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Virginia Corporation
Advantages and Disadvantages



Virginia Corporation and Asset Protection



In general, every corporation that is incorporated under Virginia law, or that has registered with the State Corporation Commission for the privilege of conducting business in Virginia, or that receives income from Virginia sources must file a Virginia corporation income tax return. Nonprofit organizations are required to file a Virginia corporation income tax return only if they incurred unrelated business taxable income at the federal level.

Corporations that have elected S status for federal purposes are automatically treated as S corporations for Virginia purposes, and file their returns on Form 500S by the 15th day of the fourth month following the close of their taxable year. All other corporations file on Form 500. The Virginia Form 500 must be filed by the 15th day of the fourth month following the close of the taxable year, except for nonprofit organizations, which file by the 15th day of the sixth month following the close of their taxable year. A filing extension of up to six months may be requested by filing Form 500E.

Virginia Corporation - Articles of Incorporation must be drafted and submitted to the Virginia Secretary of State, Corporations Division. Once articles of incorporation have been successfully filed, your Virginia Corporation has been formed and this begins its existence as a Virginia corporate entity.

Should I form a Virginia Corporation?

A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.

Advantages and Disadvantages:
Virginia Corporation

Advantages of a Corporation

  • Shareholders have limited liability for the corporation's debts or judgments against the corporations.
  • Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
  • Corporations can raise additional funds through the sale of stock.
  • A corporation may deduct the cost of benefits it provides to officers and employees.
  • Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
  • A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 - $75,000; 34% tax on income from $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
  • A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.

Disadvantages of a Corporation

  • The process of incorporation requires more time and money than other forms of organization.
  • Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
  • Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.

Federal Tax Forms for Regular or "C" Corporations

  • Form 1120 or 1120-A: Corporation Income Tax Return
  • Form 1120-W Estimated Tax for Corporation
  • Form 8109-B Deposit Coupon
  • Form 4625 Depreciation


Virginia’s Business Tax Climate Ranks 12th

Virginia ranks 12th in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Neighboring states ranked as follows: Maryland (21st), West Virginia (47th), Kentucky (44th), Tennessee (15th) and North Carolina (30th).

Virginia’s Tax Burden below National Average

Over the past 14 years, Virginia’s tax burden has consistently been among the lowest in the nation. Estimated now at 9.3% of income, Virginia’s state/local tax burden percentage ranks 37th in the nation, substantially below the national average of 10.0%.

Virginia’s Individual Income Tax System

Virginia’s personal income tax system consists of four separate brackets with a top rate of 5.75% kicking in at an income level of $17,000. That top rate ranks 13th lowest among states levying an individual income tax. Virginia’s 2002 individual income tax collections were $921 per person (ranked 7th highest nationally).

Virginia’s Corporate Income Tax System:

Virginia’s corporate tax structure consists of a flat rate of 6.0% on all corporate income. Among states levying corporate income taxes, Virginia’s rate ranks 9th lowest nationally. In 2001, corporate tax collections reached $51 per capita, ranking it 41st nationally.



| Business Partnerships | S Corp vs C Corp | Sub S Corporations | LLCs Listed by State
| Business Deductions | LLC vs S Corp | CORP vs Part/Sole Part | LLCs Taxes
| Business Formation | ICs and IRS | Piercing the Corporate Veil | How to Incorporate
| Delaware Corporation | Corporations Listed by States | S Corporations Listed by States

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