11 Easy Steps to Start a Business in Virginia

CNBC’s annual “America’s Top States for Business” ranks locations based on infrastructure, cost of doing business, innovation, technology, education, and quality of life.

Virginia has won the title 5 times, more than any other state, most recently in 2021. Today, it’s a close 3rd.

CNBC says this about Virginia: “A great education system is building a smart workforce.”

The statistics back it up:

• The Old Dominion is the 6th highest educated US state (#1 in the South)
• 40% of Virginia’s workforce has a bachelor’s degree or higher.
• With a population of 8.69 million people, the 12th highest in the US, finding the right employees isn’t a problem.

Many government agencies (the Pentagon) and Fortune 500 companies (Amazon) choose Virginia because of its rich history, location, and business-friendly environment.

But government incentives, grants, and small businesses drive the Virginian economy because 99.5% of all companies are SMBs, employing 1.6 million people.

So, if you’re fixin’ to start a business in Virginia, discover why it’s a “purdy” excellent state to do it in.

1. Fine-Tune Your Business Idea
2. Create a Business Plan
3. Choose a Business Name
4. Choose a Business Structure
5. Set up Banking, Credit Cards,& Accounting
6. Get Funding for Your Florida Business
7. Get Insured
8. Obtain Permits & Licenses
9. Find Your Team
10. Market & Grow Your Business
11. Open the Doors! 

Step #1: Fine-tune your business idea

Before starting your business, you need a viable idea that suits your skills, interests, resources, and community needs.

And Virginia has plenty of options, for example:

• You could open a laid-back oyster bar in the Chesapeake Bay or an art gallery in the ViBe Creative District.
• A small town cafe serving cured country ham, eggs, biscuits with gravy, and grits, or join the other 200+ breweries and 60 Virginian distilleries to sell craft beverages.
• Invest in the Old Dominion’s booming short-term property rentals market or join the popular tour guide industry.

But if you’re still unsure, here are some strategies for developing a business idea:

• Find and solve a problem: Get inspiration from your daily life by finding and solving problems you regularly encounter.
• Get inspiration from others: Talk with family, friends, and other business owners, use your current job for inspiration, or look at Virginia for local business ideas.
• Find a niche with a problem: Pick a niche and look at reviews to find issues, or use social media to identify a popular product or service in your new location.
• Improve an existing business idea: Find a market that needs innovation, provide a cheaper product or better service, or mix two niches and create something special. 
• Play to your strengths: You can use your experience to create a business idea by combining your current skills and knowledge with your interests and expertise. It’s about working to your strengths and entering the market from a favorable position where you can promote yourself and your business as an industry authority.

Validate your business idea:

Validation determines whether there’s a market for your business idea, the competition level, and how much people will pay for products/services similar to yours.

You validate by asking these 5 questions and should only start your business when you have the answers:

• Is there a need? Most start-ups fail due to a lack of demand, so ensure people need your solution before starting your business.
• Which way is your chosen market trending? Is it growing, stagnant, or declining?
• Who are your major competitors? Is there room for you to join the market, or is the competition too intense?
• Can you afford the investment fees? These are your start-up and initial marketing costs; you can use the SBA’s start-up costs worksheet to determine them.
• Are the regulations worth it? Your state might have too many rules regarding your niche; check them out before starting your business.

Business idea in place; it’s time to make a plan.

Step #2: Create a business plan

It’s possible to start a business without a business plan, but you could also sail a boat without a chart and end up yonder!

Do you get what I’m saying?

Your business plan’s complexity depends on your chosen market, business structure, and whether you have employees or need funding. Most small businesses can manage with a simple one-page plan that includes these 3 crucial elements:

Market research

Your market research is crucial to your business success for 4 reasons:

• Defines your business purpose by validating the problem you aim to solve.
• Identifies your competitor’s strengths and weaknesses, providing opportunities to improve.  
• Locates your target audience and determines how you’ll reach them (i.e., your marketing strategies).
• Helps you create the best product or service and establishes how it differs from your competitors.

Marketing plan

Here’s where you identify the most lucrative sales channels and create strategies to maximize your investment.

For example, will you sell online, from home, or start a brick-and-mortar store?

Your answer determines your marketing strategy.

Financial plan

Your financial plan is essential for funding as it tells you how much cash you’ll need to start and run your business.

It also answers important questions like:

• What kind of start-up funding do you need?
• Is your business eligible for a grant?
• When will you break even?
• How long before you’ll make a profit?

Choose a location

Choosing the wrong location is one surefire way to go out of business, especially in specific industries that rely on ‘walk-in’ street traffic, like food or retail.

But despite common belief, expensive town centers and congested high streets are only sometimes the best business location. Easy road access, parking, and proximity to public transport often distinguish between success and failure.

And every business location must:

• Suit your business’s style and be where people expect to find you.
• Suit your client’s style and be in an area they’ll visit. 
• Be accessible for stock deliveries.
• Have suitable water, sewage, and power supplies.
• And match your budget.

Each of Virginia’s 95 counties and 38 independent cities have desirable business areas and district zoning laws. So, research your ideal location on the Virginia Association of Counties website, where you’ll also find your county planning department’s contact details for permits and building code regulations.

Home businesses entrepreneurs:

You can run a home business throughout Virginia, but each county has specific licenses and permit requirements.

Consider a shared workspace:

Shared workspaces provide business owners with office space and networking opportunities. The facilities are excellent, affordable, and can accommodate small, medium, and large teams. 

Decide if you’re an online only business

The answer might seem obvious. Right? But many businesses evolve from one to the other or use both.

So, which are you?

• Are you an online or a brick-and-mortar business?
• Will you start as a store and add e-commerce later?
• Or will you begin with e-commerce and add physical locations alongside business demands?

The last option is often the cheapest and least risky, but you’ll need to do the following:

• Build a website.
• Create a social media presence.
• Implement your supply and distribution plan.
• Research tax laws relative to your business and location.
• And online regulations, like the Virginia Consumer Data Protection Act.

But even non-e-commerce businesses should create some online presence, like a Google My Business listing and social media presence, to help promote your location.

Next, you’ll need a name.

Step #3. Choose a business name

Your business name must be memorable and suit your branding and advertising strategies. It should allow you to expand into other markets, fit local SEO, and be available as a domain.

Thankfully, there are steps to choosing the perfect business name and securing it in Virginia:

• When registering a legal entity with the Virginia Secretary Of The Commonwealth Office, like an LLC, filing your business name is part of the process.
• You can reserve a business name for 120 days by filing an “application for reservation” with your county clerk’s office.
• Business owners who do not register a legal entity and want to trade using a catchy brand name can file a Doing Business As (DBA) with their county clerk’s office. 

Now that you have your name, you can choose a business structure; don’t worry, I’ll explain why and how faster than a Virginia summer!

Step #4: Choose a business structure

When you start a business, you must choose a structure; the four that suit most SMBs are a sole proprietorship, a partnership, an S corporation, and a Limited Liability Company (LLC).

• An LLC differs from the other three because it’s an entity approved by a state statute. Each state sets its regulations, including registration requirements, filing fees, and ongoing annual compliances.
• There are two types of partnerships, a General and a Limited Liability Partnership; one provides liability protection, and the other does not.

Choosing the proper business structure is essential because it determines how you register your business, start-up, running costs, and tax filing obligations.

Here’s a quick rundown of all four:

The common business structures

Taxation is a big factor when considering business formation and structures. Here are some factors to keep in mind:

Sole proprietorships:

A sole proprietorship isn’t a separate legal entity; the person who owns it is the business, making them liable for all debts and litigation cases.

Partnerships:

A general partnership is like a sole proprietorship with more than one person. A limited partnership is a separate legal entity that provides liability protection. Partners (called members) pay taxes on their income, determined by their percentage ownership or as per the LP’s operating agreement.

S corporations:

An S corporation avoids corporate tax and double taxation by electing the flow-through tax system, passing all profits and losses to its shareholders (owners), who pay them on their tax returns.

As a legal entity, shareholders get limited liability and can take extra payments as dividends, reducing their tax bill. To choose an S corp, you must first form a corporation or an LLC.

Limited liability company:

LLCs are separate legal entities protecting their owners’ assets from debt or litigation.

There are 2 types:

• Single Member LLCs with one owner who pays tax similar to a sole proprietor.
• Multi-member LLCs with multiple owners who pay tax like a partnership, unless either elects to become an S corporation.

As LLCs exist by state statutes and regulations, check with Virginia’s laws and policies before forming your business.

Tax advantages of each option

All structures have tax advantages; your choice can depend on whether they suit your business and are worth any extra-legal obligations and costs.

Tax benefits of a Sole proprietorship:

Simplicity is the primary tax advantage for sole proprietors as they use the flow-through tax system, meaning profits and losses pass to the owner, who files them on their tax return.

Tax Benefits of a Partnership:

LPs and GPs are flow-through tax entities, and members pay tax on their returns. However, limited partnerships have an added advantage as they avoid corporate double taxation while providing liability protection.

Tax benefits of an S corp:

S corps also pay tax as flow-through entities, avoiding corporation tax.

But an S corp offers members further tax advantages:

• Owners can draw a reasonable salary for work.
• Pay half of any self-employment tax due as employees; the S corp pays the rest.
• Reduce their tax liability by taking further payments as tax-free dividends.

Tax benefits of an LLC:

The primary tax benefit of an LLC is the flow-through tax system, avoiding double taxation and members paying tax rates relative to their income.

LLC members can further reduce their tax liability using tax deductions for business expenses and the cost of forming the business.

Regardless of which structure you choose, most businesses need to set up the following to run smoothly:

Step #5. Set up banking, credit cards, & accounting

Most small businesses need business banking, credit card, and accountancy services to receive and make payments, credit lines, and end-of-year tax returns.

Financial institutions vary on approval requirements, but most require the below information, and all can help you in the following ways:

Business banking:

A business checking account can help:

• Entities like LLCs stay legally compliant by separating their business and personal finances. 
• Your businesses appear more professional to clients and vendors.
• Simplify your bookkeeping and tax returns.

To open a business checking account, you might need articles of incorporation, business licenses, a doing business as (DBA) certificate, an employer identification number (EIN), and identification documents.

Some banks only allow non-business entities (like sole proprietors or general partnerships) with an EIN to open a business account.

Credit cards:

Business credit cards provide essential temporary funding for many small business owners, enabling you to purchase equipment and supplies to trade when your cash flow is slow.

To get a business credit card, you’ll need the following:

• A business name.
• Official address and contact details.
• Type of business.
• Legal structure.
• Years in business.
• Estimated monthly spending.
• Annual revenue.
• Employer identification number (EIN).

Accounting:

There are excellent accounting software systems for SMBs that help maintain daily bookkeeping needs and reduce accountancy costs. However, many businesses need professional help to comply with quarterly and end-of-year tax requirements.

Step #6. Get funding for your Virginia business

Few start-ups begin without funding; whether bootstrapping, commercial, or a grant, most need support. The excellent news is Virginia State offers small business funding and county grant/loan incentives.

You’ll need a business plan with a comprehensive financial section to apply; after that, each lending institution varies; let’s look at your options:

Bootstrapping:

Bootstrapping is how many first-time entrepreneurs finance their business; it includes personal savings, loans from friends or family, home equity loans, or credit cards.

Commercial loans:

Lenders, like local banks and credit unions, are the traditional first stop for many small businesses. But you’ll need the following 4 credit c’s to get a loan:

• Condition – Why you need the loan?
• Capacity – How you’ll repay it.
• Collateral – A repayment security, like an acting guarantor.
• Credit Score – A strong credit score proving your ability to repay.

The problem is many start-ups don’t have all the credit Cs. But that’s where the next option could help you. 

Small Business Administration (SBA):

The SBA supports SMBs by acting as a loan guarantee for your business with select lending institutions that match your business needs.

You can learn all about backed loans on the SBA website or research the following two Virginia SBA loan providers.

SBA-backed loans:

• RedcoU – is a non-profit development company that provides 10, 20, and 25-year fixed-rate SBA-backed loans to Virginia small businesses to finance fixed assets like land, building, construction, renovation, and expansion.
• Atlantic Union Bank – Provides favorable low-interest, long-repayment small business SBA-backed loans.

Virginia Credit Union:

VCU provides fixed and variable low-interest small business loans for equipment, commercial mortgages, credit lines, and credit cards.

Virginia-specific grants and other loan options:

Many Virginia state and country grant and loan options help start-ups and existing business expansion of all sizes and industries, so research your location.

Virginia’s small business loan providers:

• Business One Stop Portal for Entrepreneurs – One Stop is your first stop when starting a business in Virginia; they provide the steps and resources to plan, develop, and grow your business.
• Virginia Small Business Financing Authority (VSBFA) – Provides debt financing for business formation and expansion.
• Virginia SSBCI Cash Collateral Program – Loans to start, improve, and expand your business in Virginia. 
• Secretary of the Commonwealth – Provides funding opportunities for small businesses, communities, and individuals throughout Virginia.

Step #7. Get insured

Small businesses need insurance to protect themselves against lawsuits, vehicle/property damage, theft, and commercial losses caused by natural disasters, floods, or fires.

Most are optional; some are not. For example, you don’t need commercial auto insurance in Virginia, but you must have workers’ compensation insurance if you have employees.

Here are the 5 most important small business insurance policies:

• Workers’ compensation insurance: Workers’ comp provides financial assistance to employees injured at work to cover medical bills, ongoing care, and wage losses.
• General liability insurance: The nuts and bolts of business insurance; general liability protects you against claims for client property damage or physical injury caused by your business.
• Commercial property insurance: Protects commercial property (leased or owned) and equipment against damage or loss.
• Business income insurance: Replaces lost income caused by damage to your commercial property.
• Commercial auto insurance: Provides coverage against liability claims, vehicle damage or loss, and personal injury for drivers.

Step #8. Obtain permits & licenses

Most small businesses need permits and licenses from state and federal agencies.

The great news is Virginia doesn’t have a state-wide business license. Instead, it has permit and license requirements for specific occupations and professions.

Those include:

• Lawyers
• Accountants
• Medical professionals
• Architects and engineers
• Building contractors and other construction-related occupations
• Real estate brokers and salespersons
• Barbers and cosmetologists
• Private investigators and other security services

The average cost of a Virginia business license is $100, but figures vary by county. Permit requirements and fees also vary depending on your location and profession, so either contact your county clerk’s office or check the Virginia government websites:

• Virginia.gov website
• Virginia Department of Professional and Occupational Regulation
• Virginia Department of Health Regulations
• Virginia Department of Agriculture and Consumer Services

Virginia permit and license regulations

The Commonwealth does, however, require new businesses to adhere to the following regulations:

• Virginia state requires LLCs to designate a Virginia-based registered agent with a physical state address available during working hours.
• To open your business, register with the Virginia Department of Taxation.
• Small businesses with employees must register with the Virginia Employment Commission.

Virginia permit and license regulations

The 5 taxes most U.S. small businesses pay are income, estimated, self-employment, employment, and excise tax.

Many businesses pay them at a federal, state, and local level.

Now I don’t want to be “carrying the mail,” but here’s what you need to know about the federal, state, and local taxes:

Federal tax:

Self-employed individuals must pay the IRS self-employment (SE) tax and federal income tax.

You’re self-employed if you:

Run a business as a sole proprietor, an independent contractor, a member of a partnership, a multi-member LLC taxed as a partnership, and a single-member LLC owner taxed as a sole proprietor.  

Self-employment tax is the same as Social Security and Medicare taxes (payroll) withheld from an employee’s pay but for business owners.

Federal income tax is progressive and increases with your income. Self-employed individuals must pay an estimated quarterly tax and file an annual return.

Businesses with employees must withhold income and payroll taxes (Medicare, Social Security, and unemployment taxes) from their payslips and pay their equivalent share.

For more information on federal tax, visit the Internal Revenue Service website.

And if the Federal weren’t enough, state or local governments often levy additional taxes!

Virginia specific regulations

Business taxes you might need to pay in Virginia include the following:

• Corporate income tax at 6%
• Annual corporate registration fee
• LLC registration fee at $100
• Withholding tax
• Workers’ compensation insurance
• Unemployment insurance tax
• Sales and use tax at 5.3%
• Utility consumption tax

And all pass-through business structures must file an annual income tax return on Form 502. For more information, visit the Virginia state tax website.

Counties also charge taxes at the local level, such as sales, and use business tangible personal property and real estate taxes. 

Contact your county’s Commissioner of Revenue’s Office to learn more about local taxes.

Step #9. Find your team

Many factors influence your small business’ success, no more than hiring the right team.

The right players must be qualified and believe in your business culture. When everyone shares values and works towards the same goals, it creates a happy, productive workplace. And that can mean greater profitability.

“Businesses often forget about the culture and suffer for it because you can’t deliver good service from unhappy employees.”–Tony Hsieh, CEO of Zappos.

Your team also influences how your customers, partners, and investors see your business. Finding them requires understanding your business needs and a structured hiring process.

 People are the backbone of the business

When you start a business, it’s wise to surround yourself with people who bring extra skill sets to learn from their experiences, such as fellow business owners, experienced employees, and a local accountant.

Steve Jobs put it this way:

“It makes little sense to hire smart people and then tell them what to do; we hire smart people so they can tell us what to do.”

These people help you navigate the tricky waters of finance, marketing, and other business essentials. They can also provide a fresh perspective on your ideas and tips so you avoid costly mistakes.

Virginia employment laws

Virginia Commonwealth is an “at-will” employment state, meaning you can end your employee’s contract for any reason (except illegal ones).

However, you must comply with the Fair Labor Standards Act, the Occupational Safety and Health Act, and Virginia’s employment laws regarding termination.

Virginia also enforces a right-to-work law, so you can hire employees without unionizing, but you must comply with all state/federal laws and payroll regulations.

Comply with Virginia payroll regulations

Virginia payroll regulations include the following:

• Pay no less than the minimum wage of $12 an hour.
• Provide workers’ compensation.
• Withhold and pay taxes on employee wages.
• Pay salaried employees at least once per month.
• Pay hourly employees at least every two weeks.
• Upon termination, pay your ex-employee all wages by the next payday.

The Commonwealth promotes employment by offering programs to help small businesses find qualified employees, financial help, and training to attract and keep the right people.

Here are two that could help you:

• Virginia Jobs Investment Program (VJIP) – Provides funding and services to businesses creating new jobs in Virginia and helps them keep their employees.
• Virginia Talent Accelerator Program – Provides recruitment and training solutions to suit individual business needs.

Hire contractors

Not all small business owners are ready to hire employees, but that doesn’t mean you must run your business alone. You can hire contractors to help with daily business operations.

For example, you can hire an accountant on retainer to help manage your finance and tax compliance or an online marketing consultant to help promote your business across multiple platforms.

The advantages of hiring contractors over full-time employees are flexibility and cost. You can hire on a need-only basis and avoid payroll tax and employee insurance.

Virginia regulations on hiring contractors:

Virginia state allows business owners to hire employees and contractors to run operations but has strict laws regarding the misclassification of employees (saying an employee is a contractor). Breaking them can cause penalties and fines.

Business owners hiring independent contractors must inform the Virginia New Hire Reporting Center within 20 days of employment.

Step #10. Market & grow your business

Your business might be the next Airbnb, but your target audience will only know with a branding strategy.

Marketing includes any activities used to sell your services or products. Advertising, like your store signage, is the most common.

Other activities include:

• Search Engine Optimization (SEO)
• Local business listings
• Email marketing
• Partner marketing
• Content marketing
• Social media
• Customer reviews 

While they’re all different, they serve one purpose: making a sale. But remember, “marketing isn’t sales; sales result from effective marketing.”

Not all businesses need the same marketing strategies; here are six of the best:

Invite customers to opt into a mailing list or newsletter

Opt-in email marketing is as old as the hills and still the most effective, with an average ROI of 41% on every dollar spent. It works because you only email people who subscribe to your list, so they want what you’re selling.

Over time, your opt-in marketing creates a community that trusts your brand, taking sales out of the equation.

Consider making special offers to attract your first customers

Every new business needs ways to engage its audience’s attention and convince them to cross over and try its brand, and who doesn’t love a special offer or a freebie?

Some ways to lure them in:

• Offer introductory discounts.
• Specials, like buy 2-get-1-free.
• Free gift wrapping.

Special offers can attract your potential customers and change their shopping habits. Once they choose your business, track which offers they used and what they bought to target them again.

Look for local businesses or brands to collaborate with

Business/brand collaboration is when two or more relative companies combine their knowledge, technology, and marketing to extend their customer reach.

A relative business is one within your marketplace rather than in direct competition. For example, a landscaper could combine with a garden center to engage an audience needing their services. In return, the landscaper recommends the garden center to all their clients.

It’s a win-win as both businesses thrive by helping one another.

You can find businesses to collaborate with by registering with your neighborhood business associations and local chamber of commerce. And researching local business listings (Google My Business) and social media groups. 

Invest in word-of-mouth (happy customers attract each other)

Word-of-mouth (WOM) marketing encourages customers to promote your business based on their positive experiences.

When you leave a positive product review on Amazon or recommend a local business to a friend, that’s WOM. 

It’s a proven way to build a loyal community of customers who’ll support your business.

How to use word-of-mouth marketing:

• Encourage user-generated content by asking happy customers to leave reviews on your website or local business listing.
• Promote those reviews on all your marketing platforms.
• Offer incentives to encourage WOM, like a referral program.
• Connect with other industry influencers and ask them to partner with your business.

Pay attention to online reviews; ask happy customers to review you

I mentioned this a second ago, but reviews deserve more time because of their effectiveness.

You know your products or services are the best available, but potential clients don’t, so your job is to encourage reviews to ensure they do.

Here’s why:

• 95% of people read reviews before purchasing a product.
• 58% of shoppers say they’ll pay more for products/services with excellent reviews.
• 84% of customers trust online reviews as much as recommendations from friends or family.

Reviews are how you’ll create a positive reputation and trust with your target audience. If you work to get them, they’ll work for you.

Create unique, helpful content to showcase your activity

Content is anything that promotes your business, like writing, visuals, and audio. You can use them on your business website, social media posts, YouTube videos, and physical marketing materials.

Your content aims to engage your target audience and turn them into clients by resonating with their emotions and convincing them your brand meets their needs. 

And you do that by providing free valuable content that, over time, makes people trust your brand.

Step #11: Open your doors!

Now that you’ve completed all the steps, it’s time to open your doors and start managing your dream Virginia business.

Here’s what to do next:

Plan a successful launch event

A launch event aims to introduce your business’s products/services to your community and target audience.

Your event should reflect your brand’s values, in visual style, location, and context. 

Even though it’s not a sales event, launch parties are excellent for meeting prospective clients and marketing partners. They also encourage people to talk about your business, especially on social media.

How to plan a launch event:

• Define your event goals.
• Pick a venue.
• Choose an appropriate time and date.
• Create a guest list.
• Send physical and digital invitations.
• Ensure your event design reflects your branding.
• Be original with design, but don’t overshadow your products or services.
• Follow up with all guests after the event.

Land your first sale

You could land your first sale during your launch event by offering guests enticing incentives and special first-sale offers.

But don’t stress if you don’t because sales often follow when you identify your target audience, validate your idea, market it correctly, and take advantage of the many Virginia state business incentives.

Conclusion

At first, starting a business in Virginia might feel like climbing a mountain, but your journey has already begun, and everything you need is in this post.

Now take your next steps:

• Visit the Voice Of The Commonwealth Counties website for your location’s requirements.
• Choose your business name and form your business.
• Take advantage of government incentives.

You’ll soon join the other 795,000 small businesses in Virginia.

FAQ