Starting a Small Business
Steps to starting a small business in Charlottesville:
Develop a Business Plan that outlines the key functional areas of your business. There are two main reasons for having a business plan:
- To assist you in planning and developing your business
- To demonstrate the feasibility and profitability of your business to potential investors and lenders
Develop a Marketing Plan that determines competition in the market and how you will advertise your business. View an outline of a typical marketing plan (PDF).
Choose a Business Entity (sole proprietorship, partnership, corporation, or limited liability company). For additional information on how to choose a business structure, visit the US Small Business Administration site.
Forming a sole proprietorship is the easiest way to start a business. In most cases, one must only fill out a simple form to register the business with the local government and conduct a search of your company’s name to ensure there are no other companies operating with the same name in your jurisdiction. A small fee is usually required for this service.
- Easy way to start your business
- Inexpensive way to start your business
- Business owner is personally liable for the business
A business partnership is created when two or more persons agree, in person or in writing, to start a business. The two main types of partnerships are: General and Limited.
General Partnerships are the easiest type of partnership to form. The only step required is that you file to protect your trade name. This will prevent another business start-up from using the name you have chosen. The biggest disadvantage to General Partnerships is that each partner is liable for the whole business.
Limited Partnerships are similar to general partnerships, with some exceptions. There are two classes of partners that make up the partnership: General Partners and Limited Partners. General Partners have the same pros and cons as in a general partnership above; however, each Limited Partner in a limited partnership is only liable to the extent of his or her individual investment. Limited Partners have no say in the day-to-day operations of the company; the General Partners actually manage the company. In essence, a limited partner is an investor.
- Simple way to start your business
- Allows the business to benefit from a combination of talents
- Each limited partner is only liable to the extent of his or her individual investment
- Business owner is personally responsible of more than half of the business’s losses
- Responsible for your partner’s business decisions
A corporation is a legal entity that is separate from the people who own it. Shareholders govern the corporation indirectly by electing people to manage it. Forming a corporation is somewhat complicated, and you may want to enlist the assistance of an attorney if you choose to organize your business this way. To form a corporation requires filing Articles of Incorporation with the State Corporation Commission and paying filing fees and other initial fees. There are two main types of corporations:
C Corporation - Since the C Corporation is separate from its owners, also known as shareholders, the owners may be taxed twice for any profits. That is, the corporation pays taxes on its profits. Then the corporation distributes the profits to the shareholders in the form of dividends. The shareholders then pay taxes on these dividends.
S Corporation - The S Corporation shares much in common with the C Corporation. Like the C Corporation, it is owned by shareholders who do not bear personal liability for the losses of the corporation. Also, the same filing requirements and formal rules apply to both types of corporations. A major difference and an advantage of the S Corporation is that its shareholders will not be taxed twice for the company’s profits. All profits are passed through to the shareholders’ individual income tax statements.
- Is a separate legal entity from the individual(s) owning it
- More complicated and expensive to start a business this way
- Ongoing regulation to abide by and fees to maintain when you run a corporation
Limited Liability Company (LLC)
Forming an LLC is similar to forming a corporation. Articles of organization must be prepared and filed and fees must be paid. An LLC is like a corporation in that it provides liability protection for its owners. It is like a sole proprietorship, partnership or S Corporation in that it protects its owners from double taxation: profits are accounted for on the individual owner(s)’ income tax returns. The LLC owners may choose to operate the LLC like a corporation, and elect managers to run it, or they may choose to operate like a partnership and manage the company themselves.
- Owner(s)’ liability is limited
- There is no double taxation
- Somewhat complicated and expensive to start a business this way
Register your business with the Virginia State Corporation Commission by filing the appropriate entity form. Check with the SCC to determine if the business name you’ve chosen is available by calling 804-371-9733.
Download and complete the required entity form.
Obtain a Federal Employer Identification Number. Download and complete the required SS-4 Form - Application for Employer Identification Number (PDF) Complete the Employer Identification Number Application online.
Register with the Virginia Department of Taxation to receive a Virginia tax identification number. Download and complete the required R-1 Form - Business Registration Application. Complete the Business Registration Application online.
Register with the Virginia Employment Commission if you are going to hire employees. Download and complete the required VEC-FC-27 Form (PDF). Complete registration with the Virginia Employment Commission online.
- Contact the City of Charlottesville Zoning Office at 434-970-3182 for site approval, including building structural changes.
- Download a Business License Zoning Approval Application(pdf)
- If conducting business from your home, you will need a Home Occupation Provisional Use Permit (PDF)
- If erecting a sign at your business location, you will need a Sign Permit (PDF)
- To determine if you will need a Certificate of Occupancy, view our General Certificate of Occupancy (CO) information (PDF)
If doing business under a Fictitious Name, register with State Corporation Commission 804-371-9967. This is required for any business that does not use its legal, registered name as part of its business name.
Access the Certificate of Assumed or Fictitious Name forms located on the State Corporation Commission (SCC) webpage.
Apply for a Charlottesville Business License Application (pdf). The cost is $35 if gross receipts are projected to be under $50,000. If the projected gross receipts exceed $50,000, the fee for your business license will be based on your gross receipts and the tax rate for your industry.
Complete the Charlottesville City License Application and return to the Commissioner of Revenue’s Office.
Tax Rate Classification Table
To determine the rate or fee applicable to your business activity, contact the City's business tax office at 434-970-3170.