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Advantages of Incorporating a Business in Vermont

In the last 5 years, there has been more start-up companies established in Vermont as compared to large corporations. There are several industries that have been growing at a rapid rate and many businesses have been formed in such industries like Agriculture, Forestry, Fishing and Hunting, Wholesale Trade, Professional, Scientific, and Technical Services, Educational Services (Private), and Health Care and Social Assistance among others. A research study has concluded that 16 industries out of the top 25 most concentrated industries in the state include production/manufacturing related, like Logging, Tea Manufacturing, Breweries, Ice Cream and Frozen Dessert Manufacturing, Game Manufacturing, and Coffee Manufacturing. This is more so because of the variety of incentives offered by the state and local agencies.

Business Growth Incentive for New Businesses

Why should you register a new business in Vermont? The state has witnessed $12.3 billion in economic activity fuelled by small and medium sized enterprises (SME’s) that are also instrumental towards 27% of employment. There has been an increase in the number of high-tech firms in Vermont in 2017 with 3,012 firms registering in the state as compared to 2,011 firms in 2007. This also goes on to say, how beneficial the incentive programs have been for businesses. Let’s take a look at some of advantages that your business can benefit from in the state.

Advantage#1: The benefits of Incorporation or LLC formation

Corporation

  • Capital and Incentive programs: If you register a new company in Vermont then you will be able to benefit from a variety of capital as well as incentive programs. Capital sources or programs range from angel investing to a wide variety of debt sources especially those offered by Vermont Economic Development Authority. Some of these incentive programs have been rated amongst the best in the nation and include:
    – Brownfields Revitalization Fund (BRF)
    – ThinkVermont Innovation Grant Program
    – International Grants
    – Investment Capital
    – Northern Border Regional Commission Grants
    – Vermont Employment Growth Incentive (VEGI)
    – Grants by Office of Economic Adjustment (OEA)
    – Windham County Economic Development Program
    – Vermont Training Program (VTP)
  • Zero Income Tax: If you register a new business in Vermont as an S Corporation, you can benefit from the fact that there will be no income taxes levied and an S corporation income or loss will be passed through to the stockholders. It is also important to know that there are a few exceptions.

LLC

  • Tax Incentives: A start-up company in Vermont which is also an LLC can take advantage of several incentive programs offered by the state, cities, and counties like Newport. If you established your business in Newport, VT then some of the programs you can benefit from include:
    – Newport City Tax Stabilization
    – The Downtown Designation Program
    – New Markets Tax Credit Program (NMTC)
    – The Work Opportunity Tax Credit (WOTC)
    – Research and Development Tax Credits
    – Vermont Employment Growth Incentive
  • Flexible Profit Distribution: A start-up company in Vermont registered as an LLC has the benefit of being able to select different ways of distribution of profits unlike a partnership where the distribution is 50-50.
  • Limited Liability: As an owner of a Vermont LLC, you will be able to enjoy limited liability protection quite similar to what a corporation enjoys.

Advantage#2: Vermont Business Incentives

Once you register a new company in Vermont, there are several business incentives and programs that your company can benefit from. Let’s take a look at some of the most popular programs:

  • Vermont Employment Growth Incentive (VEGI): This is a business incentive program that has been implemented by the Agency of Commerce and Community Development, State of Vermont. The primary objective of this program is to provide cash payments to businesses in a variety of industries that are authorized to earn this incentive based on specific performance requirements. The value of each of the cash payments to be made will be directly based on the revenue return generated through payroll creation, prospective qualifying jobs, and capital investment. Once a business has earned the incentive, it will be paid out over several years. Sample Application and Information
  • Vermont Opportunity Zone program: The opportunity zone program has been created to target businesses that plan to relocate or expand their activities in such a zone. If you register a new business in Vermont OZ, your business will be able to benefit from several tax incentives. This includes all capital gains qualifying for a deferral. Map of Opportunity Zones

Are there any Disadvantages of Incorporating in Vermont?

As a start-up company in Vermont, you will be able to enjoy several benefits in the form of tax credits, grants, loans, Small Business Innovation Research (SBIR), Small Business Technology Transfer (STTR) programs, ThinkVermont Innovation Grant Program, and Vermont Commercial Solar Incentives, and much more. So, the big question is – are there any disadvantages? In reality, there are no disadvantages as such except the ones that are specific to the type of business you register. For example, an LLC has a limited life and can get dissolved if a member dies. Similarly, incorporation can lead to higher overall taxes and this is where you can find relief in the form of the tax credit programs.

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