How to Start a Business in Vermont
Looking to start a business in Vermont? The state’s low registration and annual fees make it easy to both form your business and keep it in good standing. But how do you get started? First thing’s first: sell something! Now that you’re doing business in Vermont, it’s important to consider all of your options when it comes to protecting yourself and your company. This in-depth guide will walk you through everything you need to know, step by step.
Ready to Start a Business in Vermont?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get Vermont Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File Vermont Annual Report
Apply for Trademarks
1. Pick a Business Structure
It doesn’t matter what you’re selling—flannel shirts, singing telegrams, milkshakes—if you’re selling something in Vermont and haven’t filed any paperwork with the state, you’re considered a sole proprietor. Working with partners? You’re a part of a general partnership. But neither of these options come with liability protection. What does this mean? The business’s debt is your debt. So, if someone sues your business, they’re really suing you and both the business’s assets and your personal assets are up for grabs.
You can get liability protection if you form a separate business entity like an LLC or corporation. Forming one of these entities means your business exists independently from you and with its own liability.
Vermont Limited Liability Company (LLC)
An LLC is a flexible business structure that provides strong liability protection. You can run it by yourself or hire a manager (or managers) to run the business with you. This entity type allows you to choose between several tax classification options, too, which is why LLCs are a popular choice with small business owners. In order to form your Vermont LLC, you’ll need to file paperwork with the Vermont Secretary of State, Corporation Division.
Corporations are not as flexible as LLCs because of the way they’re structured. The company’s shareholders elect board members, who then elect the officers who run the corporation. Corporations are also required to stick to a stricter set of rules when it comes to record-keeping. But this can pay off, because donors and potential investors might see these rules as a way to hold the business accountable. To form a Vermont corporation, you’ll need to file paperwork with the Vermont Secretary of State, Corporation Division.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about a Vermont nonprofit?
In Vermont, you can start a Vermont nonprofit corporation if your business is a public benefit corporation, a 501(c) organization, or actively working toward a public or charitable purpose. To start a Vermont nonprofit corporation, you’ll file the Articles of Incorporation of a Vermont Nonprofit Corporation with the Vermont Secretary of State, Corporation Division.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
Odds are you already have a name in mind for your business, but naming your business in Vermont may not be as easy as it seems. As a sole proprietor, the business automatically operates under your first and last name (Alex Wheeler), unless you register a DBA that better describes what your business does (Wheeler’s Bike Repair).
Vermont LLCs and corporations must pick a name that meets state requirements. The name you choose needs to:
- Include the right identifier, like “Corp” for a corporation or “LLC” for a limited liability company.
- Be distinguishable from other business names registered with the Vermont Secretary of State.
- Not include words that might indicate government affiliation (like “department of state” or “fire department”).
- Not include words that describe a professional service that requires a license, like “dentist” or “chiropractor.”
- Not imply a false business purpose, like using the word “nonprofit” if you’re business is not a nonprofit.
Find out if your desired name is available in Vermont by searching the Vermont database of businesses.
Can I reserve a business name in Vermont?
Yes. If you’ve chosen a name before you’re ready to form your business with the state, don’t worry! You can file an Entity Name Reservation form and pay the $20 fee to reserve the name for up to 120 days. Need more time? Vermont will let you renew your registration for another 120 days two more times. The Name Registration Renewal form and the $20 fee should be filed with the Secretary of State before your name reservation expires.
What is a DBA?
A DBA (also called an “assumed business name”) is any name your business uses other than its legal name.
Vermont requires every business to operate under its legal name. If you have an LLC or corporation, this will be the name listed on your formation documents. If you’re a sole proprietor, it will be your first and last name. You can also operate under a different name, but you’ll have to register it as a DBA with the Vermont Secretary of State.
In order to register a DBA your business must already be registered with the Secretary of State, Corporations Division. You can register a DBA by completing the Assumed Business Name Registration form and paying the $50 fee. This registration is only good for 5 years, so if you want to continue doing business under your DBA make sure you file the Assumed Business Name Renewal form ($50) before your DBA expires. Want to register more than one DBA? You’ll need to submit a separate form for each DBA you’d like to use.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
If you’re operating as a sole proprietor or partnership, you don’t need to worry about filing formation paperwork with the Vermont Secretary of State. You’re only to file paperwork if you want to form a separate business entity.
In order to officially form your business entity you’ll need to file the correct paperwork with the Secretary of State, Corporations Division.
- To form a Vermont LLC, file Vermont Articles of Organization.
- To start a Vermont corporation, file Vermont Articles of Incorporation.
These forms require you to list a Vermont registered agent who can accept your legal mail. Once you’ve completed the form, you’re ready to submit your filing to the Secretary of State. The easiest way to file is online through the Secretary of State website. However, you can also submit your filing to the Corporations Division by mail or in person, but you’ll need to request paper forms from the Secretary of State.
Note: All of the information you include on your filing will become part of public record, so keep in mind that any name or address you include will be available to the public online in Vermont’s database of businesses.
How can I keep my information off the public record?
Finding a registered agent is the best way to help preserve your privacy, especially if your registered agent will let you list their name and address on state forms instead of your own. (Hint: we do that!)
What is a registered agent?
A Vermont registered agent is a person or entity you designate to accept service of process on behalf of your business. Law requires that your registered agent is available to accept service of process during business hours at their own physical address in Vermont. Not everyone runs their business from the same place all day every day, which is is why a lot of business owners choose to hire a registered agent to act as the point of contact for their business.
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the Vermont Secretary of State, Corporation Division. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Vermont LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a Vermont LLC Operating Agreement template that you can use as a solid foundation.
Vermont Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in Vermont (see 11A V.S.A. § 2.06).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a Vermont Corporate Bylaws template you can use to get started.
Starting a nonprofit? We also have Vermont nonprofit bylaws.
5. Get Vermont Business Licenses
Vermont doesn’t have a general state business license, but this doesn’t mean that your business won’t need any licenses or permits. Businesses that operate in Vermont who sell or lease any tangible property, offer professional services, or operate in certain industries may be required to register for specific licenses from the state. For example, if you’re a pediatrician you’ll have to obtain the correct professional licenses from the state in order to open your practice.
Vermont State Business License
Vermont has no general business license, but the state still requires certain licenses and permits for specific types of businesses. For example, most businesses will need to obtain a Vermont Sales Tax License if they plan on collecting sales tax on any physical property sold or leased in the state of Vermont. And professional businesses, like a veterinarian’s or dentist’s office, have different professional licenses they’ll need to obtain before opening their doors.
Professional Business Licenses
If your business offers a service that requires extensive training or education (such as accounting), you’ll probably need a professional business license in order to operate in Vermont. There are different licensing requirements for different professions, but luckily the Vermont Office of Professional Regulation has put together a list of professions and their required licenses. You can find it here.
Local Business Licenses
Your business might also need to register for local business licenses. For example, the city of Burlington requires a Catering License if you want to operate a catering service in town. And Montpelier even has a special business license for those interested in opening a blacksmith shop. Make sure you check in with your local government so that you know which licenses you’ll need.
Learn more about How to Get a Business License.
How do I get a Vermont business license?
You’ll just need to do a little more paperwork. Once you know which licenses you need, fill out the correct forms, and submit them to the appropriate licensing board. The form’s requirements, due dates, and filing fees will depend on who is issuing the license or permit.
How much does it cost to get a Vermont state business license?
Vermont doesn’t require a general business license, so the cost of your license or permit will vary depending on the kind you need. Luckily, Vermont’s Office of Professional Regulation has put together a list of businesses that need a license. This list includes directions on how to get the license your looking for, who to contact with your questions, and how much it will cost.
How do I get a professional license in Vermont?
Professional business licenses in Vermont are usually administered by a relevant licensing board that works with the Secretary of State’s office. For example, if you want a license to open an Acupuncture Center, you’ll apply with the Board of Acupunturist Advisors. Opening a tattoo parlor? You’ll apply for a license with the Board of Tattooist and Body Piercer Advisors.
How do I get a local business license?
The process to get a local business license will depend on the city you’re operating in. In Burlington, for example, you’ll need to submit your application for a local business license with the City Clerk’s office.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
Whether you choose to hire employees or independent contractors, you’ll need to set up payroll. In order to this, you’ll need to:
- get an EIN
- register for a Vermont Withholding Account Number with the Vermont Department of Taxes
- register for an Employer Account Number with the Vermont Department of Labor
- get your State Employer Unemployment Insurance (SUI) Tax Rate
- decide if you’re hiring employees or independent contractors
- prepare the required paperwork for your new hires
- decide on a payroll service or software
- organize a payroll schedule
Finding a good payroll service or software will make managing your payroll that much easier. These services can automatically withhold payroll taxes, schedule direct deposit payments to your employees, and some will even file your state and federal tax returns for you.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
How do I get Vermont Employer Account Numbers?
Your business will need two account numbers to operate in Vermont: an Employer Account Number from the Department of Labor, and a Withholding Account Number from the Department of Taxes.
In order to get an Employer Account Number from the Vermont Department of Labor, you’ll need to file an Employer Registration Application. You can do this through the Vermont Department of Labor website. Once complete, you’ll receive your Employer Account Number within 2 weeks.
You can register for a Vermont withholding account number by creating a business tax account with the Department of Taxes. After you’re assigned a withholding account number, you’ll receive your State Unemployment Insurance (SUI) Tax Rate. You won’t be able to set up payroll until you do this.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
But, is business insurance something you really need? Vermont requires business to have workers’ compensation insurance, but if you want to purchase other types of coverage that’s up to you.
Here are some of the most common types of business insurance:
Workers’ Compensation Insurance
Almost every business in Vermont is required by law to purchase workers’ compensation insurance. If an employee is injured on the job, this insurance covers anything your business may be liable to pay for, including medical bills or lost wages. If you don’t purchase insurance, the state can fine you $50 for every day you operate without coverage. If you still fail to purchase insurance within 5 days of receiving notice, the state will bump that penalty fee up to $150 a day. You can purchase workers’ compensation insurance through most insurance companies.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t.
Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers' compensation insurance in Vermont?
Vermont law requires workers’ compensation insurance for employees, LLC members, and corporate officers. Workers’ compensation insurance is not required for sole proprietors and partners of unincorporated businesses, but you can choose to have it if you’d like.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
Corporations are required to pay income tax in Vermont, but the net income tax rate depends on how much your corporation makes:
$0 to $10,000: 6%
$10,001 to $25,000: 7%
Over $25,000: 8.5%
Corporations also need to pay a minimum tax based on Vermont gross receipts. Most pay the minimum tax of $300, but if your corporation has over $2 million in gross receipts, you’ll have to pay $400. Earn more than $5 million and the amount will increase to $750.
Most LLCs won’t need to worry about the above taxes, unless you elect to be taxed as a C-Corporation.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
- Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable Vermont corporate tax rate.
To pay your federal taxes (and take a good deal of the other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for an EIN with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in Vermont, the corporate tax rate ranges from 2 to 9.4%). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
Local Vermont Business Taxes
Vermont’s sales tax rate is 6%, but cities are allowed to include an additional local sales tax of up to 1%. This is why the City of Essex Junction and Colchester have a total local sales tax rate of 7% compared to the 6% rate in Woodstock or Underhill.
You’ll also want to check with the city or county you’re located in for any specialty taxes you may need to pay. Some municipalities charge a 9% tax for prepared meals, hotel rooms, and a 10% tax for serving alcoholic beverages.
9. Build Your Business Website
If you want Vermonters to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“firstname.lastname@example.org”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
10. File a Vermont Annual Report
Vermont requires all LLCs and corporations to renew their business registration every year by filing an annual report. The day your report is due depends on what type of business you have. LLCs are required to file their annual report and pay the $35 fee within the first 3 months after their fiscal year end. For most businesses, this is March 31st. Corporations have 2.5 months (March 15th for most businesses) to file and pay the $45 filing fee.
What if I don’t file an annual report in Vermont?
If you’re late filing your annual report, you’ll be charged an additional $25. If you don’t file your annual report at all, you’ll lose your good standing with the state and risk administrative dissolution.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of Vermont or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Vermont is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Vermont.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
How do I register for a trademark in Vermont?
In order to register a trademark in Vermont, you’ll need to file a Trademark Registration/Renewal form the Vermont Secretary of State and pay the $20 filing fee. Make sure you provide a description of your product, an explanation of how the mark is used with your product, and the date you first used or adopted the trademark. Once filed, your trademark registration will be valid in Vermont for ten years.
Keep in mind that registering your trademark with the Secretary of State only protects your trademark in Vermont.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.