After you start a Virginia LLC, there are two main types of ongoing filings. The first is the Annual Report with the state, and the other is taxes.
Paying taxes is an important part of running a business, but figuring out which taxes you need to pay can be a pain.
This lesson will provide you with general resources and the basics of Virginia LLC tax filing requirements.
What taxes does a Limited Liability Company pay in Virginia?
Each LLC has a different tax situation, so the taxes paid for a Virginia LLC varies.
The amount of taxes owed for your LLC depends on rules like:
- how your LLC is taxed
- state and local tax rules
- any sales and use tax requirements, or
- whether you have employees
Additionally, some business types are required to register for industry-specific taxes.
Pro Tip: We recommend hiring an accountant to ensure your LLC meets all of its tax obligations.
We also recommend getting an EIN Number for your LLC. An EIN is also called a Federal Tax Identification Number. They mean the same thing.
Not only will an EIN number be used to open an LLC bank account, but it will also be used for filing taxes with the local, state, and federal governments.
LLC pass-through taxation (Who pays the taxes?)
By default, LLCs don’t pay taxes.
Instead, the LLC Members are responsible for reporting the income (or losses) on their personal 1040 tax return. The Members pay taxes on any LLC profits. This is because of LLC pass-through taxation.
Simply put, pass-through taxation means the responsibility for reporting tax information from an LLC “passes through” the LLC to the LLC Members.
How are LLCs taxed in Virginia?
By default, a Virginia LLC is taxed by the Internal Revenue Service (IRS) based on the number of Members the LLC has. Then the Virginia Department of Taxation honors this and taxes your LLC the same way at the state level.
An LLC with 1 owner (Single-Member LLC) is taxed like a Sole Proprietorship.
An LLC with 2 or more owners (Multi-Member LLC) is taxed like a Partnership.
The above are referred to as the “default status“. Meaning, they are automatically applied based on the number of LLC Members.
Alternatively, you have the option of requesting an “elective status” for your LLC. This is done by filing an extra form with the IRS. Once granted, this elective status means the IRS will treat your LLC as a Corporation (either an S-Corporation or C-Corporation) for tax purposes.
Note: Your Virginia LLC Operating Agreement should also include information about how your LLC is taxed.
Federal Income Taxes
There are several different options for how the IRS can treat your LLC for tax purposes.
Single-Member LLC taxes (default status)
The IRS treats all Single-Member LLCs as Disregarded Entities for tax purposes. This just means that the IRS doesn’t expect the LLC to file its own federal income tax return.
Instead, the owner of the Single-Member LLC files the return (and pays the federal income taxes).
How the LLC pays federal income tax is determined by who owns the LLC:
- If the LLC is owned by an individual, the LLC is taxed like a Sole Proprietorship.
- If the LLC is owned by another company, the LLC is taxed as a branch/division of the parent company.
Multi-Member LLC taxes (default status)
If an LLC has two or more owners, the LLC is taxed like a Partnership.
The LLC needs to file a 1065 Partnership Return and issue a Schedule K-1 to the LLC owners.
The K-1s report each owner’s distributive share of profits. And the K-1 income “flows through” to the owners. The income taxes are then paid by each owner on their personal income tax return (Form 1040).
Husband and Wife LLC taxes
You may have heard that in some states, a husband and wife LLC has the option to file taxes as a Single-Member LLC (aka Qualified Joint Venture) instead of a Multi-Member LLC.
This is true for community property states (like Texas). That said, Virginia isn’t a community property state, which means Qualified Joint Ventures are not available in this state.
Electing to have your LLC taxed as a Corporation
Instead of the default statuses above, a Limited Liability Company (LLC) can be taxed like a Corporation.
Note: We recommend speaking with an accountant before making a corporate election.
There are two types of corporate elections:
LLC taxed as an S-Corporation (elective status)
By filing Form 2553 with the IRS, your LLC can request to be taxed like an S-Corporation.
Being taxed as an S-Corp can help businesses (with established profits) save money on self-employment taxes.
Tip: There are additional expenses to having your LLC taxed as an S-Corporation Most new business owners shouldn’t make this tax election until their business is established and revenue is consistent. Once there is at least $70,000 in annual net income per LLC Member, we recommend speaking to your accountant about this option.
LLC taxed as an C-Corporation (elective status)
By filing Form 8832 with the IRS, your LLC can request to be taxed like a C-Corporation.
Being taxed as a C-Corp can help large employers save money on healthcare fringe benefits.
Note: This election is not common. Most of our readers don’t choose to have their LLC taxed as a C-Corporation.
Virginia State Income Tax for Virginia LLCs
Single-Member LLCs in Virginia: The LLC itself usually doesn’t file a state-level return. However, the owner files a personal state-level return that includes the LLC’s profits or losses.
Multi-Member LLCs in Virginia: The LLC itself may need to file a Partnership return at the state-level. And the owners file a personal state-level return that include the LLC’s profits or losses.
Pass-through Entity Tax
All LLCs that aren’t disregarded entities for tax purposes, must file the Pass-through Entity Tax Return.
This means that all Multi-Member LLCs in Virginia are required to file the Pass-through Entity Tax Return (Form 502PTET) every year.
That said, most Single-Member LLCs don’t have to file this tax return. Again, it just depends on how your LLC is taxed at the federal level.
You can read more about Pass-through Entity Requirements from the Virginia Department of Taxation: Pass-through Entities.
There are also other types of Virginia business tax that apply to certain industries and types of businesses.
We recommend hiring an accountant to prepare and file your state taxes.
You can also contact the Virginia Department of Taxation for more information about Virginia state taxes.
Local Income Tax for Virginia LLCs
You and/or your LLC may need to file and pay income taxes with your local municipality (town, city, county, etc.).
We recommend hiring an accountant to prepare and file your local income taxes.
You can also contact your municipality to check on their requirements.
Virginia Sales Tax
If you sell products to consumers in Virginia, you may need to collect sales tax and get a Seller’s Permit.
A Seller’s Permit is the license that allows you to collect sales tax on retail sales in the state where you do business. It’s sometimes also called a:
- resale license
- wholesale license
- sales tax permit/license
- reseller permit
They all mean the same thing and we may use these terms interchangeably.
You can get a Seller’s Permit online from the Virginia Department of Taxation.
You can read more information about Virginia sales tax from these Virginia DOT resources:
For more information on permits, read Virginia Business Licenses and Permits.
And if you have any questions about whether you need a Seller’s Permit, you can contact the Virginia Department of Taxation at 804-367-8037.
Tip: Save time by hiring an expert. We recommend using TaxJar. They'll help you register for, collect, and pay sales tax.
Virginia LLC Payroll Taxes
If your Virginia LLC will have employees, you must submit payroll taxes. Payroll taxes are essentially a group of taxes and filings, including:
- Federal income tax withholding
- State income tax withholding
- Social Security tax
- Medicare tax
- Federal unemployment taxes (FUTA)
- State unemployment taxes (SUTA)
- Local/county deductions
- Employee deductions
As an employer in Virginia, you need to set up payroll, withhold payroll taxes from employees’ paychecks, and then submit those filings and taxes to various state and government agencies.
Although you can file payroll taxes yourself, the calculations can be burdensome and very complex. And if done improperly can lead to penalties and fines. Most people hire a payroll company or ask their accountant for help.
Our favorite payroll company is Gusto Payroll. They’ll automate and take care of your payroll taxes.
For more Virginia payroll tax resources, please see the references section at the bottom of this page.
Managing your books & staying organized
You can keep track of income and expenses using Microsoft Excel or Google Sheets. Or you can use software to help automate things and save time.
The accounting software we recommend is Quickbooks Online.
Working with an accountant
As you can see, figuring out the different types of taxes you owe can be complicated, let alone how to properly fill out all the forms. And doing taxes improperly or missing deadlines can be harmful to your business
We strongly recommend working with an experienced accountant in Virginia to help make sure you file your federal, state, and local taxes correctly.
Check out our guide on how to find an accountant.
Virginia Department of Taxation Contact Information
There are other types of Virginia business tax that apply to certain industries and types of businesses.
You can contact the Virginia Department of Taxation at 804-367-8037 for more information about Virginia state taxes.
Virginia LLC Taxes FAQs
Do I have to pay an annual fee for my LLC in Virginia?
Yes, all Virginia LLCs have to pay an annual fee by filing a Virginia LLC Annual Report every year. This is separate from the federal, state, and local taxes that you pay.
The LLC Annual Report is filed with the Virginia State Corporation Commission. It is not a tax paid to the Virginia Department of Taxation.
The Annual Report for Virginia LLCs costs $50 per year. This is paid every year for the life of your LLC.
How much is an LLC in Virginia?
Virginia LLC Costs include:
$100 to form your Virginia LLC (to file your LLC Articles of Organization).
$50 in annual fees (to file your LLC Annual Report).
Do I need to file a Virginia state tax return for my LLC?
Maybe – it depends on what type of LLC you have.
Single-Member LLC taxed as a Sole Proprietorship: No. You only need to file your personal tax return (Federal Form 1040 and Virginia Form 1) and include your LLC profits on the return.
Multi-Member LLC taxed as a Partnership: Yes. Your LLC must file an IRS Form 1065 and a Virginia Pass-through Entity Tax Return (Form 502PTET).
LLC taxed as a Corporation: Yes. Your LLC must file tax returns with the IRS and the Virginia Department of Taxation to pay your Virginia income tax. Check with your accountant to make sure you file all the correct documents.
How do I know my LLC tax classification?
You can tell your LLC’s tax classification by looking at how many Members are in your LLC.
This is because LLCs receive their tax classification from the IRS based on the number of Members (owners) your LLC has.
If you have one Member, your LLC is taxed as a Sole Proprietorship.
If your LLC has more than one Member, your LLC is taxed as a Partnership.
This is called being taxed in your default status. Meaning, you don’t have to file any paperwork to let the IRS know that’s how your LLC will be taxed because they tax LLCs that way by default.
However, in order for your LLC to be taxed as a Corporation, you or your accountant would have to file paperwork with the IRS letting them know you’ve chosen to be taxed as a Corporation.
And then the IRS would mail you an Approval Letter to confirm you’ve chosen the Corporate tax election for your LLC.
Note: Being taxed as a Corporation is rare for LLCs, so most people don’t need to worry about this.
And if you’re still unsure about how your LLC is taxed, we recommend calling your accountant or the IRS (1-800-829-4933). To speak to a live person at the IRS, press option 1, option 1 again, and then option 3.
How to start an LLC in Virginia?
Here are the steps for starting an LLC in Virginia:
- Choose an LLC name and make sure it’s available
- Choose who will be your Virginia Registered Agent
- File the Virginia LLC Articles of Organization
- Complete and sign an LLC Operating Agreement
- Get a Tax ID Number (EIN) from the IRS
- Open an LLC bank account
- Check whether you need a business or sales tax license in Virginia
IRS: Tax Information for Businesses
Virginia Department of Taxation: Withholding Tax
Virginia Department of Taxation: All Other Business Taxes
Virginia Employment Commission: Unemployment Insurance Information for Employers