How to Start an LLC in Vermont
How to start an LLC in Vermont in 6 easy steps
Step 1. Naming Your Texas LLC
The first step in starting your Vermont LLC is to name it. The name that you choose should be completely distinct and unique from any others business in the state, in addition to following specific naming rules.
Legally Required Designation
According to Vermont LLC regulations, the name of your business must contain the phrase “limited liability company” or one of the following abbreviations:
- Limited Company
- Co.
- LLC
- L.C.
- LC
- C.
Unique Name
Like we mentioned above, the name that you select for your LLC must be distinguishable from every other business in Vermont and not at risk of infringement. To ensure your name is unique, you can perform a search in the Vermont Secretary of State’s business database.
If you find an available name that you would like to use, you can reserve it ahead of filing to establish your LLC by filling out a Name Reservation application. From the list of documents on the website, select “request form,” and you will be emailed a copy of the application. You can reserve an LLC name for up to 120 days before establishing your LLC for a $20 filing fee. You may file the application online or through the mail.
While you are searching for an available LLC name, you may also want to perform a domain name search. Even if you don’t want to create a business website immediately, it is a good idea to purchase a matching domain name ahead of time, reserving it for when you do need it.
Restricted Words
When choosing an LLC name, keep in mind that you are not able to include any words that run the risk of confusing your business with a government entity. This can include words like “IRS,” “Treasury,” “FBI,” or “State Department.”
You should also be aware that using words such as “bank,” “trust,” or “attorney” may categorize you as providing professional services, and may require the presence of a properly licensed individual in your LLC and additional LLC paperwork.
Using a Trade Name
You can use a trade name or DBA (doing business as) name for your LLC in Vermont. This means that you will continue using the legally registered LLC name on all official documents, but may use a different registered name when interacting with the public.
In order to register your DBA name with the state, you will need to file an assumed business name registration. You can file this form either online or through the mail, and there is a $50 filing fee associated with it.
If you choose to file online, your form will be processed within 1 to 2 days. If you file through the mail, it can take up to 10 days for your DBA name to be officially registered.
Step 2. Choosing a Registered Agent
In Vermont, every LLC must have a registered agent, also called an agent for service of process, appointed. Your registered agent will act as a contact point between your LLC and federal agencies or the state of Vermont and will be responsible for receiving all legal documents, government communications, and tax documents. They will also be the responsible party that is contacted in the event of a lawsuit against your LLC.
You can appoint any Vermont resident, official registered agent service, or other business that is authorized to conduct operations in Vermont as your registered agent. As long as your appointee has a valid Vermont address, they are eligible to be your registered agent.
Step 3. Filing the Certificate of Formation
In order to legally establish your LLC in Vermont, you will need to file your Articles of Organization with the Vermont Secretary of State. This document will contain vital information about your business, which you can read more about below.
- Your LLC’s name
- Your LLC’s sub-type (you can read more about this here)
- The last month of your LLC’s fiscal year (for most businesses, this will be December)
- Your LLC’s business type
- Your LLC’s principal office address
- Your LLC’s registered agent name, address, and email
- If your LLC has members at the time of filing
- If your LLC will be member-managed or manager-managed
- The principal members’ or managers’ names and addresses
- Your LLC’s organizer name and address
- Your LLC’s organizer’s signature
You can file your Articles of Organization either online or through the mail. There is a $125 filing fee associated with this form.
Online
If you choose to file your Articles of Organization online, you will need to access the Virginia Secretary of State online business service center. Once you are on the website, you will need to select the option to “start or register your business” and follow the subsequent instructions. You will need to create an account and put all applicable information on the online form.
After the Articles are completed, you will submit the form for processing and pay the $125 fee.
Online filings typically take 1 to 2 days to fully process, so this is usually the preferable choice for someone looking for their business to be established quickly.
By Mail
To file your Articles of Organization by mail, you will need to register an account in the online system. From there, you will select the option to file your Articles through the mail, print off the form, and send it to the address below. Be sure to include a check made out to the Vermont Secretary of State for the filing fee of $125.
It can take up to 10 business days for your Articles of Organization to be processed when filing through the mail.
Vermont Secretary of State
Corporations Division
128 State Street
Montpelier, VT 05633
Step 4. Create an Operating Agreement
An operating agreement is not required by the state of Vermont, but it is a good idea to create one for your LLC anyway. An operating agreement sets clear guidelines for how exactly your LLC is managed, the rights that members or managers have, and what to do in the event that your LLC dissolves or experiences a lawsuit.
Additionally, most business bank accounts, loan applications, and other business services will require you to have an operating agreement on hand to demonstrate your LLC as a separately operating business entity before you can secure funding or business services.
You will not have to file your operating agreement with the state, but you can make copies of it and distribute it to the members or managers of your LLC to ensure that you are all in agreement about your business’s operations.
Step 5. Getting an EIN/Tax ID Number
Once your LLC is legally established in Vermont, you will need to apply for a Tax ID number, also known as an EIN (Employer Identification Number), from the IRS. Any LLC that has more than one member, any single-member LLC that wants to hire employees, and any LLC that chooses to be taxed as a corporation is required to apply for an EIN.
Your EIN will be used to identify your business to the IRS on all tax documents and necessary government filings. The number acts much like a social security number for your LLC. If you want to hire employees, file federal taxes, open business bank or credit accounts, or apply for business funding, you will need an EIN.
It is free to apply for your EIN with the IRS, and you can file the application online or by mailing it in.
Online
The quickest and easiest way to apply for your EIN is online, and you will receive your number once your application is completed. Visit the IRS website to apply for your EIN for free.
By Mail
Keep in mind that if you are a foreign filer or do not have a social security number, you will need to fill out this form when applying for your LLC by mail. If you are a foreign filer or do not have a social security number, leave section 7b blank. Mail the completed form to the address below. If you have any questions, you can contact the IRS at (267) 941-1099.
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Step 6. Keeping Your LLC Running
Even after your LLC is legally established in Vermont, there are a few things you will need to keep up with to ensure your LLC stays running smoothly year after year.
File Annual Reports
Each LLC in Vermont is required to file an annual report with the Secretary of State’s office. This report keeps the state up to date on your LLC’s business and information, and failure to file the report could result in the involuntary dissolution of your LLC.
You may file your annual report either online or through the mail. For both filing methods, you will need to access the annual report form through the online business service center. From there, you will fill out all the necessary information. If you want to file online, you will submit and pay the $35 filing fee using a credit or debit card.
To file through the mail, you will select the option that says “print and mail with check,” and can then send the form to the given address with a check for the $35 filing fee. Keep in mind that online filing is processed faster than mail filing.
Each year, your annual report will be due 3 months after your LLC’s fiscal year end. For most businesses, this happens in December, so your annual report will be due between January 1st and March 31st each year. If you have more questions about annual report filing, you can find answers here.
Separate Your Business Finances
Separating your business finances isn’t required by the state of Vermont, but it can be helpful. A business credit or debit account can help keep your LLC’s finances separate from any personal ones, establishing the LLC as an independently operating business and protecting your assets in the case of lawsuits or other legal issues.
You will most likely need to show your Articles of Organization, operating agreement, EIN, or other LLC business documents to open a bank account for your LLC. Compare all of your options before making a choice on which bank account to open, as different banks will have different minimum required balances or credit spending limits, so you want to be sure that you select something that is the best for your LLC’s needs.
Keep Up With Federal and State Taxes
It is important to keep up to date with both federal and state tax requirements while your LLC is operating in order to avoid any major penalties or fines.
Federal Tax Requirements
There are several different tax structures you can choose from to use in your LLC that may meet different company needs, and each tax structure comes with its own unique type of federal taxation. This article can help you gain an in-depth understanding of the differences between each type and help you decide which is best for you.
In general, most LLCs are taxed as sole proprietorships or partnerships. This means that you will be expected to file Schedule C along with your individual income tax return to declare any income that you receive through your LLC. When using this tax structure, you should keep in mind that you will most likely need to pay self-employment tax (which has a rate of 15.3%), in addition to any income tax. You may also need to make quarterly estimated tax payments to avoid any IRS fines.
If you want, you can choose to have your LLC taxed as an S Corporation or a C Corporation. You will need to fill out IRS Form 8832 and IRS Form 2553 to make these designations. After these forms have been processed, your LLC will be treated as a corporation and expected to file a separate corporate tax return with the IRS.
Vermont Business Taxes
Vermont does have a state business entity income tax and a corporate income tax. The business entity tax applies to LLCs that have opted to be taxed as sole proprietorships and partnerships, while the corporate income tax applies to LLCs that have elected to be taxed as S or C corporations. There are various rate scales for both types of taxes which you can read more about here.
Additionally, LLCs that are sole-proprietorships or partnerships will be considered as pass-through entities. This means that the income passes through to the individuals operating the business. In these cases, you will also be required to file an individual state income tax return annually on top of paying any business entity taxes.
If you are confused about what you owe or how to calculate your total tax burden, it is a good idea to meet with a professional accountant or tax advisor to ensure that you are meeting all tax requirements.
Sales and Use Taxes
If your LLC will be selling goods and services in Vermont, you will most likely be liable to pay sales and use taxes. These taxes are registered for and filed through the state’s Department of Taxes. You can also find information about calculating these taxes and expected payment dates from the Department website.
State Employer Taxes
For an LLC that has employees, you will most likely need to pay both withholding taxes and unemployment insurance taxes. Withholding taxes can be registered for and paid online or through the mail. More information about both of these processes can be found on the Vermont Department of Taxes website here.
Unemployment insurance taxes need to be registered for and paid through the Vermont Department of Labor. You can also find information about calculating taxes, quarterly reporting dates, and general employer assistance.
Acquire Necessary Permits and Licenses
There isn’t any type of statewide business license in Vermont, but certain cities and counties may require you to obtain a business license. You should check with the clerk’s office of the locality that your LLC is located in to ensure that you don’t miss any licensing requirements.
You may be required to meet extra requirements if your LLC will be a professional LLC, such as an attorney’s office or other licensed professional entity. You can find more information about professional licensing in Vermont here.
Additionally, you may be required to obtain certain permits and licenses for your LLC on a federal level. Whether this is needed depends mostly on the type of business you are running and the services you are offering. For help determining if you need to meet any type of federal licensing requirements, you can use the directory on the U.S. Small Business Administration’s website.
Vermont LLC Resources
The below list of resources will help guide you through every step of the LLC formation process in Vermont.
- Available LLC name search
- Reserve an LLC name
- Available domain name search
- Register a DBA name
- Articles of Organization information
- Online business service center
- IRS EIN free application
- Annual Report information
- Vermont Department of Taxes
- Vermont Department of Labor
- Vermont professional licensing information
- S. Small Business Administration
Vermont LLC FAQs
The answers to these frequently asked questions can help you put your mind to rest about key aspects of the LLC establishment process.
In Vermont, it will cost you $125 to file your Articles of Organization and establish your LLC. It may also cost you $20 to reserve an LLC name ahead of time or $50 to register a DBA name for your LLC.
The cheapest way to start an LLC in Vermont is to file your Articles of Organization online without reserving an LLC name ahead of time or registering a DBA name in the state. Doing it this way will only cost you $125 to get your LLC established.
How long it takes to form your Vermont LLC depends on how you file. Online filing of your Articles of Organization will take between 1 and 2 business days to fully process, while filing your Articles through the mail can take up to 10 days to fully process.
Certain states allow the formation of low-profit LLCs, which are LLCs that are designed for a charitable purpose, but still provide the owners with some sort of profit. Vermont is a state that allows this type of LLC formation, and the steps for forming such an LLC are similar to those for establishing a traditional LLC, save for some naming rules.
You can read more about low-profit LLCs here and find Vermont-specific information about low-profit LLCs here.
How much your Vermont LLC pays in taxes depends on the individual tax structure you have set up. Keep in mind that in addition to any federal taxes, you will be liable for state business taxes such as business entity or corporate income tax, sales and uses taxes, or state employer taxes.
If you have any questions about your tax burden, you should consult with a professional tax advisor to ensure you meet all taxation requirements.
In Vermont, you will need to file state reports annually. The report is due within the first 3 months after your LLC’s fiscal year ends each year and costs $35 to file. You can choose to file your annual report either online or through the mail.
Once you are done conducting business under your LLC, you will need to file Articles of Termination with the Vermont Secretary of State. This form costs $20 to file and can be filed either online.
You will also need to consult your operating agreement and follow the previously agreed-upon terms for closing down your business and tying up any loose ends associated with your LLC’s operations.