WHAT YOU NEED TO KNOW ABOUT STARTING A BUSINESS IN THE CITY OF PETERSBURG, VIRGINIA
www.petersburg-va.org

There are certain procedures that need be followed when starting a business. While there are many steps you need to follow in starting a business, this brochure gives an easy-to-understand, brief overview of starting a business in Petersburg. It is NOT intended for use without involvement by or discussion with your Certified Public Accountant and attorney and your other important financial advisors. The forms and deadlines discussed herein incur substantial penalties if not timely filed. Always consult professional advisors before starting any business venture. The use of this brochure without their substantial input can be hazardous to your wealth.

THE BUSINESS ENTITY

Perhaps one of the most important steps is choosing the type of entity structure for your business, as it will determine how you will keep your records and how you will be taxed.

Sole Proprietorship A sole proprietorship is a type of business entity which is unincorporated and consists of one person, who pays tax on all income and is personally liable for all losses and liabilities.

Partnership A partnership is an entity formed by two or more persons contributing abilities, money, and other assets to the business. In a general partnership, the partners are liable for all debts. Each partner pays tax on his or her share of the income.

Corporation A corporation is a separate legal entity from its owners. There are three main characteristics of a corporation: 1) limited liability, owners can only lose their investment in the corporation, 2) easy transfer of ownership through the sale of stock and, 3) continuity of existence. A corporation can be either an "S" corporation or a "C" corporation. An S corporation has fewer than 35 stockholders and income tax is paid once, at the individual level. If a corporation is not an S corporation, it is a C corporation. A C corporation, on the other hand, is taxed at the corporate level and stockholders are also taxed on any dividends taken by shareholders.

Limited Liability CompanyThe limited liability company (LLC) income tax is paid by the "members," not the company. With an LLC, the personal liability of its owners is more limited and, unlike an S corporation, an LLC can have more than 75 stockholders, which may be corporations and foreigners.

SOME COMMON FEDERAL AND STATE FORMS

• Form SS-4 is used to obtain a Federal Employer Identification Number (EIN) and is filed with the Internal Revenue Service.

• Certificate of Assumed Name needs to be filed with the Clerk of the Circuit Court in the city or county in which your business is located if it will have a name other than the legal business name.

• Articles of Incorporation and a charter fee need to be filed with the State Corporation Commission.

• Articles of Organization and a filing fee need to be filed with the State Corporation Commission.

• Form VEC-FC-27 needs to be filed with the Virginia Employment Commission if your business is subject to unemployment tax.

• Form R-1 needs to be filed with the Virginia Department of Taxation if corporate income tax, sales tax, employer withholding tax or any other state tax apply to the operation of the business.

• Form 2553 needs to be filed with the IRS by the 75th day of an S corporation’s existence.

WHAT FORMS DO YOU NEED?

Sole Proprietorship

Form SS-4, if you have at least one employee; sole proprietorships are not required to file with the State Corporation Commission or with the Clerk of the Circuit Court, unless you need to file a Certificate of Assumed Name; Form VEC-FC-27 and Form R-1, if applicable

Partnership

Form SS-4; a partnership also must file Articles of Partnership with the Clerk of the Circuit Court where the business will be located; and, if applicable, Certificate of Assumed Name; Form VEC-FC-27 and Form R-1

Corporation

Form SS-4; Articles of Incorporation; Form R-1 and if applicable, Certificate of Assumed Name, VEC-FC-27, and Form 2553 (If "S" status elected)

Limited Liability Company

Form SS-4; Articles of Organization; and if applicable, Certificate of Assumed Name; Form R-1 and Form VEC-FC-27

APPLICATION FOR A LOCAL BUSINESS LICENSE

If your business will operate in the City of Petersburg, you need to complete an application for a Petersburg business license, available from the Office of the Commissioner of Revenue. Before applying for a business license, you must complete a Business License Action Form, which requires that you visit seven locations, the Zoning Department, Building Inspections, Fire Department, Health Department, Clerk of Circuit Court, Police Department, and the Office of the Commissioner of Revenue, to obtain approval for your business. You also must have filed a Certificate of Assumed Name, if necessary, with the Clerk of the Circuit Court.

The tax liability will be based on either a flat rate or an amount per $100 plus a permit fee of $50, depending on the type of business. Usually, the total tax owed is calculated based on a business’ gross receipts or gross purchases (for a wholesale merchant) from the previous year. Persons starting new businesses, will need to estimate gross receipts or purchases for the year. There are basic classifications of business types, which determine the tax rate. It is acceptable for a business to have more than one business license, for each segment of the business, which would be subject to various tax rates. Business licenses expire on December 31 and you must renew them each year by January 31.

BUSINESS PERSONAL PROPERTY TAX

By March 31, you must file a City of Petersburg Return of Business Tangible Personal Property. On the form you will list all furniture, equipment, tools, office machines, signs, and other property used in the operation of your business. The tax is based on the purchase cost of the property and the time you have owned it. You not only pay tax the year you purchase property, but for each year it remains in use.

Manufacturers in Petersburg are exempt from business licenses, but must still pay business personal property on all machinery and tools.

Additionally, you might also want to contact other state agencies, such as the Alcoholic Beverage Control Board, Department of Health, Department of Housing and Community Development, Virginia Department of Occupational Regulation, Department of Labor and Industry, and some other departments which may have other requirements for your particular type of business.

WHAT IS THIS PLACE CALLED PETERSBURG?

The area where Petersburg is located today, on the Appomatox River, began with the founding of Fort Henry in 1645. In 1675, a trader named Peter Jones, settled in the area to establish Peter Jones Trading Station. Later, it came to be known as Peter’s Point until September 1732 when William Byrd II suggested naming it Petersburg. It officially became a city in 1850. Some of the bloodiest fighting of the War Between the States occurred in or about Petersburg.

Petersburg is part of a state program promoting investment in the city, through tax incentives, by businesses located in a Enterprise Zone. Among the requirements to receive state and local tax benefits are that at least 40 percent of employees of a new business must be in a low-income category and the business must create new jobs. Businesses can receive general and unemployment tax credits and refunds of state sales tax it collects, depending on their specific situation. A qualifying business can also receive local tax incentives such as exemptions from the business license tax and zoning and building permit fees. Petersburg also participates in a Small Business Minority Business Loan program with local banks. Contact the Petersburg Economic Development Office at (804) 733-2352 for more information.

IMPORTANT PHONE NUMBERS

INTERNAL REVENUE SERVICE

(800) 829-1040

FOR FEDERAL TAX FORMS

(800) 829-3676

VIRGINIA DEPARTMENT OF TAXATION

(Richmond District Office)

(804) 367-8037

STATE CORPORATION COMMISSION

(804) 786-3733

VIRGINIA EMPLOYMENT COMMISSION

(804) 786-7159

COMMISSIONER OF THE REVENUE

(804) 733-2315

CLERK OF THE CIRCUIT COURT

(804) 733-2367

ECONOMIC DEVELOPMENT

(804) 733-2352