The progressive, scenic state of Vermont is known almost as well for its entrepreneurs as its natural beauty. After all, it is the home of Ben & Jerry’s, one of the most famous ice cream brands in the world. If you want to follow in their footsteps, forming your own LLC is a great first step.
Getting an LLC started, though, means you will have to put down some money. That might sound ominous, but it’s relatively painless if you know what you’re doing. We’re here to help you figure out where you need to spend your money, as well as optional purchases you’ll want to make that can make your life easier, both now and in the future.
This article will help you make a budget for starting an LLC in Vermont.
- The required costs for every LLC
- Extra costs we recommend you incur
- The different ways you can form your LLC, as well as the pros and cons of each
Total Minimum Vermont LLC Cost – $125
Forming an LLC in Vermont only requires that you file articles of organization, which will cost you $125 if you file online with the Secretary of State. Though many states require a separate statement appointing a registered agent, in Vermont, you will do that in your LLC’s articles.
Click here for a current fee schedule from the Vermont Secretary of State.
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How Much it Costs to Start a Vermont LLC
Of course, there’s quite a bit more to starting your company than just filing a legal document. There are several things you need to consider, and all of them cost money. Though you probably want to save as much money as possible, this section will outline the costs you need to think about incurring if you want to have the best start you can have.
Articles of Organization Filing Fee – $125
Of all your LLC’s legal papers, this one is the most important. Articles of Organization are like an LLC’s birth certificate. Without articles of organization, the company doesn’t exist in any sense. Once they have been filed, it can do business, pay taxes, and take any other legal action. Thus, you need to make sure your LLC’s articles are done first and done right.
This isn’t as tough as it sounds. While you can draft the Vermont LLC articles from scratch if you want, there’s no need. Vermont has a robust online filing system, and you can also find a basic fill-in-the-blank form and instructions on the Internet if you want to file in person or by mail.
If you have a complicated business or ownership structure, you may need an attorney to draft your Vermont LLC articles of organization. In most cases, though, the basic form should be fine.
Vermont LLCs – Optional Costs to Consider
$125 may be all you need to get your LLC running. That doesn’t mean, though, that you shouldn’t plan on spending more. There are many other costs you should also plan for to give your LLC the best start it can get.
Expedited Filing Service – Free
Filing your articles online is the quickest way to go because the processing time is less than one business day. If you file a paper copy of your articles in person or by mail, though, you should expect a longer wait of 7-10 business days.
The online filing option, then, is by far the better option in terms of processing time. Unlike other states, which might charge you hundreds of dollars for that extra speed, Vermont’s online filing option does not cost you any more money. Thus, you should take advantage of this when setting up your LLC.
Business License – varies
Your Vermont LLC will need a tax license, which we’ll discuss in more detail below. A general business license, though, is not required by the state. Many types of businesses will need professional licenses, so you should check with the Vermont Office of Professional Regulation to see what kind of license the LLC requires, as well as how much it will cost.
Your city or county may also require your LLC to get a license. The City of Montpelier, for example, requires licenses for certain kinds of businesses. As a rule of thumb, you should check with your city or county governments to make sure that you have complied with all licensing requirements.
Registered Agent Fee – about $100 per year
When you file your articles, you’ll have to name your LLC’s registered agent so that the state and the public can timely communicate with your Vermont limited liability company. This is important if someone decides to sue your LLC. That may not sound like fun, but it is critical to the life of your business that you know exactly when this happens.
Because your agent’s details are included in your articles, you don’t pay an extra fee to the state to name an agent. Still, you should think about hiring a company to serve as your company’s agent.
Many owners are tempted to serve as their LLCs’ agents. This is not a good idea. It involves making your address public and always being available just in case someone wants to sue your company.
It’s an easier and more cost-efficient plan to hire a Vermont registered agent service for your LLC. These registered agent companies usually charge $100 per year and take care of all your agent needs. It’s money well spent.
Check out our Best Registered Agent Services article for some of our recommendations.
Operating Agreement – varies
An operating agreement sets down the rules of your LLC. It says how the people in charge should do their jobs, when meetings must be held, how members can enter and exit the company, and almost any other matter you might need to address.
Vermont won’t force your LLC to have an operating agreement if you don’t want one. Even so, we strongly recommend that you have a written contract. Without one, you have much less control over your company if and when something unexpected happens.
If you choose to have an LLC operating agreement, you don’t have to file it with the state. You can write it yourself, but unless you are a lawyer or know exactly what it’s supposed to look like, we don’t recommend that option.
A lawyer would likely charge you by the hour to draft a Vermont LLC operating agreement. While that contract would likely be a good one, and a lawyer in Vermont is often less expensive than lawyers in other parts of the country, it would still cost at least a few hundred dollars.
If you use an LLC formation service, though, you can save quite a bit of money. One of these services can get you a good contract for as little as $39.
DBA Fee – $50
After filing their Vermont articles of organization, many LLC owners find that the legal name of their LLC does not quite serve their needs. The LLC name might be hard to remember, sound too much like that of another company, or need to reflect a change in management or ownership.
These are common problems. All you’ll need to do is apply for an assumed name or DBA (“doing business as”) name for your LLC. Getting a DBA is easy. All you have to do is file an application online and pay a $50 fee. The DBA is then good for five years, after which time you will have to renew your DBA.
Name Reservation Fee – $20
Maybe you have a good plan and the perfect business name for your company, but you’re not ready to start just yet. If you want to make sure that you can use a certain LLC name when you are ready, you can apply online for $25. The reservation is good for 120 days.
Domain Name – about $20 per year
In this day and age, small businesses need a presence on the Internet. The first step in creating a good website is to get your own domain name. While this might have been pricey in the past, it is now very affordable.
You should secure your domain name as soon as possible, even if you don’t have plans for a website right now. If you don’t, a competitor could buy your ideal domain and its variations to block you from using them. Domain squatters also sift through newly registered LLC names and will buy their domains only to relist them with huge markups.
In general, a domain ending in .com will be more expensive than a .net or .info domain, and some names will likely be taken, meaning you will have to do some searching (and maybe compromising).
A domain name from GoDaddy.com or a similar registrar may cost you between $20 and $50 per year, with regular specials and sales where you can get substantial discounts.
Registering with the Tax Office – Free
All LLCs must register with the Vermont Department of Taxes for a license and Vermont Business Tax Account. Registration is free and ensures that you correctly calculate and pay your LLC’s sales and use tax.
Getting a Federal Employer Identification Number (“EIN”) – Free
An EIN is a number created and assigned by the Internal Revenue Service to a business for paying taxes. (Think of an EIN as a social security number for a business.) Some LLCs need them, and some don’t.
Regardless of whether the IRS says you need one, we recommend getting an EIN. Many banks won’t allow your company to have its own account without one. Having an EIN can also simplify the process of getting credit.
You can apply online and get an EIN for free in minutes, or you can apply for one through the mail or fax. Whatever you do, don’t pay someone else to get an EIN for you. It’s too easy to pay someone else to do it unless it is part of a broader service package.
Read More: How to Get an Employer Identification Number in Vermont
Foreign LLC Qualification Fees – about $100 per extra state
If your business takes off, congratulations! You may soon start thinking about expanding to new locations. If one of those places is in another state, you’ll have to pay for the privilege of doing business there. You won’t have to re-form your business, but you will have to register as a foreign limited liability company with the Secretary of State there and pay some extra fees.
The exact fees will depend on the state in which you are registering. As a rule of thumb, expect to pay about $100 in filing fees to register your LLC in another state.
Writing Formation Costs Off
Because it takes money to start your business, you can write off many, if not all, of your startup costs on your taxes for a deduction. The IRS has a lot of guidance on this matter, and you should compare your specific costs to the materials on the IRS website.
Though you can use these deductions in many states for their income taxes as well, Vermont does not allow itemized deductions on your state income taxes, so for these purposes, you will only need to worry about your federal income tax deductions.
Keep in mind that, in most cases, an LLC is taxed by the IRS as a pass-through entity. Generally speaking, LLC owners can deduct up to $5,000 of their business startup expenses in the first year.
Having grown up on a horse ranch, Bruno has decided that he wants to be a blacksmith and make horseshoes in Montpelier, Vermont. As he was getting together the items needed to start, he reserved the name “Vermont Horseshoes LLC” with the state. A week later, he filed his articles of organization online.
After filing his articles, Bruno wanted to make ads with the name “Bruno the Blacksmith”, so he applied for that DBA. He also got a business license from the City of Montpelier.
As he was setting up the shop, Bruno also chose to have an LLC formation service help him with an operating agreement. (He doesn’t think that he will ever expand his business, but he may train his son as an apprentice blacksmith in a few years and would like to be prepared to have his son take over.)
Bruno also hired a registered agent company and obtained a web domain, so he could put together a website in the future after his business takes off.
Bruno’s LLC formation costs are as follows:
- Vermont Name Reservation fee: $20
- Vermont Articles of Organization filing fee: $125
- Vermont DBA fee: $50
- Montpelier Blacksmith Business License fee: $10
- Registered agent service fees: $100
- Operating Agreement: $39
- Web domain costs: $50
Bruno has elected to have his LLC taxed as a pass-through entity. This means that he will claim both his business income and deductions on his personal federal tax return.
Bruno’s startup costs, which will form his deduction, total $394. His taxable income before the deduction was $30,000, which puts Bruno in the 12% federal income tax bracket.
With the deduction, Bruno’s taxable income will be reduced to $29,606. That saves him $47.28.
Keep in mind that if Bruno had more than $5,000 in expenses, he would likely be able to claim those, but he could not deduct them all in the first year.
Cheapest Way to Start an LLC in Vermont
Now that you know all the basic costs, it’s time to shop around. Not every business needs to be formed in the same way, and you can save both time and money by picking the best option for you.
Formation Service – $39 + state fees
A business formation service is a popular and inexpensive way for new LLC owners to get started.
These companies are dedicated to helping entrepreneurs bring their visions to life. They have not only the knowledge of all the state laws you need to know, but also forms, documents, and procedures to make your life as easy as possible.
Formation services are quick and complete ways to handle formation needs for most LLCs.
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
While formation services can be great for most people, they are not always the best choice. Some cons for these services are:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
Attorneys are licensed, reliable, and powerful resources for business formation. They are also pricey and more than most business owners need. In Bruno’s case, he’ll be running a solo business in a highly niche area where his customers will be mainly farmers and ranchers. An expensive business lawyer is thus probably not necessary for him.
A business owner with more money than Bruno, though, could benefit from having an attorney if their business was at all complicated. For that reason, some owners choose to go this route.
Despite the expense, sometimes hiring a lawyer is the best choice.
- Lawyers help you manage risk. An LLC with complicated legal issues needs a lawyer. Let’s say that, instead of a blacksmith shop, Bruno wanted to open up a cannabis dispensary. Cannabis laws are changing and differ between states and the federal government, so getting a lawyer on board can be a good call.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
For most people, getting an attorney comes with considerable downsides that outweigh any benefits.
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very caring people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
Many people, after searching the Internet for the information they need, decide to try forming their new LLCs themselves. This process can give you a lot of personal expertise, but remember that time is money. If you are spending hours on formation, that’s time you’re not spending on the substance of your business.
In most instances, then, it is more cost-effective to just pay an LLC formation service, with confidence that everything has been done correctly, rather than try to reinvent the wheel yourself.
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t figure out the value of your time, a DIY solution is the cheapest option.
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that then costs them more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual Vermont LLC Fees: How Much Will it Cost to Maintain your LLC?
Even after you’ve formed the LLC, there are annual costs for which you will have to budget. These include both government fees and amounts paid to third parties, like:
- Local Business License, depending on exact location: Varies
- Annual report fee: $45
- Registered agent fee: $100
- Domain name: $20
Vermont LLC annual reports are due within three months of the end of the state’s fiscal year, which ends on July 1. So, for example, if you form your LLC in May of 2024, you will have to file your first annual report no later than October 1, 2024. As with many other LLC documents, you can file your annual report online with the Secretary of State.
Failure to timely file an annual report can result in fines or loss of the ability to do business, so it’s important that you strictly observe this deadline.
Also, keep in mind that any small business should have an accountant. Costs for accounts vary significantly, but you should spend an average of $2,000 to $3,000 per year on an accountant in most cases.
How Much are LLC Taxes in Vermont
How your LLC is taxed depends on how you characterize it with the IRS. If you elect pass-through taxation (the default method), the IRS will tax you personally on money that you received from your LLC.
If your LLC elects a different tax treatment (e.g., as an S Corporation or partnership), then your LLC will need to pay taxes according to its income. Consult a Vermont accountant for further details.
Vermont has a graduated state personal income tax, with your rate falling between 3.35% and 8.75%. Assuming that you have elected pass-through tax treatment for your LLC, you will be taxed at your rate when the income passes through to you from your LLC, but not before.
If you elect to have your LLC taxed directly, Vermont’s corporate income tax rate varies between 6% and 8%.
As mentioned above, you will also need to obtain a sales tax license and pay that to the state as well. As of the time of this writing, Vermont’s combined state and local sales tax rate sits at 6.24%.
Finally, LLCs with employees will also be responsible for withholding taxes, unemployment insurance, and similar costs.
Vermont LLC Formation Costs Quick Links
- City of Montpelier — Business Licenses
- Department of Labor — Unemployment Insurance
- Department of Taxes — Sales and Use Tax
- Department of Taxes — Withholding
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Secretary of State — Annual Report Filing
- Secretary of State — Business Name Search
- Secretary of State — DBA Registration
- Secretary of State — Fee Schedule
- Secretary of State — File Articles of Organization Online
- Secretary of State — Forms Request
- Secretary of State — Limited Liability Company
- Secretary of State — Office of Professional Regulation (Licenses)
- Secretary of State — Online Business Service Center
Vermont LLC Formation Costs FAQs
How much does it cost to start an LLC in Vermont?
The minimum cost is $125. You must pay at least this amount to file your LLC’s articles with the state.
What is the cheapest way to start an LLC in Vermont?
A do-it-yourself approach will have the lowest price tag, but it isn’t the cheapest in terms of your time. The best balance of price and time, for most people, is to use a formation service.
Do I need to hire an attorney to form an LLC in Vermont?
No. Most people will not need to invest the considerable expense and time of hiring a lawyer. A formation service or a DIY approach will work for most business owners.
Can I pay to form an LLC more quickly in Vermont?
Yes. Formation services will generally complete formation tasks faster than business owners acting on their own.
If you are forming the LLC on your own, you can use the state’s online filing system to get it done within one business day. There is no fee for using the online service, and it is significantly faster than filing a hard copy, which can take 7-10 business days.