Sole Proprietorship in Virginia
A sole proprietorship is owned by one person in Virginia. To start, use your Social Security Number as your business tax ID and report profits and losses on your personal tax return.
Liability Protection: LLC vs. Sole Proprietorship
An LLC offers liability protection for owners as personal assets are protected if sued. In contrast, a sole proprietor’s personal assets are at risk.
Starting a Sole Proprietorship in Virginia
To start a sole proprietorship in Virginia:
- Choose a business name
- File a trade name
- Obtain licenses, permits
- Obtain an EIN (Employer Identification Number)
You can establish a sole proprietorship without filing legal documents with the state. Sole proprietorships do not offer limited liability protection like LLCs do; the business owner has personal liability for all debts and legal liabilities.
Name Reservation for Your Business
You can reserve a sole proprietorship name in Virginia by filing with the Corporation Commission. Pay a $10 filing fee to reserve the name for 120 days.
Sales Tax Certificate or Seller’s Permit
Any Virginia business, including sole proprietorships, can register for a sales tax certificate or seller’s permit.
Comparison Between Sole Proprietorship and LLC
An LLC combines a corporation’s limited liability protection with the operational flexibility of a partnership or sole proprietorship. Sole proprietorships are simpler, with the downside of personal liability. An LLC versus sole proprietorship comparison is important for an informed decision about your business structure. A single-member LLC is a "disregarded entity" for tax purposes, taxed the same as a sole proprietorship.