Small business owners can find many benefits in starting a limited liability company (LLC). An LLC gives its owners limited liability for business debts. An LLC also offers a flexible management structure and tax options. However, you do need to keep up with ongoing maintenance requirements for your LLC.
In Vermont, you'll need to file an annual report and file a business entity tax return for your LLC. Let's take a look at the most important ongoing reporting and state tax filing requirements for Vermont LLCs.
The State of Vermont requires you to file an annual report for your LLC with the Vermont Secretary of State (SOS). You must file your report online through the SOS' Online Business Service Center (bizfile). However, at the end of the online process, you'll have the option to pay by mailing in a check.
To complete the annual report you mainly just need to confirm or update basic information, such as:
The annual report is due within the first three months following the end of your LLC's fiscal year. For example, if your fiscal year matches the calendar year (ends in December), your annual report is due any time between January 1 and March 31. As of 2024, the filing fee is $55.
With income tax, most LLCs are considered "pass-through tax entities." With a pass-through entity, the responsibility for paying federal income taxes passes through the LLC itself and falls on the individual LLC members. So, as an LLC owner, you report and pay your share of the LLC's income on your personal tax return. The LLC itself doesn't pay income tax.
Must pay minimum business entity tax (BET). LLCs taxed as partnerships, S corporations, and partnerships must file a Business Income Tax Return (Form BI-471) in Vermont. Your LLC will be responsible for a $250 minimum BET. Along with your tax return, your LLC might be responsible for other taxes if you have nonresident LLC members or elect to file a composite return (discussed below).
Electing to file a composite return. Many states allow LLCs and other pass-through entities to pay income tax at the entity level on behalf of the LLC members. In Vermont, LLCs must pay estimated income tax payments on behalf of its members who don't reside in Vermont. But you can elect to have your LLC pay income tax on behalf of all its members (both residents and nonresidents). LLC members who are part of the composite return don't have to pay their share of the LLC taxes on their personal tax returns.
Electing corporate tax status. Usually, LLCs are taxed as partnerships by default. However, you can choose to have your LLC taxed as a corporation for federal tax purposes. File IRS Form 2553 with the IRS to make this election. If you elect federal corporate tax status, Vermont will also recognize your LLC as a corporation for tax purposes. Vermont's corporate income tax is based on a small set of marginal rates applied to net income along with certain minimum taxes. Use Form CD-411 to file your Vermont corporate income tax return. You can find links to the corporate tax forms, filing deadlines, tax rates, and other instructions on the DOT's corporate income tax webpage.
Visit the DOT's business entity income tax webpage for more information about when and how to file your LLC's taxes. The webpage also has links to the relevant tax return forms and filing due dates.
If your LLC has employees or plans to, you must pay employer taxes to the federal and state governments. You'll need to first obtain a federal employer identification number (EIN) from the IRS to report and pay these taxes as an employer.
Withholding employee wages. As a Vermont employer, you'll need to withhold and pay employee income taxes to the DOT. Register your business with the DOT for a withholding tax account using myVTax or by mailing or faxing Form BR-400, Application for Business Tax Account. Once you've registered, you'll need to file withholding taxes periodically—either quarterly, monthly, or semiweekly. All filers must also complete both a quarterly and annual withholding reconciliation form. Check out the DOT's withholding for employers webpage for more details and instructions.
Unemployment insurance (UI) tax. In addition to withholding employee wages, you'll probably need to register to pay state UI taxes to the Vermont Department of Labor (DOL). You can register your business online or mail Form C-1 to the DOL to create an employer unemployment tax account. Then, each quarter, use DOL Form C-101 to report on wages and pay the UI taxes. You can submit your quarterly reports online.
If your LLC will sell taxable goods or services to customers in Vermont, you will need to collect and pay sales tax to the DOT. You must first register for a sales and use tax account with the DOT either online myVTax or using Form BR-400. Once you register, you'll be sent a license to collect sales tax.
You must file returns and pay your taxes due on either a monthly, quarterly, or annual basis. Your filing frequency depends on how much sales tax is owed. You can file online using myVTax. Some filers are required to file electronically.
In some instances, you might organize your LLC in one state and do business in other states. For example, you might form your LLC in Vermont, but have business activities in New York or Massachusetts. If your LLC does business in a state outside of Vermont, then you might need to register as an out-of-state (foreign) LLC in that state.
Every state has rules and requirements for when an out-of-state business must qualify as a foreign business. In general, you probably need to register as an out-of-state LLC if you have a physical presence in a state, hire employees in the state, or advertise directly to residents of the state. But you should check the state's laws around qualifying as a foreign business.
You should review our state guide to qualifying to do business outside your state to determine whether you need to register your LLC in another state.
If you'd like more guidance about how to manage and operate your LLC, check out the various articles in the LLC section of our website. If you need answers to legal questions specific to your business, consider speaking with a Vermont business attorney. A lawyer can help you determine your tax obligations as an LLC owner and employer. They can also help you meet your filing deadlines and keep your Vermont LLC in good standing.
(If you need information about other states' LLC requirements, you can review our article on LLC tax and filing requirements.)