If you’re looking for a reliable DIY guide for starting an LLC in Vermont, look no further.
Below you’ll find all the information you need to launch your business and handle any associated costs. Follow each step carefully and your LLC will be established and ready to hit the ground running.
That said, the process can be complex, with various filings and costs, so if at any point you need help, you can hire an LLC registration service.
Need Help Starting Your LLC?If you want to make sure your LLC is formed correctly, hire an LLC service. Below are the top two that will take care of all the legal paperwork:
ZenBusiness – $39: If getting the most value out of an LLC service is your priority, choose ZenBusiness. They charge one of the lowest rates online and include all the most important features when starting a business. IncFile – $0: If you're on a strict budget and prefer using the cheapest LLC service, choose IncFile. They will form an LLC for free (plus state filing fee) and give you great features along the way.
ZenBusiness – $39: If getting the most value out of an LLC service is your priority, choose ZenBusiness. They charge one of the lowest rates online and include all the most important features when starting a business.
IncFile – $0: If you're on a strict budget and prefer using the cheapest LLC service, choose IncFile. They will form an LLC for free (plus state filing fee) and give you great features along the way.
Step 1: Name Your LLC
What’s in a name? Quite a bit, actually. Your business name is your Vermont LLC’s identity, its personality, its reputation. Find a name that sticks in customers’ minds – while conveying your brand qualities – and you’ve struck gold. A unique, memorable name can draw in new customers and keep existing ones coming back.
Your LLC name is going to appear everywhere: business cards, marketing collateral, websites, legal contracts, bank accounts, invoices, directories, and much more. So be sure that it conveys your product, service, brand, and values.
While you can (and should) be creative with your business name, there are certain state requirements that it must follow.
According to 11 V.S.A. § 4005, all Virginia LLC names must contain the words “limited liability company” or “limited company” or the abbreviation “L.L.C.,” “LLC,” “L.C.,” or “LC.” On top of that, any name that uses obscene, indecent, or discriminatory language, or suggests government affiliation, will be rejected. Finally, and perhaps most importantly, your name must be distinguishable from all other business names on record with the Secretary of State.
If you need to distinguish your LLC name from another, similar one, the following changes will make it unique:
- Adding or subtracting one or more key words or numerals
- One or more key words or numerals that are different
- Substituting synonyms for key words
- Rearranging key words
However, making changes to the following components will NOT make a name distinguishable:
- Entity designators like LLC or Inc.
- Prefixes and suffixes
- Abbreviations and contractions
- Punctuation and special characters
- Numbers expressed as Roman Numerals, Arabic Numerals, or words
Visit the Secretary of State’s Business Name Rules page for more information and to learn about potential exceptions to these rules.
Consider this: your friend Fanny wants to open a flower shop in Stowe, Vermont. The name she is considering, Flowers by Fanny, LLC is already in use. So she comes up with a new one: Fanny’s Florals and Design, LLC. This name is similar to the original but includes new words, distinguishing it in the Secretary of State’s records.
Determine the Name is Available
Of course, you will only need to make distinguishable changes if your name is already taken. Don’t make the mistake of ordering business cards, creating advertisements, and using a name on documents like the Articles of Organization without first confirming it’s available. Use the Secretary of State’s Express Search to see if there’s an existing business using your desired name.
Maybe you pegged a distinguishable name right away, or maybe it took some modifications, but either way, once you have a unique name, you can lock it down by filing a name reservation.
Optional: Name Reservation
You may have fallen in love with a particular name, but still have some preparation and paperwork to sort out before starting your LLC, and you’re worried that someone will swipe it in the meantime. To calm your nerves, you can reserve that name in Vermont for a total of 120 days.
Think about Fanny. After making her name distinguishable, she’s ready to make it official, but if she’s waiting on some paperwork to start her LLC, she can place a hold through Vermont’s Online Business Service Center. After creating an account, all she would need to do is create an account, then choose the Application to Reserve a Specified Business Name form and follow the instructions.
Paper applications are available as well, but the process is a bit more complicated. If you prefer a hard copy, access the form through the Online Business Service Center and print it out. Or, you can request it on this page. Complete the form and mail it to:
Vermont Secretary of State
128 State Street
Montpelier, Vermont 05633-1104
Electronically-submitted forms are processed right away, while hard copies take 7-10 business days. Both options come with a $20 fee, payable by credit card or check.
Step 2: Choose a Registered Agent
Fanny’s LLC is quickly taking shape, and if it’s going to operate in Vermont, she’ll need a go-between for state and legal communications. This is called the registered agent.
A registered agent is a key component of your budding LLC, handling all of its sensitive communication with the state so you don’t have to.
According to the Vermont Secretary of State, “The registered agent is the individual or business entity who accepts service of process of a lawsuit, or other official correspondence, or papers on behalf of the company.” But maintaining an agent isn’t just a convenience, it’s required. The state’s LLC Act requires all Vermont LLCs to “designate and continuously maintain” a registered agent.
Taxes, lawsuits, maintenance requirements, and more – the registered agent takes care of it all. If you had to do this yourself, it would pile additional tasks onto your already-full plate. Plus, your agent makes your business available to receive documents even when you’re out of town or away from the office. This is especially important if your physical office is outside Vermont.
Now for the practical application, the “how-to.” Declare your registered agent by including their name and Vermont address on your Articles of Organization. This is a required part of the form, so have your registered agent ready before starting on it.
You have two options for who can serve as a registered agent: an individual or a company.
Individual as Registered Agent
You may think that an individual registered agent would need specialized training or experience, but this isn’t the case. Anyone can serve as your registered agent, as long as they are a Vermont resident with a physical address in the state (not a P.O. box).
You can even serve as your own LLC’s agent, provided you meet these requirements. Other wise choices might include an attorney or accountant, third parties who understand the intricacies of state LLC requirements.
Registered Agent Service
It can be a lot easier, though, to use an LLC formation service like ZenBusiness (or even Northwest Registered Agent), so we highly recommend it. Not only will they take care of business formation requirements, but they’ll also include a free registered agent service. Or, if you’d rather start your LLC on your own, you can use registered agent services to cover your agent duties.
During the life of your LLC you may, at some point, need to change your registered agent. Perhaps you want to switch from an individual to a professional service, or maybe your existing registered agent resigns. Either way, you’ll want to make the change as soon as possible because operating without an agent on file can lead to administrative dissolution.
Step 3: File the Formation Documents with the State
This is where the LLC formation process kicks into high gear. Let’s check back in with Fanny.
She’s reserved her unique business name, designated a registered agent, and she’s ready to get her LLC off the ground. It’s time for Fanny to take on the most important LLC document: the Articles of Organization. This filing creates a record for Fanny’s Florals and Design, LLC with the Vermont Secretary of State, giving it authorization to commence business in the state.
You can file the Articles of Organization either online or using a hard copy, so whether you covet the expediency of electronic filing or prefer to do business on paper, there’s an option for you. Both options cost $125.
Like the name reservation, you can use Vermont’s Online Business Service Center to file the Articles of Organization. If you don’t already have an account, you will need to create one. Once logged in, choose “I am Creating a New Domestic Business” and select “Limited Liability Company” from the Business Type dropdown box. Your form will be processed within one business day.
Hard Copy Filing
If you want to file a paper application instead, you’ll still need to access it through the Online Business Service Center. Once you find the form, simply print it instead of completing it electronically. Or, request a form from this page. You can mail or hand-deliver your document to:
Vermont Secretary of State
128 State Street
Montpelier, Vermont 05633-1104
Keep in mind that hard copy processing takes longer, likely 7-10 business days.
Step 4: Create an Operating Agreement
The operating agreement is the framework that holds up an LLC, the vital underpinning that establishes processes for its procedures, activities, and conduct. Essentially, it serves as your company’s bylaws.
As a Vermont LLC, you aren’t technically required to maintain an operating agreement. Despite what the state says, creating an agreement is immensely beneficial to your company, establishing optimized procedures and protecting your personal assets in legal disputes. Think of it as your business’ bylaws, a necessary foundation for your business activities.
Let’s say our friend Fanny sells a percentage of her company to two other owners. Her operating agreement could stipulate how the LLC’s assets would be distributed among them in the case of dissolution. But if she decided to maintain sole ownership, the agreement could be used in court as evidence that the LLC’s assets are separate from her personal ones. These are just two examples, but the operating agreement governs everything from member duties to tax structure.
If you’ve decided to draft an agreement, there are two ways to go about it:
- Write it yourself. Don’t be intimidated by this option. There are plenty of free online templates that serve as helpful guides. You can create an effective document from most of the templates out there, but we recommend getting one through ZenBusiness, which includes a free LLC operating agreement with every package. This will save you a lot of time and money.
- Hire an attorney. If you want to be absolutely sure that you don’t miss any important details, an attorney can write or review the agreement for you, ensuring that it complies with state law, includes all necessary information, and avoids the state’s default laws.
What are default laws?
Each state has its own set of generic, baseline laws for how LLCs should operate. These laws, however, only govern matters not included in your operating agreement. Take dissolution, for example. If your LLC ever dissolves, your operating agreement would determine what happens to its remaining assets and debts. But if you fail to include it in the agreement, the state will make that decision for you.
Because default laws are broad and not tailored to your specific business, they often aren’t in your LLC’s best interest, so it’s best to avoid them by being as comprehensive as possible in your agreement.
Step 5: Get an EIN
There’s simply no way to avoid taxes. In fact, it’s illegal to try, so don’t do it.
Federally, LLCs are classified as “pass-through” entities, businesses that don’t file corporate tax returns, but whose owners include income and losses on their individual returns. Still, there are certain circumstances that require LLCs to pay federal taxes, like classifying as a corporation or partnership, hiring employees, or selling merchandise. So, in Fanny’s case, if she plans on hiring additional florists and selling bouquets, she will need to apply for an EIN.
The Employer Identification Number (EIN) is a nine-digit number that the IRS will use to identify your company’s tax accounts, so if you pay any business taxes, it’s extremely important to have one. Click the “Do I need an EIN?” link on this page to see if you fall into this category. If so, apply for an EIN one of three ways:
Need to get this done quick? File online – it’s by far the most efficient method. You can only complete the process between 7 a.m. and 10 p.m. EST, Monday through Friday, but you’ll receive your number immediately upon finishing the digital form. Keep in mind that you will need to provide a valid individual taxpayer number (like a Social Security Number) as part of the process.
You might prefer the feel and security of a paper form. In this case, download Form SS-4, complete it, and fax it to (855) 641-6935. You will receive your EIN within four business days.
Or, there’s always trusty postal mail. However, this is the slowest option, as processing typically takes around four weeks. If that doesn’t deter you, fill out Form SS-4 and send it to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Okay, so you’ve filed the Articles of Organization, designated a registered agent, adopted an operating agreement, and filed for an EIN. Time to start doing business, right? Sorry, there are a couple of additional steps you may need to take first. But don’t worry, you’re almost there!
Step 6: Taxes, Licensing & Income Reporting
For all intents and purposes, most LLCs will be official after completing all the prior steps. Still, it’s important for business owners like Fanny to keep looking ahead, as there are certain maintenance requirements to keep a Vermont LLC running smoothly and in good standing with the state.
Before you start doing business, create a plan for the following potential LLC requirements:
As mentioned earlier, LLCs are almost always classified as “pass-through” entities, which means that they don’t pay income taxes directly to the federal government. That responsibility falls instead on the owners, who must include business income and losses on their personal 1040 tax returns and/or Schedule C. LLCs are flexible with tax structure, so you can choose to have yours taxed like a corporation instead. In this case, it would need to file a separate corporate tax return.
Fortunately for you, LLC state taxes are equally simple. Like federal income taxes, state ones are also reported on personal returns, so your LLC won’t need to file a separate state income tax documents. You may be aware that some states impose a tax for the privilege of doing business there (a “franchise” or “privilege” tax), but Vermont does not.
However, you’re not completely off the hook for taxes. Certain circumstances will require your LLC to pay specific business-related taxes. Do you sell merchandise? If so, your LLC will owe a Sales Tax and Use Tax. Do you have employees? Then you will also owe a Withholding Tax and Unemployment Tax. Register for any applicable taxes either online or using an Application for Business Tax Accounts.
Plus, depending on your LLC’s location, it may owe a local tax to its city, municipality, or county. Consult your local government’s website to find out.
The Articles of Organization may have already made your business legitimate, but your LLC might still need to obtain a license before doing business. This all depends, however, on the type of business you run.
For example, real estate brokers must obtain licensure through Vermont’s Real Estate Commission. And if our friend Fanny wanted to start offering cosmetology services in her flower shop, she would need to apply for a separate license. Unsure if your LLC requires licensure? See the Secretary of State’s Professional Regulation page to find out.
Certain cities and counties require their own specific licenses, so you should also check with your local government.
Once you’ve taken all the steps to start your LLC, you’ll be off and running, making deals and growing the company. But when things are moving 100 miles per hour, don’t forget that Vermont requires all of its businesses to submit one important recurring filing: the Annual Report.
Your LLC’s Annual Report is due each year within three months of your fiscal year’s end. All reports must be completed online, although you have the option to print your finished form at the end and send it via postal mail. Either method requires a $35 fee. Mark this down on your calendar so that you don’t forget, as missing an Annual Report will cause your business to lose its good standing.
And we’ve come to the end. It’s a long process, and not always easy, but the reward is well worth it. If you’ve made it this far, congratulations! Your Vermont LLC is ready for takeoff. So go ahead and start with that big sale, promotional campaign, or business deal. Maybe you’ll see Fanny out there in the business world, selling her beautiful floral creations.
Need Help Creating Your LLC?
If you even skimmed this guide to look over the steps, you likely got a sense of how many moving parts there are when starting an LLC. Can you do it all yourself? Absolutely. We have complete confidence in you.
But if you’d rather hand it off to someone else and not have to worry about it again, we recommend using a formation service. This way, you can go about your other business responsibilities with the confidence that everything will be submitted correctly and punctually.
Plus, an LLC formation service can handle maintenance items like Annual Reports, so you can take them off your to-do list. And on top of that, many services also provide a registered agent.