To start a sole proprietorship in Virginia, you do not file anything with the State Corporation Commission to form the business itself: you are in business the moment you start operating. The real setup work is a short list: register a fictitious name if you plan to use one, get a federal tax ID if you need or want one, apply for a local business license, confirm your location’s zoning allows the activity, and set up your tax accounts so quarterly payments do not catch you off guard.
Before you commit, know the trade-off. A sole proprietorship offers no legal separation between you and the business, which means your personal house, car, and savings are exposed to business debts and lawsuits. An LLC provides a liability shield for a modest annual cost. If you accept that risk and want the simplest possible structure, the steps below are what starting looks like in practice.
Register a Fictitious Name (Only If You Use One)
If you plan to operate under any name other than your full legal name, Virginia law requires you to file a Certificate of Assumed or Fictitious Name with the State Corporation Commission before you conduct business under that name.1Virginia Code Commission. Virginia Code 59.1-69 – Certificate Required of Person Transacting Business Under Assumed Name Running a consulting practice as “Jane Smith” when that is your legal name needs no certificate. Calling it “Blue Ridge Consulting” does.
Before you file, search the SCC’s Clerk’s Information System to make sure your desired name is distinguishable from existing corporations, LLCs, and other fictitious names already on record. A name that is too similar will be rejected, and the $10 filing fee is not refunded.
The form asks for the fictitious name, your full legal name, and the street address of your office or residence, including city, state, and zip code.2Virginia Code Commission. Virginia Code 59.1-70 – Filing a Certificate with State Corporation Commission; Fee A PO box alone will not satisfy the street-address requirement. You indicate that you are filing as an individual and sign the certificate yourself.
You can file online through the Clerk’s Information System or mail a paper form to the Clerk of the Commission in Richmond. The filing fee is $10.2Virginia Code Commission. Virginia Code 59.1-70 – Filing a Certificate with State Corporation Commission; Fee One detail that surprises people: Virginia fictitious name registrations do not expire, and there is no renewal fee. If you later stop using the name, you file a Certificate of Release for another $10 to remove it from the record.3Virginia SCC. Fictitious Names
Get a Federal EIN
A sole proprietor without employees can legally use a Social Security number for tax filing. You are required to get an Employer Identification Number if you hire employees, maintain a Keogh or other qualified retirement plan, or need to file excise tax returns.4Internal Revenue Service. Get an Employer Identification Number Most banks also require an EIN to open a business checking account.
The IRS issues EINs free through an online application at irs.gov. You provide your SSN, the date the business started, and its primary activity.5Internal Revenue Service. Instructions for Form SS-4 The number is assigned immediately when you apply online during business hours. Even when it is not strictly required, having an EIN keeps your Social Security number off invoices and vendor forms.
Apply for Your Local Business License
Virginia delegates business licensing to its cities, counties, and towns. Nearly every locality requires a Business, Professional and Occupational License (BPOL) from anyone conducting business within its borders.6Virginia Code Commission. Virginia Code 58.1-3700 – License Requirement Operating without one when it is required is a local-ordinance violation regardless of whether you owe any tax.
You apply through the local Commissioner of the Revenue or Director of Finance. The application asks for your estimated gross receipts for the first year, which determines whether you owe a flat fee or a percentage-based tax. Fees vary by locality. In Fairfax County, for example, businesses with gross receipts of $10,000 or less pay nothing, those between $10,001 and $50,000 pay $30, and those between $50,001 and $100,000 pay $50; above $100,000 the tax is a percentage that depends on the nature of the business.7Fairfax County, Virginia. Understanding Business, Professional and Occupational License Tax Other localities set their own thresholds and rates, so check with your local tax office before assuming any specific numbers apply to you.
The BPOL must be renewed annually. In many jurisdictions the renewal deadline is March 1, and late renewals typically trigger a 10% penalty.7Fairfax County, Virginia. Understanding Business, Professional and Occupational License Tax Put the date on your calendar during year one.
Check Zoning If You Work From Home
If you plan to work from home, your local planning or zoning department will need to confirm that your business activity is allowed at a residential address. Home-based businesses typically face restrictions on noise, client traffic, signage, and the share of your home devoted to the business. You submit a home occupation permit application to the local planning department, and processing generally runs anywhere from a few days to two weeks.
If your application is denied, Virginia law allows you to appeal zoning decisions to the local Board of Zoning Appeals. The board can also grant a variance if you demonstrate that strict application of the zoning rules would unreasonably restrict use of your property.8Virginia Code Commission. Virginia Code 15.2-2309 – Powers and Duties of Boards of Zoning Appeals The burden of proof falls on you, and the zoning administrator’s original decision is presumed correct, so bring specifics rather than general complaints.
Set Up Your Taxes
You do not file a separate business tax return as a sole proprietor. Your business income flows directly onto your personal federal and Virginia returns. The complication is that no one is withholding anything for you, and you owe taxes that W-2 employees never see.
Federal Self-Employment Tax
You pay both the employer and employee shares of Social Security and Medicare. The combined self-employment tax rate is 15.3%: 12.4% for Social Security on net earnings up to $184,500 in 2026, plus 2.9% for Medicare on all net earnings with no cap.9Social Security Administration. Contribution and Benefit Base Earnings above $200,000 ($250,000 if married filing jointly) face an additional 0.9% Medicare surtax. You deduct half of your self-employment tax when calculating adjusted gross income, which lowers your income tax bill and applies even if you take the standard deduction.10Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
Virginia Income Tax
Your business profit, after deductions, is added to any other income on Virginia Form 760. The state uses a graduated rate structure with a top rate of 5.75% on taxable income above $17,000.11Virginia Department of Taxation. Tax Rate Schedule Virginia starts your calculation from federal adjusted gross income, so the federal self-employment tax deduction carries through automatically.
Quarterly Estimated Payments
At the federal level, you owe quarterly estimated payments if you expect to owe $1,000 or more when you file. The 2026 federal deadlines are April 15, June 15, September 15, and January 15, 2027.12Taxpayer Advocate Service. Making Estimated Payments Virginia has its own parallel requirement: if your state tax liability after withholding and credits exceeds $150, you make estimated payments to the Virginia Department of Taxation. The state deadlines are May 1, June 15, September 15, and January 15 of the following year.13Virginia Department of Taxation. Individual Estimated Tax Payments Virginia’s first-quarter deadline is May 1, not April 15. Setting aside roughly 25-30% of each payment you receive is a practical habit to build early.
Sales Tax
If you sell tangible goods or certain digital products, register with the Virginia Department of Taxation for a sales tax certificate and collect tax from customers. In-state retailers with a physical location in Virginia generally must register regardless of sales volume.14Virginia Department of Taxation. Retail Sales and Use Tax Service-only businesses are generally exempt, though lodging and meals carry their own local taxes. If you are unsure whether your activity triggers a collection obligation, contact the Department of Taxation before your first sale.
If You Plan to Hire
If you bring on even one employee, a stack of new obligations starts. Getting these right from day one prevents penalties that can dwarf what you pay the employee.
- Get an EIN before your first hire if you do not already have one.4Internal Revenue Service. Get an Employer Identification Number
- Carry workers’ compensation insurance once you regularly employ three or more people. Employers with fewer than three are exempt unless they voluntarily opt in, and subcontractors who do the same type of work as your business may count toward your total.15Virginia Code Commission. Virginia Code 65.2-101 – Definitions16Commonwealth of Virginia Workers’ Compensation Commission. Workers’ Compensation Insurance Information for Employers
- Register with the Virginia Employment Commission to determine whether you owe state unemployment insurance tax.17Virginia Employment Commission. How Do I Register My Business Now That I Have Employees?
- Report each new or rehired employee to the Virginia new hire directory within 20 days of their start date.
- Collect a signed W-4 from each employee on or before their first day, withhold federal and Virginia income taxes from each paycheck, and file quarterly payroll tax returns (federal Form 941).
Recordkeeping expands too. Retain payroll tax records for at least four years and keep I-9 employment verification forms on file for three years after the hire date or one year after termination, whichever is later.
Ongoing Compliance
Because a sole proprietorship has no entity-level registration with the state, there is no annual report to file with the SCC. Your ongoing obligations are local and tax-related: renew your BPOL by your locality’s deadline, keep federal and Virginia estimated payments current, and if you ever stop using a fictitious name, file a Certificate of Release with the SCC for $10 so it comes off the public record.3Virginia SCC. Fictitious Names Failing to renew the BPOL does not dissolve your business, but it does make continued operation unlawful and triggers penalties.