Guide to Forming an LLC in Vermont

Follow our free guide to form an LLC in Vermont

• Pros and Cons of Forming an LLC in Vermont

• Starting Your Vermont LLC

• Maintaining Your Vermont LLC

• Additional Vermont Resources

You will find there are a lot of steps involved in starting an LLC in Vermont. Let our comprehensive guide help make the LLC formation journey easier.

Pros and Cons of Forming an LLC in Vermont

Pros

Low Taxes for LLCs LLCs in Vermont do not have to contend with high tax payments — the Business Entity Tax is a flat fee ($250) that is paid annually.

Low Unemployment & Poverty Rate Vermont’s economy may be moving more slowly than other states, but the state’s unemployment rate (3.2%) is almost two percent below the national average. Vermont’s poverty rate is also below the US median — 11.9% versus 14%.

Low Crime Rate Vermont has one of the lowest crime rates in the nation — recent polls show the state in second place below Maine for low crime stats in violent and property crimes.

Cons

Among Worst States for Businesses There are a number of factors that have hampered Vermont’s status as a business-friendly state, but the primary reason is the cost of owning a business — recent reports show that the fees and taxes charged to companies in Vermont are 12% above the national average. Additionally, high labor costs and slow economic growth put Vermont at #47 on the list.

High Corporate Taxes Vermont’s 8.50% corporate tax rate is one of the highest in the nation; by comparison, it is only slightly lower than California's 8.84% corporate rate.

Slow Job Growth When judged against the average national statistics, Vermont falls behind in current/future job growth: The state has been stagnant in 2018 with a 0% change in job growth, and it’s 36% prospective rate is lower than the 38% US average.

Cost of Doing Business

• $125 Filing Fee

• $35 Annual Report

• $250 Business Entity Tax

Phase One: Starting Your Vermont LLC

The first part of forming an LLC in Vermont centers around that actual set-up of your business without all the stress. Begin the process by following these six simple steps: 

• Step 1: Name your LLC

• Step 2: Establish Ownership of your LLC

• Step 3: Select a Registered Agent

• Step 4: File the Articles of Organization

• Step 5: Create your Operating Agreement

• Step 6: Register for an EIN

Step 1: Name Your Vermont LLC

Finding a name for your business is the first main step in forming your Vermont LLC. There are government regulations and restrictions concerning business names.

Tip: Use a free business name search tool to ensure your company’s desired name is available.

Business Name Guidelines

• The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.

• Your business name cannot be intentionally misleading to consumers

• The name of your new LLC must not be similar to another organization’s name/trademark

Restrictions

• “Lottery” and “Bank” are ineligible for use (any state)

• Terms that represent educational or Veterans’ organizations are restricted

• Terms related to the Armed Forces or civil servants (police, EMT, fire)

LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.

URL Availability Creating an online presence is equally important in the current culture. Check domain name availability through any online web services sites.

Step 2: Establish Ownership

LLC owners are actually known as members and managers. While every LLC will have members, but not all LLCs have managers —  it the difference depends on the management structure of the business.

LLC Management Structures:

• Member-managed: All members participate in operating and making decisions for the LLC

• Manager-managed: An appointed manager oversees the daily operations of the LLC and the members are not actively involved.

Vermont LLC Member Guidelines

Required Number of Members There must be at least one member or manager to form an LLC in Vermont.

Member Disclosure Requirements All managers/members of the LLC must be included in the Articles of Organization.

Age Restrictions LLC members in Vermont may be of any age.

Residence Restrictions There are no residency restrictions imposed on LLC members in Vermont.

Step 3: Find a Registered Agent in Vermont

Having a registered agent is necessary for all LLCs formed in Vermont. Your business must have this position to operate.

What is a registered agent? A registered agent is a person or business who is authorized to accept official government mail and service of process notices for the LLC.

Why do you need a registered agent? Vermont law requires you to appoint a registered agent so that the state government has a consistent contact person for your LLC.

What are the main requirements for a registered agent?

• The registered agent must have a physical address — not a P.O. Box

• The registered agent must be available during business hours

Who can be a registered agent in Vermont?

• A state resident with a physical address in Vermont

• An LLC or corporation that is licensed to conduct business in Vermont

Is the registered agent’s contact information publicly accessible? The name and contact information of the LLC’s registered agent is a matter of public record.  

Can I be my own registered agent for my business? You are legally allowed to be your own registered agent as long as you have a physical address in Vermont.

Is being my own registered agent discouraged? If you choose to be your own registered agent, then you risk compromising personal information.

Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in Vermont. Find more information here.

Step 4: File the Articles of Organization

The most important step in creating your Vermont LLC is filing the Articles of Organization with the Secretary of State.

What is the Articles of Organization? The Articles of Organization is a legally binding document that is filed with the state government to officially and legally form your LLC.

Why do I need the Articles of Organization? The Articles of Organization is part of your Vermont LLC’s foundation; your business is not considered official by the Secretary of State without this document.

What is the cost of filing the Articles of Organization? The filing fee for Vermont is $125.

What information is included in the Articles of Organization?

• The name and address of the LLC

• The names of the LLC members

• The name(s) of the manager/initial members

• The liability status of the members

• The name and location of the registered agent

• The chosen LLC management structure

• The duration of the LLC

Additional Vermont Filing Information — Professional LLCs

Professional businesses in Vermont can form a specific type of LLC known as a Professional Limited Liability Company (PLLC).

Example professions that may form PLLCs:

• Healthcare

• Legal

• Financial

• Real Estate

A few points to consider:

• All members of the PLLC must be licensed in the profession of the business.

• The PLLC is only allowed to provide services for which the business was formed.

• The members are still subject to whichever licensing boards govern the PLLC’s profession.

Step 5: Create an LLC Operating Agreement

Though not generally required, you still need to create an Operating Agreement for your Vermont LLC to help ensure the successful formation of your business.

What is an LLC Operating Agreement? The LLC Operating Agreement is a legally binding document that defines the rights and responsibilities of the members/managers and defines the business’s operating practices.

Why do I need an LLC Operating Agreement? The LLC Operating Agreement is necessary because it provides structure for the business, protects business assets from creditors, and reduces disputes among members.

Do I need to file the LLC Operating Agreement? The Operating Agreement does not need to be filed anywhere; it is for the benefit of your LLC and remains in-house.

What goes into an LLC Operating Agreement? The  LLC Operating Agreement will generally include the following information:

• List of the members/managers and their roles

• Designation of authority in the LLC

• Initial capital contributions of the members

• Voting designations and percentages of the members

• Member transfer/addition rules and restrictions

• Distribution of profits

• Meeting schedule

Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.

Step 6: Register for an EIN

Almost all businesses in Vermont must register for an EIN. Your Vermont LLC will not be able to conduct business without this ID.

What is an EIN? The EIN is a nine-digit number that is assigned to your business by the Internal Revenue Service (IRS) to identify your business with the government.

What does EIN stand for? EIN is an acronym for Employer Identification Number. It is also known as a Federal Tax ID.

Are all businesses required to have an EIN? Federal law requires certain business entities to register for an EIN:

• Businesses with employees

• Businesses with more than one member

• Partnerships (LLC or C-corp)

Please Note: A sole proprietorship is not required to have an EIN, but it is still recommended.

Why does my LLC business need an EIN? The more common reasons you would need an EIN are:

• To hire employees

• To open a bank account in the U.S.

• To file your company’s taxes

• To pay independent contractors

In short, if you make money through your business and it has employees, you must have an EIN.

Is the EIN publicly listed? The EIN for your LLC will be part of public record.

Can I use my Social Security Number as the EIN? You can use your social security number as the EIN, but this information is publicly listed.

Swyft Filings offers EIN services for small businesses in Vermont. Find more information here.

Phase Two: Maintaining Your Vermont LLC

Now that you have officially set up your Vermont LLC, you need to prepare your new business for daily operations. The next few steps are:

• Step 1: Register for Taxes in Vermont

• Step 2: Apply for Permits and Licenses

• Step 3: File the Annual Report

• Step 4: Request a Certificate of Good Standing

Step 1: Register for Vermont State Taxes

LLCs in Vermont are responsible for paying the Business Entity Tax (BET) — the annual fee is $250.

State Income Taxes Vermont’s state income tax rates are listed in the table below:

Corporate Tax Information You can also choose to have your LLC taxed as a corporation; if so, you will be responsible for paying corporate taxes on your business’s earnings

Corporations in Vermont are required to pay two types of taxes:

• Corporation Income Tax

• Gross Receipts Tax

Corporation Income Tax

Gross Receipts Tax

Additional Tax Information Other taxes your LLC may need to pay:

• Sales and Use Tax at 6%

• Employee Withholding Tax

• Unemployment Tax

Step 2: Obtain Business Licenses and Permits

The licenses and permits required for an LLC in Vermont can vary, depending on a number of variables:

• Location (city and county)

• Type of Business

• Industry

Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.

Step 3: File an Annual Report

All LLCs formed in Vermont are required to file an annual report with the Secretary of State.

What is an annual report? An annual report is a legal form that is designed to keep your business’s information current and is filed with the Secretary of State.

What kind of information is in the annual report? The information requested in the annual report is similar to what is in the Articles of Organization:

• The name and address of the business

• The name and address of the registered agent

• The business’s EIN

Is the annual report part of public record? The annual report filed on behalf of your LLC is a matter of public record.

Fees and Due Date

Fee: $35 Due Date: Within 3 months after end of fiscal year Frequency: Every year Implications of Late Filings: Dissolution of LLC

Swyft Filings helps you stay compliant by providing stress-free solutions. File your annual report with us today.

Step 4: Request a Certificate of Good Standing

The last step in forming your Vermont LLC is to obtain a Certificate of Good Standing.

What is a Certificate of Good Standing? The Certificate of Good Standing confirms your business is legally formed and compliant with all state regulations.

Who issues the Certificate of Good Standing? The Certificate of Good Standing is generally issued by the Secretary of State.

When can I request a Certificate of Good Standing for my business? You will be able to request a Certificate of Good Standing after your LLC is officially formed through the Secretary of State.

Why do I need a Certificate of Good Standing? A Certificate of Good Standing adds credibility to your LLC  since some banks, financial institutions, and other businesses may be hesitant to have dealings with a new business.

Additionally, some states require a Certificate of Good Standing before a business can apply for Foreign Qualification.

Does the Certificate of Good Standing have an expiration date? The Certificate of Good Standing does not expire/does not need to be renewed.

Swyft Filings can create a Certificate of Good Standing for your Vermont LLC. Click here for more information.

Additional Vermont Resources

• Vermont Corporation Guide

• State of Swyft Industry Report