How to Start an LLC in Vermont

Starting a Vermont limited liability company (LLC) can seem intimidating to new business owners. But with a bit of help, you can discover how to easily create your own LLC.

This article will help you understand:

• The steps you’ll need to take to create a Vermont LLC
• Additional tasks you’ll need to handle after you register your LLC
• How much it costs and how long it takes to start an LLC Vermont

Keep reading to learn all about your Vermont LLC formation!

Last updated: Sep 2024

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Step 1: Name your Vermont LLC

Before you can start a Vermont LLC, you’ll need to pick a business name. Just keep in mind that there are rules about LLC names that you’ll need to follow. For instance, some words are not allowed to be used, while others are required.

We’ve laid out Vermont’s LLC name rules in the sections below.

Words You Have to Use

Vermont Statutes Title 11 Section 4005 says that Vermont LLC names must include one of the following:

• “limited liability company”
• “limited company”
• “L.L.C”
• “LLC”
• “L.C.”
• “LC”

Words You Can’t Use

LLC names should not have words that suggest that they are a part of the government. Likewise, an LLC’s name can’t make it seem like it is another type of business entity, such as a corporation.

Your LLC name also can’t imply that the business commits crimes or provides other illegal services. For example, if you don’t have a license to offer certain services, your name should not suggest that these services are available.

Section 4005 also requires LLC names to be “distinguishable” from every other name registered with the Vermont Secretary of State. This rule is in place to keep buyers from getting confused by two companies with the same name.

You can learn more about Vermont’s name availability rules on the Secretary of State’s website.

Research the LLC Name You Want

Once you’ve chosen a name for your LLC, you can use the Secretary of State’s Business Name Search to find out if it is available.

If your preferred name is taken, you can’t use it unless the other business consents and changes its name. You can also use the name if you get a court order that says you have the right to do.

If the name you want is available, Vermont Statutes Title 11 Section 4006 lets you reserve it for renewable 120-day periods. To do so, you must submit a name reservation using the Secretary of State’s Online Business Service Center. There is a $20 filing fee.

Vermont DBA: Using an Assumed Business Name

Like many other business owners, you may find that you prefer to run your LLC under a “doing business as” or “DBA” name. A DBA is an alternate name that your business can “go by” instead of its legal name.

A good DBA name will often be more memorable and less formal than the LLC’s official name. With a DBA, you also have the choice to change your business’s name without having to go through the process of officially changing it.

Vermont calls DBAs “assumed business names.” If you want to use a DBA for your LLC, Vermont Statutes Title 11 Section 1621 says you must register it with the Secretary of State. You can do this by filing an Assumed Name Registration through the Online Business Service Center. 

There is a $50 filing fee.

Step 2: Appoint a Registered Agent for your LLC

A registered agent, known in Vermont as an “agent for service of process,” is a person or business that receives legal documents for a business.

Vermont Statutes Title 11 Section 4007 says all LLCs must have an agent for service of process in the state. Your registered agent must keep an office in Vermont and be available during standard business hours to receive service of process.

Many new LLC owners think they should just serve as the registered agent themselves. And there are some benefits to doing so:

• It’s cheap: You’re not paying someone else to do it for you.
• It’s easy: The only address and contact information you have to keep current is your own.
• It’s reliable: You will receive all important documents personally.

However, you should know that being your own LLC’s agent for service of process can create risks and cause problems.

Some issues that you might face include:

• No privacy: Your name and address will be published on the Secretary of State’s website. This means that anyone with an internet connection can find your personal information.
• Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
• No breaks: You also must be available at all times during regular business hours to receive documents. This means no vacations, sick days, or leaving the office for lunch.
• Business interruptions: Client meetings can be interrupted by people serving process. That could be embarrassing or hurt your reputation.
• It’s your fault if you miss something: You always have to make sure your address is correct and up to date. If you make a mistake or miss something, you are held responsible.

This is why we suggest using a professional registered agent service for your LLC. It costs about $100 per year, and you’ll be informed immediately if your business receives any documents.

If you plan to do business in another state, each state will require you to register as a foreign LLC and appoint a registered agent. 

In these cases, we suggest that you hire a national registered agent service. That way, one business can serve as your registered agent in every state where you need to have one.

Step 3: File Your Vermont LLC Articles of Organization

Articles of Organization are a document that lists vital data about your business. You must submit them to the Vermont Secretary of State to officially start your LLC.

What to include in my Vermont Articles of Organization?

Vermont Statutes Title 11 Section 4023 says your articles of organization must include:

• The LLC’s name.
• The address of the initial designated office.
• The name and address of the registered agent.
• The name and address of each organizer.

You can file your Vermont articles of organization with the Secretary of State’s Online Business Service Center.

Vermont LLC Filing Fee

According to the Secretary of State’s Fees list, the filing fee for Vermont LLC articles of organization is $125.

Read More: How Much Does It Cost to Form an LLC in Vermont

Vermont LLC Processing Time

Online filings will typically be processed in less than one business day. Any filings received by mail will require 7 to 10 business days for processing, so we suggest filing online whenever possible.

Step 4: Draft your Vermont LLC Operating Agreement

An LLC operating agreement sets the ground rules for how your business should run. It also assigns each member’s rights and responsibilities.

You aren’t legally bound to make an operating agreement for your Vermont LLC. Still, it can be advantageous to decide how the LLC will operate before you open for business. An operating agreement helps align the members’ expectations and can help prevent future confusion. 

For example, say an LLC owner wants to leave the business. The operating agreement would spell out the process for selling their interest. It could also establish steps for reassigning their duties after they are gone.

Operating agreements are also helpful because:

• They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
• They say what the manager has the right to do. Managers also have special duties to the company and the members. The LLC operating agreement should state these.
• They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
• They say how new members can join the company. They also have rules about how exiting members can leave.
• They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
• They say whether members or managers are in charge. They also say how to hire and fire managers.
• They say how and under what circumstances the LLC should end. You might not want to dissolve your business entity now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
• They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.

When writing an LLC operating agreement, make sure all members are included in the process. This will allow you to address critical issues early on and avoid running into problems down the line.

Vermont Statutes Title 11 Section 4003 lists the state’s rules about operating agreements.

Step 5: Get an EIN (Employer Identification Number) for Your Vermont LLC

An Employer Identification Number (EIN) is a nine-digit tax ID number that the IRS assigns to companies. You can identify your LLC with its EIN, just like you can use your SSN to identify yourself.

Here are the most common times when you need an EIN:

• Does your LLC have more than one member?
• Does your LLC have any employees?
• Is your LLC taxed as a C corporation or S corporation?

If the answer to any of these questions is yes, your LLC must get an EIN.

A single-member LLC isn’t required to get an EIN since the business owner can use their SSN to file taxes. Still, an EIN can be helpful for other reasons, such as opening business bank accounts and protecting your identity.

You can get an EIN through the IRS website or by filling out Form SS-4. Applying online saves you time since you don’t have to print and mail the form. After you request an EIN online, you’ll get your tax ID number in a few short minutes.

It’s always free to get an EIN, so there’s no need to hire someone to get one for you.

Read More: How to Get an Employer Identification Number in Vermont

First Tasks After Registering your Vermont LLC

Registering a Vermont LLC is one of the first steps to take when setting up a new business. Once you’ve started your LLC, there are a few other vital tasks you should handle before you officially open.

Open a Business Bank Account

You aren’t legally required to open a business bank account for your LLC, but it is in your best interest to do so. Having a company bank account will make bookkeeping easier and help to protect against possible personal liability.

Some of the benefits of an LLC bank account are:

• Convenience: Keeping things separate makes your LLC’s bookkeeping much simpler.
• More business opportunities: Your LLC can only receive credit card payments through a business bank account. You can also do business with people who won’t take personal payments.
• Personal asset protection: Mixing your personal and business funds could cause you to be held responsible for the LLC’s debts.

The third advantage, personal asset protection, is key.

One reason that so many business owners start LLCs is that they are treated as separate legal entities from their owners. This legal concept is called the “corporate veil.” It prevents creditors from coming after your personal assets to pay your company’s debts.

But when you “commingle” your personal assets with the LLC’s assets, the corporate veil can be “pierced” if your business is sued. And when the veil is pierced, you can be found personally liable for the debts of the business. 

To keep the corporate veil intact and benefit from the LLC’s liability protection, we suggest opening a business bank account and only using it for your LLC’s expenses. This way, all your business funds will be in one account and your personal assets in another.

Get Business Insurance For Your Vermont LLC

It is crucial to find the right insurance coverage for your Vermont LLC. Consider your industry’s particular risks and explore different policy options so you can choose the best one for your business.

Here are some common business insurance policies:

• General liability insurance: You’ll need this if there’s an injury on your property. It pays for damages and a lawyer if you need one.
• Commercial automobile insurance: This works like your own car insurance. It covers drivers and vehicles for your business.
• Workers’ compensation insurance: Vermont law requires all employers to obtain workers’ compensation insurance coverage. You can choose to buy a policy from a private insurance company or get approved to self-insure.
• Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
• Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
• Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses will be covered.

Keep Your Vermont Company Compliant

Once you’ve set up your LLC, it’s essential to remain compliant with your ongoing legal obligations. For instance, some businesses will be required to pay taxes. Certain industries may also have license or permit requirements.

Make sure to stay current on the laws that your business must follow, including updates to local regulations. This will help you ensure your LLC is in good standing,

Vermont Business Permits and Licenses

Businesses involving certain professions and industries require a business license or permit to operate legally. You can review the Office of Professional Regulation’s list of regulated professions to learn more. 

Additionally, some cities and towns require new businesses to obtain local licenses, so you’ll need to check with your local government to see if there are any additional requirements.

Vermont Tax Requirements

Vermont LLCs are required to file a Business Entity Income Tax return. And if you plan to hire employees, rent rooms, or sell physical goods, meals, or alcohol, you must register for a business tax account. 

Check out the Vermont Department of Taxes’ resource on starting a new business for more information.

Federal LLC Tax Filing Requirements

LLCs are considered “pass-through” entities for Federal tax purposes. This means that all profits will be reported on Schedule C of the individual tax returns of its owners. The LLC itself is not subject to taxation.

You also need to pay Social Security and Medicare taxes, even if you don’t plan to hire any workers. If you do have employees, you will have to withhold payroll taxes out of their wages.

Annual Report and other Filing Requirements

Under Vermont Statutes Title 11 Section 4033, each LLC must submit an annual report to the Secretary of State. You can file online using the Online Business Service Center. 

There is a $35 filing fee.

Vermont Business Formation Quick Links

• Internal Revenue Service — apply for an EIN online
• IRS information regarding the federal tax treatment of LLCs
• Online Business Service Center (SOS)
• Business Name Search (SOS)
• Fees (SOS)
• Forms Request (SOS)
• Limited Liability Company (SOS)
• Name Availability Rules (SOS)

Statutes:

• Name Requirements: Vermont Statutes Title 11 Section 4005
• Name Reservation: Vermont Statutes Title 11 Section 4006
• Assumed Business Name: Vermont Statutes Title 11 Section 1621
• Registered Agent: Vermont Statutes Title 11 Section 4007
• Operating Agreement: Vermont Statutes Title 11 Section 4003
• Annual Report: Vermont Statutes Title 11 Section 4033