Starting a corporation in the state of Vermont comes with several advantages. Some of them include tax credits, small business innovation research, grants, loans as well as many other incentives offered in the state.
The following step-by-step guide will show you how to start a corporation in Vermont.
1. Select a name for your corporation
Irrespective of what type of business structure you’re forming, deciding on a business name is often the first step in the process. Additionally, when choosing a business name for your Vermont corporation, ensure that it complies with naming requirements in the state.
General corporate name guidelines
Bear the following corporate naming guidelines in mind when deciding on a business name for your Vermont corporation:
- Your Vermont corporation name must contain the word company, corporation, limited, Inc., or an abbreviation of any of these above-mentioned words
- Your Vermont corporation name must not include phrases or words that denigrate or defame individuals or groups based on color, race, ancestry, religion, sex, natural religion, sexual orientation, place of birth, gender identity, disability, or age
- Your Vermont corporation name must not include phrases or words that falsely suggest that your business is associated with a government agency
- Your Vermont corporation name cannot include phrases or words that depict excretory or sexual organs or their activities thereof
- Your Vermont corporation name must not suggest or imply that your corporation is formed for anything pertaining to sexual conduct
- Your Vermont corporation name cannot include the word cooperative or even an abbreviation of this word unless your corporation is organized as a cooperative association or a worker cooperative corporation
- Your Vermont corporation name must be significantly different from other existing businesses in the state, including Vermont reserved names
Refer to the Vermont state statute for additional guidance on naming your Vermont corporation.
After deciding on the ideal name for your Vermont corporation, it’s time to start thinking about protecting your business name from intellectual property theft and misuse. One of the best ways to do this is to register a trademark.
A trademark gives you legal precedence in the event that any other individual or business tries to conduct business under the same or similar name as yours. So if you’re thinking of going national, then it’s a good idea to trademark your Vermont corporation name.
There are two ways to trademark your corporation name. The first way is to register your trademark with the United States Patent and Trademark Office. This option gives your business name nationwide protection.
Alternatively, you may trademark your Vermont corporation name with the state of Vermont. However, if you choose the latter option, then your business name only has protection within the state of Vermont.
Your Vermont corporation’s entity name is its legal business name. This legal business name is the one that is stipulated on all your corporation’s formation documents and is also the name that the state uses to identify with your business.
DBA (Doing-business-as) name
A DBA is short for (doing business as) name. In the state of Vermont, a DBA is referred to as an assumed business name. Vermont corporations are allowed to register an assumed business name which then allows your corporation to legally operate under a different name from its entity name.
However, you should know that a DBA is mainly for branding and does not offer any type of liability protection for your personal assets in the event that a lawsuit is brought against your corporation.
If you’d like to go ahead and register an assumed business name in the state of Vermont, you’ll need to ensure that it is unique and meets the business naming requirements.
First, start with a business name search on the Vermont Corporation Division Business Name Search page.
Once you’ve established that the name is indeed available, you can go ahead and file the Vermont Assumed Business Name Registration online with the Vermont Corporations Division.
Alternatively, you may download the Assumed Name Registration Form and then mail it to the Vermont Secretary of State.
2. Nominate a registered agent
Prior to registering your Vermont corporation with the Secretary of State, you’ll need to appoint a resident agent. A resident agent often goes by the name of a statutory or registered agent.
The main role of a resident agent is to receive compliance documents from the state on your corporation’s behalf. The resident agent is also responsible for receiving some process on your corporation’s behalf in the event that it is sued.
While some corporation owners nominate themselves as their business’s own registered agent, it’s not always advisable. This is because a resident agent must remain available during normal business hours at the registered office address.
This means that during normal operating hours, you need to be present at the office address to ensure that you don’t miss out on accepting any type of official correspondence from the state.
Additionally, a resident agent must be at least 18 years of age or older. Lastly, they must consent to the appointment and also have a Vermont address.
3. Appoint initial directors at the organizational meeting
Every corporation in the state of Vermont must hold an organizational meeting. The organizational meeting is where a few company formalities will be addressed.
Some of those tasks include determining the corporation’s share structure, selecting a board of directors, creating and approving bylaws, and executing the incorporator’s statement.
However, one of the most important formalities to be completed during this meeting is the appointment of initial directors. In the state of Vermont, you need to appoint at least one director to oversee the operations of the corporation.
This corporate director will serve a term until the first shareholder meeting is called. Some of the responsibilities of a corporate director include adopting, amending, and repealing corporate bylaws, in addition to selecting, supervising, and removing corporate officers.
4. File Articles of Incorporation
One of the main steps to forming your Vermont corporation is filing the Articles of Incorporation. This document officially sets up your corporation in the state. The document will need to cover some pertinent information such as:
- The name of your corporation
- The address of your corporation
- The NAICS code
- The number of authorized shares your Vermont corporation is permitted to issue
- The street address and name of the corporation’s resident agent
- The address and name of the corporation’s incorporator
Once you gather the necessary information, go ahead and submit the articles online to the Vermont Corporations Division.
Alternatively, if you intend on filing a hard copy of the articles, then you must complete a form request with the Secretary of State.
5. Create and approve bylaws
Your Vermont corporation must store complete and correct records and books. It is recommended that you draft your corporate bylaws by using a template. The bylaws are essential governing documents for your corporation. It clarifies the rules and priorities for all members of the corporation.
Additionally, it may contain a provision for managing the business as well as regulating the affairs of the company. However, it must be consistent with both the Articles of Incorporation as well as the law. When the first board meeting is held, the bylaws will need to be reviewed, approved, and ratified.
Some of the information that the bylaws will need to include are:
- How the corporation will be overseen and governed
- How corporate records will be stored and maintained
- The roles and responsibilities of corporate directors and corporate officers
- How often annual meetings will be held
- The process for electing corporate officers and corporate directors
- How voting procedures will be carried out
- How company disputes will be handled
- The process of adding or amending bylaws
- The date that the annual shareholder meeting will be held
- The process of negotiating company contracts
6. Select a share structure
Your Vermont corporation will need to decide on the share structure and strategy. The unit of ownership of the corporation is, in fact, a share of stock. So each share of stock indicates a portion of ownership of the corporation.
So in the event your corporation plans on issuing one share of stock or plans to issue stock to a stock owner, then that individual would then own a hundred percent of the corporation.
Additionally, you may structure shares into classes. A share class is a term used to describe each class that holds a different set of privileges and rights. Vermont corporations are allowed to have multiple classes.
Additionally, every class can contain any sum of shares.
7. Obtain an EIN
An EIN is short for Employer Identification Number. Essentially it’s a federal tax identification number issued by the Internal Revenue Service or federal government. The federal government uses this unique nine-digit code to identify business entities in every state.
Additionally, the EIN is useful when completing several tasks such as hiring employees, filing excise taxes, submitting paperwork for tax purposes, and opening up a business bank account.
To request an EIN, you’ll need to complete the online application on the IRS website. It’s a step-by-step application process and should be completed once your Vermont corporation is officially formed.
Alternatively, you may download the EIN Application Form and have it mailed directly to the Internal Revenue Service.
8. File Vermont state taxes
Depending on your business type, or business structure, your Vermont corporation may be liable for one or more corporate taxes:
- Corporate income tax: Vermont does have a corporate income tax that’s applicable to all C corporations or traditional corporations. The corporate income tax is applicable to the net income of your C corporation, and there are several marginal rates.
Additionally, the business entity tax in Vermont is applicable to S corporations which are required to pay tax at a flat rate of $250 annually.
- Employer taxes: Vermont corporations hiring staff will need to register for employer taxes via the Vermont Department of Taxes website
- Sales tax: All Vermont corporations selling physical products will need to register for a seller’s permit on the Vermont Department of Taxes website. Once you’ve registered for the seller’s permit, you’ll receive a certificate allowing you to collect sales tax on the applicable goods you’re selling.
9. Vermont business licenses and permits
Based on the type of business you’ve formed, and the products and services you’re going to be offering, your Vermont corporation may need to obtain specific licenses and permits before legally operating in the state:
- Sales tax license: You’ll need to register for a sales tax license online with MyVTax. Alternatively, you may download the necessary application form and have it mailed to the Vermont Department of Taxes.
- Professional license: Professional corporations offering services, such as barbers, contractors, cosmetologists, etc., will need to apply for a professional license prior to offering their services in the state.
The state of Vermont does not have a general or statewide business license.
10. Annual report requirements in Vermont
Vermont corporations must file an annual report every year. The report must be filed within 2 1/2 months after the end of the corporation’s fiscal year. You may file the annual report online with the Vermont Secretary of State.
11. Costs of starting a corporation in Vermont
The filing fees below apply to all Vermont corporations:
- Name reservation: $20
- DBA name: $50
- Articles of Incorporation: $125
- Annual report: $45
- Vermont Certificate of Good Standing: $25
Next steps after forming a corporation
Once you’ve filed the relevant paperwork and gone through the necessary steps to form your Vermont corporation, it’s time to start thinking about preserving your business and ensuring it has the best success. Implement the following steps to help your corporation run smoothly:
Obtain a business bank account
To protect both your business and personal assets and have some form of personal liability protection, you’ll need to create a separate bank account for your Vermont corporation. In order to obtain the business bank account, you’ll need to submit your EIN along with your corporation’s formation documents.
Once you’ve obtained a business bank account and have your personal and business finances separated, it will simplify the accounting process as well as the business tax filing process.
Get a business credit card
There are a number of factors involved in building your business credit score. This includes establishing your business’s fundability, establishing credit lines, being listed with the most important business credit agencies, and keeping credit lines in good standing to build your score.
A good business credit score is beneficial in several instances, such as obtaining better interest rates on loans and higher credit lines of credit as well. Ultimately, all of the above-mentioned factors will protect your personal assets and ensure that your business is liable for any debts incurred instead of you being required to pay off the debt of your business in your personal capacity.
The type of business structure you choose will depend on your goals. A nonprofit corporation is designed to generate profit to further the nonprofit’s cause and not the personal agendas of founders. Limited liability companies, on the other hand, are designed to generate profit for their owners.
A sole proprietorship does not have multiple business owners but one business owner. Therefore, as a sole proprietor, all the company profits belong to you, but so do the business’s liabilities, losses, and debts. However, it is one of the easiest business structures to form.
Since a C Corporation has shareholders, the C corp is considered a separate legal entity from its owners. Additionally, a C Corporation enjoys liability protection under state law.
C corporations are the only type of business that experiences double taxation. This is because the dividends are taxed at both the corporate level and shareholders are also taxed at the individual level.
A shareholder agreement is an agreement between owners or members of a corporation. They contain various clauses that pertain to the dispute resolution between shareholders, the management of the company, and the disposition and evaluation of shares.