Forming your company entity in Delaware, especially a C Corporation, allows you a lot of flexibility, but depending on which state you operate in, you may still need to observe local rules.
If you conduct business in Virginia, you must register with the state. We'll go over the steps and simplify them. But first, how can you know if you're conducting business lawfully in Virginia?
When to register as doing business in Virginia
The State refers to Delaware C corps and all other corporations incorporated outside of Virginia as "foreign" corporations.
Virginia statutes do not specify what constitutes doing business in the state. However, Virginia statutes provide that the following actions do not need registration with the state:
Defending or settling a legal action
Having a state-issued bank account
Using independent contractors to sell
When To Register To Collect Sales Tax In Virginia
Every state has different regulations about when a corporation is obligated to pay sales tax. These are referred to as sales tax nexus regulations.
You can think of the nexus as a unique version of that state's border; if you execute specific commercial operations within that border, you come under the state's sales tax nexus, and you must register for and collect state sales tax.
Typically, these behaviors involve the purchase and sale of goods and services.
The sales tax nexus laws in Virginia only apply to vendors who offer actual products or services to Virginia residents.
Until 2018, selling or purchasing non-physical things, such as subscriptions to streaming services, SaaS memberships, and so on, did not normally qualify you for sales tax nexus. That changed after a significant court judgment in 2018. These days, if you buy or sell non-physical products or services in a state, you may be subject to its sales tax.
Virginia Sales Tax Nexus (physical goods and property)
If you have a physical presence in Virginia, you will almost certainly be required to collect and return sales tax. If you have warehouses, retail locations, or workers and/or representatives of your company in the state, you may be physically present.
You must pay sales tax regardless of any minimal requirements as long as you have a physical presence. More information on physical presence for sales tax purposes may be found on the State's website.
Virginia Sales Tax Nexus (non-physical goods and property)
The new state sales tax legislation that apply to non-physical (i.e. online) purchases allow you to qualify for sales tax nexus even if you do not have a physical presence or items. To qualify in Virginia, you must meet specific criteria.
If you did the following in the current or prior year, you must collect and pay sales tax:
Earn $100,000 or more in retail sales in Virginia; or
Have at least 200 distinct transactions into Virginia
You may learn more about remote sellers on the State's website.
Remember that this isn't legal advice; rather, it's a guide. If you're not sure whether you're subject to Virginia's sales tax nexus, consult your legal counsel and/or an accountant who is familiar with the state's legal code and tax rules.
How To Register To Do Business In Virginia
- Select a name under which to do business. This doesn’t have to be the name you registered when incorporating in Delaware, but it can be.
- Fill out an application. You’ll need to file an Application for a Certificate of Authority to Transact Business in Virginia to the Virginia Secretary of State.
- Pay the fee. Now you pay the Virginia Secretary of State a filing fee. The filing fee depends on your company’s authorized shares.
- Submit your Application for Certificate of Authority to Transact Business in Virginia.
- Wait. Processing typically takes two to four weeks.
After receiving approval to operate as a qualified foreign firm in Virginia, you will be required to adhere to specific regulations.
Compliance as a Qualified Foreign Business in Virginia
To stay in compliance and continue legally doing business in Virginia, you need to meet two requirements: maintaining a registered agent and filing your annual report. On top of that you will also need to pay your corporation income tax.
Registered Agent in Virginia
Your registered agent in Virginia is your point of contact with local authorities. If you don’t have a physical address for your company in Virginia, it may be advantageous to find a registered agent to receive state notices on your behalf.
Foreign corporations are required to have a registered office in Virginia. The office cannot be a P.O. box; it must be a physical address of your registered agent or a licensed registered agent service.
Your registered agent will forward any important information, such as business mail, to you. There are a number of firms that contract out registered agents. They typically cost $50 – $100 per year.
Annual Reporting In Virginia
Every two years, you must file a statement with the State, updating any changes to the company address or the composition of the Board and officers. You’ll include info like:
- The legal name of your business
- The name and address of your registered agent
- The names and addresses of board members, managers, and officers
Your annual report filing fee depends on your company’s authorized shares.
Paying Corporate Franchise And Income Tax
Virginia has a corporation income tax. A corporation income tax is a direct tax imposed on the income of a corporation. For more information on paying your corporation income tax, please see the following guidance from Virginia’s Department of Taxation.
Sales Tax In Virginia
If you meet the requirements to collect sales tax in Virginia, you will need to register with the Virginia Department of Taxation. You can register to collect sales tax through the Virginia Tax Online Services for Businesses provided by the Virginia Department of Taxation.
Hiring And Paying Employees In Virginia
When you hire a new employee in Virginia, federal and state laws require that you report new hires to the state within 20 days of their hire. You can report your new hires online.
Your payroll provider should be able to take care of paycheck withholdings, but it’s up to you to register as an employer with the State and set up an online employer account.
For a comprehensive guide of your responsibilities, Virginia provides the following information.
The Easiest Way To Register Your Business In Virginia
To register your business in Virginia, you’ve got to keep track of a lot of moving parts. Failing to file the right forms, provide the right information, or stay on top of compliance laws can lead to serious headaches.
Capbase makes it easy. When you incorporate your Delaware corporation on Capbase, we will generate the required information needed to register to do business in Virginia and keep you up to date on any required filings.
The compliance calendar inside your Capbase account will notify you of upcoming fees, reporting, or other requirements, so you can keep your startup in good standing with Virginia state officials.
Written by Beth Zhao
Beth is a second year law student at The George Washington Law School. She is a member of the Public Contract Law Journal.
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