In Virginia, you may incorporate a S corporation (S corp) by founding a limited liability company (LLC) or a corporation and then choosing S corp status from the IRS when applying for an EIN.
An S corporation is a tax categorization, not a company structure, according to the IRS. The S corp classification is used to lower a company’s tax burden.
In our How to Start a S Corp in Virginia tutorial, we’ll walk you through the steps.
Considerations Before Forming a S Corp
You must examine the following things before founding a S corporation:
Is a S corporation the best option for your company?
S corporation limitations
Why is an LLC the ideal structure for the S corporation tax status?
Are the tax benefits of a S corporation good for you?
Table of Contents
Is a S Corporation the Best Business Structure for You?
How to Form a S Corporation
There are two major methods to form a S corporation:
When requesting your employee identification number, organize an LLC and obtain S corp tax status from the IRS (EIN)
By creating a company and applying to the IRS for S corp status
We do not advocate forming a company with the S corp tax status since it undermines all of the advantages of forming a corporation.
Forming an LLC and Choosing S Corp Status in Virginia
To form an LLC and elect S corp status, follow these five simple steps:
Step 1: Give Your LLC a Name
Step 2: Select a Registered Agent.
Step 3: Submit the Articles of Incorporation.
Create an Operating Agreement in Step 4
Step 5: Obtain an EIN and submit Form 2553 to elect S Corporation tax status.
Step 1: Give Your LLC a Name
The first and most significant step in forming an LLC in Virginia is deciding on a name.
Make sure your name conforms with Virginia naming regulations and is readily searched by prospective customers.
1. Follow the Virginia LLC naming guidelines:
Your firm’s name must contain the words “limited liability company” or “limited company” or one of its acronyms (LLC, L.L.C., LC, or L.C.).
Any term, abbreviation, or combination of characters that declares or suggests the LLC is a corporation or a limited partnership is not permitted in your name.
Your name cannot contain the terms “bank” or “trust” unless the LLC will be involved in the banking or trust firm business, or the context of the remaining words clearly indicates that it will not be engaged in such activity.
Unless the LLC will be legitimately engaged in such services or it is evident from the context of the remaining words that it will not conduct such activity, your name cannot contain the terms “engineer,” “architecture,” or “land surveying,” or any variant of those words.
The terms “United States,” “national,” “Federal,” and “reserve” may not appear in the name of a firm involved in banking, lending, building and loan, brokerage, factorage, insurance, indemnity, savings, or trust.
Your name must be distinct from any other current company in the state. This lists reserved names in Virginia.
2. Does the name exist in Virginia? To determine whether your selected LLC name is available, utilize the business entity search on the Virginia State Corporation Commission website.
3. Is the URL accessible?
We suggest that you check to see whether your company’s name is accessible as a web domain. Even if you don’t intend to construct a company website right away, you may want to purchase the URL to prevent others from gaining it.
Step 2: Select a Virginia Registered Agent
Your Virginia LLC must have a registered agent.
A registered agent for your LLC will accept legal papers and tax notifications on your behalf. When you submit your LLC’s Articles of Organization, you will name your registered agent.
Many company owners opt to use the services of a registered agent. Many of these firms will incorporate your LLC for a modest price and provide free registered agent services for the first year.
Step 3: Submit the Articles of Organization for the Virginia LLC.
To properly register an LLC, the Virginia Articles of Organization are utilized.
Step 4: Draft an Operating Agreement for your LLC.
An LLC operating agreement is a legal document that defines your LLC’s ownership and member responsibilities.
Read our Virginia LLC Operating Agreement guide for more details.
Step 5: Apply for an EIN and fill out Form 2553 on the IRS website.
An EIN is a number assigned by the US Internal Revenue Service (IRS) to companies in order to identify and tax them. It is basically a business’s Social Security number.
When you apply directly with the IRS, EINs are free.
Select S Corporation Tax Status
The IRS will give a link to Form 2553, the Election by a Small Business form, during the online EIN application process.