited partners. The limited partners have limited liability and limited income, based on their original investment in the business. This arrangement can shelter the liability and income of some of the partners.

4) Corporation: When you form a corporation, you are creating a new entity, one with its own name and tax identification number. It is solely responsible for everything that transpires. This entity completely insulates the founders of the business by making them shareholders of the corporation rather than owners. The shareholders are not responsible for the liabilities of the business and derive income in the form of dividends. The major disadvantage of this entity is that the income is taxed twice, once as corporate earnings and a second time (on an individual basis) as income for the shareholders.

Naming your business
You will need to find out if the name is available for use. Check with the SCC online or call (804) 371-9967 to see if the name you want is available in Virginia. Avoid names easily confused with national brands. Large companies aggressively protect their brand names.

Registration with the State Corporation Commission
The SCC is the clearinghouse for all companies in Virginia. Most entities must register. Contact the SCC if you plan to conduct business under your business name or a trade name (commonly called a "dba" or "doing business as"), to sell securities, to use a trademark or to operate a franchise. See the SCC Web site at or call (804) 371-9967.

Business plan and structure
A business plan will help you clarify your mission, analyze the potential of your new venture and define how much financing you need.

Financing
Financing for new businesses usually comes from the owners themselves or family members. Established businesses have other financing options for expansion or working capital. See the financing section on page 10 for your options.

Local licenses, taxes and requirements
Contact the county, city or town in which your business is established to find out which licenses are required. If you're a new business, contact the local planning/zoning department to make sure your location is zoned for business activities.

Virginia taxes
All Virginia businesses must also register with the state Department of Taxation. Use the Combined Application Form (Form R-1) to register for sales and use, employer withholding, corporate income, litter and consumer use taxes. There are also various taxes imposed on individuals, businesses and certain products. Most taxes are dependent on the type and structure of your business. To download the appropriate forms, log on or call (804) 367-8037.

Federal Employer Identification Number
Corporations, partnerships and some sole proprietorships must obtain an ID number from the federal government for tax purposes. Contact the Internal Revenue Service at (800) 829-1040 for details. You can go online or call (800) TAX-FORM to obtain form SS-4. Once that form has been completed and filed, the IRS will send you other required forms and instructions for a new business. It's a good idea to get advice from an expert in accounting or tax law to make sure you are filing the forms correctly and in the proper time frame.

Virginia Unemployment Insurance
If you intend to hire employees, you will be subject to unemployment insurance tax. The Virginia Employment Commission will assign your business an account number and send you an Employee Handbook, which explains the reports, notices, requests for information and other communications you will begin receiving from the VEC. For more information, go online.

Employers in Virginia with three or more full or part-time employees are required to carry workers' compensation insurance with a private insurance carrier, hold a certificate of self-insurance issued by the Virginia Workers' Compensation Commission or be a member of a self-insurance association approved by the Virginia State Corporation Commission. Operations with fewer than three employees may voluntarily come under the requirement. Go online or call (877) 664-2566.

Labor regulations
All Virginia companies are required to comply with state and federal labor laws. For guidance in all areas of labor regulations contact the Virginia Department of Labor and Industry at (804) 371-2327 or go online.