Choosing the Right Business Structure
Selecting the appropriate business structure is one of the most important decisions you’ll make when registering your tech startup in Vermont. Each structure offers different legal protections, tax implications, and management styles, so it’s crucial to choose one that aligns with your business goals. Here are the common types of business structures available in Vermont:
1. For Profit Corporation
A traditional corporate structure that allows for the issuance of shares and is typically used by businesses looking to raise capital. Shareholders have limited liability, and profits are subject to corporate taxes.
Ideal for organizations with charitable, educational, or social missions. Nonprofits enjoy tax-exempt status, but they must reinvest their profits back into the organization’s objectives.
3. Limited Liability Company (LLC)
Offers flexibility by combining the limited liability of a corporation with the tax benefits of a partnership. LLCs are a popular choice for tech startups due to their simplicity and protection of personal assets.
4. Cooperative Corporation
This structure is owned and operated for the benefit of its members, often used by businesses that emphasize member participation and shared ownership, such as agricultural or food cooperatives.
5. Mutual Benefit Enterprise (MBE)
An emerging business model that blends aspects of a cooperative and a for-profit business. MBEs are designed to benefit members while still generating profit, often used in industries focused on shared services or products.
6. Limited Liability Partnership (LLP)
Typically used by professional services firms (such as law firms or accounting practices), LLPs offer liability protection for partners while allowing them to manage the business directly.
7. Limited Partnership (LP)
A structure that includes general partners, who manage the business, and limited partners, who invest capital but have no management responsibilities. LPs are often used in investment ventures or real estate projects.
8. Blockchain-Based Limited Liability Company (BBLLC)
A Blockchain-Based Limited Liability Company (BBLLC) in Vermont allows a company to govern itself, in whole or in part, using blockchain technology. This unique designation in Vermont permits the use of blockchain for operational elements such as voting, membership, and smart contracts. It is required that the company's operating agreement specify the blockchain system's structure, including decentralized or public access and protocols for security breaches.
For more details, visit Vermont Statutes.
Steps to Register Your Business
Once you’ve determined the best business type for your venture you’re ready to officially register your business. This will involve some paperwork and waiting for responses from government agencies. There are also online services like
LegalZoom to help you complete this process.
Obtaining a federal Employer Identification Number (EIN) is a simple and essential step for most businesses. The EIN is issued by the IRS and acts as a unique identifier for your business, much like a Social Security number for individuals. It’s required for federal tax purposes, opening a business bank account, and hiring employees.
You can easily apply for an EIN online through the IRS website, and the application process typically takes just a few minutes, with the number issued immediately upon completion. Having an EIN ensures your business is properly registered with the federal government, allowing you to operate legally and efficiently.
Register Your Business in Vermont
Next, you’ll need to
register with the Vermont Secretary of State. Vermont’s Online Business Service Center makes the registration process straightforward and efficient. You’ll create an account, complete the necessary forms based on your business type, and submit your registration fee online. This step formalizes your business as a legal entity within the state.
If your business has employees or will be collecting sales tax, you’ll need to register with the Vermont Department of Taxes. This step ensures that your startup can file state tax returns and meet any other tax obligations.
Vermont’s Department of Taxes offers online registration services that make setting up your account fast and easy. If you’ve hired an accountant to handle payroll, they may take care of this step for you.
At BRIC, we understand that navigating the business registration process can be daunting, especially for tech startups with unique needs. During our Actuator program we can help you determine the best business structure for your startup and guide you through the process of starting off on the right foot.
