Starting a Business in Vermont – A Comprehensive Guide

How to Start a Business in Vermont

Have you been nurturing a unique business idea and considering giving it life in Vermont? This blog is your go-to guide, a valuable resource with information specifically tailored for anyone looking to plant their entrepreneurial seed in the Green Mountain State.Vermont capitol building


Top Two Benefits of Starting a Business in Vermont

  1. Supportive Small Business Infrastructure:
    Vermont is known for its robust small business infrastructure, which includes a network of state-funded programs and initiatives aimed at helping new businesses thrive. From technical assistance and training to funding opportunities, Vermont offers a supportive ecosystem for entrepreneurs.
  2. Quality of Life:
    Aside from business, Vermont offers an excellent quality of life. Its beautiful landscapes, tight-knit communities, and exceptional healthcare and educational systems make it an ideal place to balance work and personal life – a factor increasingly important for business owners.


Top Two Challenges When Starting a Business in Vermont

  1. Population Size:
    Vermont’s small population can be a double-edged sword. On the one hand, it fosters a close-knit business community. On the other hand, it may limit market size, especially for businesses dependent on a high volume of local customers.
  2. Cost of Living:
    Despite the excellent quality of life, the cost of living in Vermont can be relatively high compared to the national average. Things like leasing office space or paying employee salaries might be more expensive.

To put things in perspective, as per a 2023 survey, Vermont was ranked as the 2nd best state for quality of life but also among the top 10 states with the highest cost of living.

Despite these challenges, thanks to its supportive business environment, countless entrepreneurs have succeeded in Vermont. This guide will provide the tools and knowledge you need to navigate starting a business in Vermont successfully.

Regulatory Factors and Taxes in Vermont

When starting a business in Vermont, it’s essential to understand the state’s regulatory factors and tax policies. In Vermont, companies are subject to several types of taxes, each varying depending on the nature and size of your operation.

Vermont levies a state corporate income tax that operates on a progressive scale. Businesses making up to $10,000 are taxed at 6%, those earning between $10,001 and $25,000 are taxed at 7%, and companies making over $25,001 are taxed at 8.5%. This progressive system means the more your business earns, the higher your tax rate.

Another critical tax to consider is the sales tax. In Vermont, the state sales tax rate is 6%. However, local jurisdictions can add a local option tax of 1%, making a total sales tax of 7% possible in some areas. Business owners need to consider this when determining pricing strategies and forecasting profits.

Businesses should also be aware of the unemployment insurance tax paid by employers to fund the state’s unemployment compensation program. This tax varies depending on the size of your workforce and your company’s history with layoffs. Still, the standard rate for new employers in Vermont typically hovers around 1.1% to 8.4% on the first $16,100 in wages paid to each employee.

Understanding these taxes is crucial to planning and operating a business in Vermont. Remember that this information is just a starting point, and tax laws can change, so it’s always advisable to consult with a tax professional or the Vermont Department of Taxes to ensure you have the most current information.

How do I Choose a Business Structure?

There are five primary types of businesses. Each type of business entity is described below.

Sole Proprietorship

A business owned and operated by one individual with no legal distinction between the business and the owner. The owner is personally responsible for all debts and liabilities of the business. Most small business owners in  Vermont use this business type.

Limited Liability Company (LLC)

A flexible business organization that combines the liability protection of a corporation with the tax benefits and simplicity of a partnership. Owners of an LLC are called members, and their assets are typically protected from the debts and liabilities of the business. You have the flexibility to define many aspects of how your business will work in your Articles of Organization.

S-Corporations

A type of corporation allows for pass-through taxation, meaning that profits and losses are passed through to the shareholders and reported on their tax returns. S-Corporations are limited to 100 shareholders and must meet specific eligibility requirements. An S-Corp can be particularly advantageous if the founders or investors have other income. If the business doesn’t generate a profit in any year, the shareholders can use the losses from a tax perspective.

C-Corporations

A separate legal entity from its owners (shareholders) means that the corporation can enter into contracts, own assets, and sue or be sued. C-Corporations are subject to double taxation, meaning that the corporation and the shareholders are taxed on profits.

A Note About S-Corps and C-Corps

For both S-Corporations and C-Corporations, your business formation documents will include Articles of Incorporation, sometimes called a Corporate Charter.  The specific requirements and format of Articles of Incorporation can vary by jurisdiction. It is advisable to consult with a business attorney or online legal service such as Legal Zoom to ensure compliance with local laws and regulations when drafting and filing these documents.

Limited Liability Partnership (LLP)

A partnership that limits the personal liability of its partners. LLPs are typically used by professional service providers such as lawyers, accountants, and architects. Each partner is protected from the other partners’ wrongful acts, omissions, and negligence, but they may still be personally liable for their actions.

Distribution of Businesses

Business Type Percent of Businesses in  Vermont
Sole Proprietorship 50-55%
Limited Liability Company (LLC) 20-25%
S-Corporation 10-15%
C-Corporation 5-7%
Limited Liability Partnership (LLP) 2-3%

The percentages may vary yearly depending on the industry and location. Additionally, the data includes businesses registered in states other than Vermont but operating within the state.

What is an Employer Identification Number – EIN?

Definition of an EIN or Employer Identification Number

An EIN, or Employer Identification Number, is a unique nine-digit number the IRS gives to businesses in the US. This number makes managing taxes easier for businesses. It’s also known as a Federal Tax Identification Number or a Federal Employer Identification Number.

Do I Need One to Start a Business in Vermont?

If you’re opening a business in Vermont, you’ll likely need an EIN. This number is needed when you create a business entity, hire employees, get business licenses, or open a business bank account..

How Do I Get One?

You can apply for this critical number straight from the IRS website. Or, you can send Form SS-4 to the IRS by mail or fax. Getting an EIN online is fast and easy – you get the number right after completing the application. If you need more help or want to know more, call the IRS at 1-800-829-4933. You can also visit their website at


https://www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers

How to Start a Business in Vermont – Important Registrations

Registering My Business Name

One of the first steps to starting a business in Vermont is officially registering your business name with the Secretary of State’s office. Their office can be contacted at (802) 828-2363 or visit their website at


https://sos.vermont.gov/

.

Registering a DBA (Doing Business As) If Relevant

If your business operates under a name different from yours, you must register a DBA, or “Doing Business As,” with the Secretary of State’s office. Vermont has 14 counties, each with local government services and regulations.

A comprehensive directory of Vermont’s local governments can be found at this website:


https://www.vermont.gov/

This directory provides contact information for each county and can help businesses navigate local rules or requirements.

Registering for Payroll, State Payroll Taxes, and Unemployment Insurance

For payroll taxes and unemployment insurance in Vermont, you must create an account with the Vermont Department of Taxes. They can be reached at (802) 828-2551 or visit their website at


https://tax.vermont.gov/

.

Registering for Worker’s Compensation Insurance

Businesses in Vermont also need worker’s compensation insurance. You can get this insurance from a licensed provider. If you use a payroll service
they should also be able to provide worker’s comp.

Registering for Collecting Sales Tax

Businesses in Vermont must register to collect sales tax. You can accomplish this on the Vermont Department of Taxes website:

https://tax.vermont.gov/business-and-corp/sales-and-use-tax

.

Registering for Income Tax

For corporate income state tax, in Vermont, registration should be done through the Vermont Department of Taxes. You can contact them at (802) 828-2551 or visit their website at


https://tax.vermont.gov/

.

Registering to Pay Property Tax

If your business needs to pay property tax in Vermont, contact the assessor’s office in your local county. For more information, visit the Vermont Department of Taxes website:


https://tax.vermont.gov/property-owners

.

Permits for Starting a Business in Vermont

Do I Need a Business Permit to Operate a Business in  Vermont?

Montpelier, Vermont, USA town skyline at twilight.
At the State Level:


Depending on your business’s nature, you may require specific state-level permits in Vermont. The Vermont Agency of Commerce and Community Development has resource pages, including state-level license information. Visit their website at 
https://accd.vermont.gov/
or by phone at (802) 828-5202.


Check With Your City:


City-level requirements can differ based on location. You often need additional permits or licenses from your city government. Contact your city clerk’s office to learn about any city-specific requirements. For example, in Burlington, the largest city in Vermont, the Clerk/Treasurer’s Office can provide relevant information. They can be reached at (802) 865-7000.


Check With Your Country:


Certain businesses, especially those in regulated sectors such as broadcasting, aviation, or alcohol sales, may need federal permits. For federal permits and licenses, check the U.S. Small Business Administration’s (SBA) guide to federal business licenses and permits at


https://www.sba.gov/business-guide/launch-your-business/apply-licenses-permits

.Check With Your County:

County-level permits are less common than city and state-level ones, but they can be relevant in certain situations. Check with your county’s administration to determine whether additional permits are required. In Chittenden County, for example, you can reach the county clerk’s office at (802) 863-3467.

How do I learn about any special permits I need for my business? 

The requirements for special permits or licenses can vary greatly depending on your business activities. Some resources that can help you determine your needs include your local Chamber of Commerce, the Vermont Department of Economic Development, and industry-specific associations.

Vermont’s Small Business Development Center is also an excellent resource for guiding startups and operating a business in Vermont. Additionally, consider consulting with a business attorney or advisor to ensure you have all the necessary permits and licenses to run your business in compliance with Vermont regulations and business laws.
https://www.vtsbdc.org/

Financing Options for Entrepreneurs in Vermont

Starting a business often requires financial investment. While some entrepreneurs might rely on personal assets and credit cards, it’s also good to know other financing options that are available. Securing proper funding helps your business get off the ground and fosters growth and stability.

Financing a New Business

Financing is a critical component of any new business. It allows a business to move from concept to reality and sustains operations as it grows. Funding can come from various sources, including grants from local or state governments and investments from venture capitalists or angel investors. Doing thorough research on potential funding sources is key to finding the best fit for your business’s needs and goals.

SBA Loans and Microloans

The U.S. Small Business Administration (SBA) offers various loan programs to support small businesses. Among these programs is the Microloan program, which provides smaller, short-term loans that offer immediate access to funds for small businesses. These microloans can be a lifeline for businesses needing flexible, accessible financing. For more information, visit


https://smallbusinessplans.com/sba-microloans-for-small-businessess-and-startups/

.

SBA Microlenders in Vermont

Here are some SBA Microlenders in Vermont:


Community Capital of Vermont

100 State St #300, Montpelier, VT 05602 

Phone: (802) 479-0167 

Website:


https://communitycapitalvt.org/


Opportunities Credit Union

92 North Ave, Burlington, VT 05401 

Phone: (800) 865-8328 

Website:


https://www.oppsvt.org/


Vermont Community Loan Fund

15 State St #101, Montpelier, VT 05602 

Phone: (802) 223-1448 

Website: https://www.investinvermont.org/

State and Local Grants and Incentives

Vermont offers several state and local grants and incentives to help small businesses grow.

  1. Vermont Economic Development Authority (VEDA)
    VEDA offers a variety of financial assistance programs, including grants and loans, to help Vermont businesses expand. You can visit their website at

    https://www.veda.org/

    or contact them at (802) 828-5627.
  2. Vermont Employment Growth Incentive (VEGI)
    VEGI provides cash payments to businesses that plan to grow jobs in Vermont and make investments that enhance the community. For more information, visit

    https://accd.vermont.gov/economic-development/funding-incentives/vegi
    .

Angel Investor Groups

Angel investors are individual investors or groups of individuals who provide capital for startups in exchange for equity or debt. They can be an essential source of early-stage financing and often bring valuable experience and advice to new ventures.

In Vermont, the Vermont-based FreshTracks Capital is an active venture capital firm with an angel investor network. They focus on early-stage technology companies and can be a valuable resource for entrepreneurs seeking funding. Their website is


https://www.freshtrackscap.com/

.

Another excellent resource is LaunchVT, a community-driven program that supports entrepreneurs through pitch competitions, mentorship, and seed capital. More information can be found on their website at


https://launchvt.com/

.

Engaging with these groups can provide potential financing and vital mentorship and guidance for new businesses.

Benefits of a Well-Structured Business Plan

Two boys rushing to school in Jericho, Vermont.A well-structured business plan is indispensable for starting a business in Vermont. A comprehensive plan serves as a roadmap that outlines your business’s operational and financial goals and the specific steps you will take to achieve them. This planning process is especially beneficial in Vermont, which has a diverse economic landscape ranging from agriculture to tech startups. A solid business plan can help entrepreneurs identify their niche within this varied market and align their strategies accordingly.

Additionally, Vermont offers many resources for small businesses, from financial incentives to networking events. A detailed business plan can help entrepreneurs make the most of these opportunities by clarifying their needs and objectives. For example, businesses seeking funding from Vermont-specific loan programs or grants must demonstrate a feasible plan for using those funds effectively.

To execute a proper business plan in Vermont, businesses should thoroughly research the local market, set realistic goals, and develop a clear strategy for meeting those goals. The Vermont Small Business Development Center (VtSBDC) is a valuable resource for businesses during this process, providing expert advice and guidance on business planning.

Meeting Lender and Investor Expectations

Meeting lender and investor expectations are essential to obtaining the necessary funding for your business. Lenders and investors want to ensure that their investment is safe and that your business has a high potential for success. Therefore, they will often expect a detailed business plan, a strong management team, a clear market strategy, and a thorough understanding of the competitive landscape.

To meet these expectations, it’s crucial to present a well-researched and professional business plan that outlines your business’s goals, strategies, and financial projections. Moreover, demonstrating your understanding of the business’s financial metrics and marketplace can reassure lenders and investors of your ability to manage the business successfully.

Open communication with your investors and lenders fosters a strong working relationship. Regularly updating them on the business’s progress, challenges, and financial health can build trust and confidence in your leadership.

Business Plan Templates and Resources

Where Can I Find a Mentor to Help Me Succeed?

Experienced mentors, well-versed in Vermont’s diverse business ecosystem, can provide priceless guidance, insights into the industry, and practical strategies tailored for success in the state. Vermont boasts a robust network of organizations and resources dedicated to nurturing its entrepreneurial community. Let’s explore some valuable options:

Vermont SCORE:

A part of the U.S. Small Business Administration (SBA) network, Vermont SCORE is a superb source of complimentary business mentoring. Additionally, they conduct cost-effective workshops and offer an array of tools and resources that support businesses at various stages of growth.  Contact Info: Phone: (802) 879-8790.  Website:https://champlainvalley.score.org/

Vermont SBDC:
Offering services like business plan assistance and financial analysis, Vermont Small Business Development Centers (SBDC) is a useful asset for new and existing businesses. Contact Info: Phone: (802) 728-9101  Website:http://www.vtsbdc.org/

Vermont Center for Emerging Technologies (VCET):

With a focus on encouraging innovation and growth, VCET offers startups a robust platform for development, with programs and events crafted to motivate and equip them. Contact Info: Phone: (802) 656-3880 .  Website:
https://vcet.co/

LaunchVT:
An advocate for Vermont’s entrepreneurial community, LaunchVT provides education opportunities and fosters connections to fuel business growth and success. 

Contact Info: Email: info@launchvt.com.  Website: https://www.launchvt.com/

By tapping into these resources, entrepreneurs can gain essential knowledge and support to navigate Vermont’s dynamic business environment effectively.

The Economy of Vermont

Starting a business in Vermont requires a solid understanding of the state’s economic landscape. Grasping economic trends, consumer behavior, and potential growth opportunities can provide a significant advantage. A robust economy often sets the stage for new businesses to prosper.

Economic Overview

Average Household Income

The median household income in Vermont is approximately $67,674. While this might be slightly lower than the national average, Vermont’s diverse demographics and steady economy make it a promising venue for starting a business.

Average Level of Education

A substantial portion of Vermont’s population aged 25 and over, about 92.3%, have completed high school. Furthermore, around 36.8% hold a bachelor’s degree or higher. This data points to a well-educated workforce in the state, which could be advantageous for businesses needing skilled personnel.

Consumer Spending per Capita

The measured personal consumption expenditures (PCE) in Vermont amount to $47,105. Even though this might be lower than in some states, it represents significant consumer spending. The gradual increase in PCE over time suggests a rising demand, offering potential revenue opportunities for businesses.

Being aware of these economic factors can help entrepreneurs make informed decisions that meet the demands of the Vermont market. Consequently, carrying out comprehensive economic analysis and developing a robust business strategy that aligns with these trends is crucial.

Top Industries in Vermont:

Vermont is characterized by various thriving industries contributing to its economic health. Manufacturing is one of Vermont’s key industries, with significant contributions from computer and electronic product manufacturing. These sectors together generate more than 30% of the state’s gross domestic product, making them central to Vermont’s economy.

Another leading industry in Vermont is the healthcare sector. With over 34,000 jobs, healthcare services are a major source of employment, accounting for about 11% of the state’s total work. High-quality hospitals and health institutions make Vermont a hub for healthcare professionals and services.

Tourism also plays a critical role in Vermont’s economy. The state attracts millions of tourists yearly with its picturesque landscapes, ski resorts, and iconic fall foliage.

Education is another influential sector in Vermont, with the state home to prestigious institutions like the University of Vermont. These educational institutions contribute to the economy through employment and shape Vermont’s skilled workforce, attracting businesses in need of qualified employees.

Looking to the future renewable energy is an emerging industry in Vermont. The state has set ambitious goals to achieve 90% renewable energy by 2050, creating numerous opportunities for businesses in the renewable energy sector. The tech industry, too, shows promising growth potential, with Vermont actively promoting tech-based startups and innovation. This focus on future sectors indicates that Vermont has a dynamic and evolving business environment poised for continued growth and diversification.

  1. Identify Complementary Businesses:
    In Vermont, identifying businesses that complement your own can foster mutual growth and open new market opportunities. For instance, a farm-to-table restaurant might partner with local farms for fresh produce, supporting the local agriculture industry and offering unique, locally-sourced dishes to its customers. Such collaborations can help businesses expand their reach, improve product offerings, and strengthen their position in the Vermont market.
  2. Leverage Workforce Talent:  Vermont’s workforce is known for its high education and skill level. Businesses can leverage this talent to drive innovation and enhance productivity. From tech startups tapping into the pool of graduates from Vermont’s colleges and universities to manufacturing firms benefiting from experienced local craftspeople, using the state’s human resources can give your business a competitive edge.
  3. Collaborate with Industry Leaders:
    Collaborating with industry leaders in Vermont can provide your business with strategic advantages. Industry leaders can offer valuable insights into market trends, regulatory challenges, and growth opportunities. Whether participating in local business associations, attending industry-specific events, or seeking mentorship from established entrepreneurs, these collaborations can significantly contribute to your business’s success in Vermont’s dynamic economic landscape.

Workforce and Talent

As you strategize for your business in Vermont, it’s crucial to consider the state’s labor market and talent pool. Understanding the demographics, educational attainment, and workforce skill sets can guide your recruitment plans and growth strategies.

Unemployment Rate

Vermont’s economy is richly diversified, encompassing healthcare, education, tourism, and manufacturing sectors. According to recent data, the unemployment rate in Vermont is approximately 2.1%, indicating a robust job market. This statistic provides businesses with a gauge of the labor pool available in the state.

Minimum Wage

The minimum wage in Vermont stands at $13.18 per hour, which is higher than the federal minimum wage. This figure is essential for businesses when formulating financial projections and setting employee wage structures.

Average Age and Demographics

The median age in Vermont is around 42.9 years, indicating a mature and experienced workforce. The gender breakdown in the state is roughly equal, with females making up approximately 50.7% of the population and males representing about 49.3%. Gaining insights into these demographics can help businesses tailor their offerings to cater to the unique needs of different demographic groups in Vermont.

Breakdown of People with Various Levels of Education 

Focusing on the population aged 25 and above in Vermont, the education level is as follows:

  • 36.8% hold a bachelor’s degree or higher.
  • 92.3% have a high school diploma or equivalent.
  • 7.7% have no high school diploma.

These educational attainment statistics are important for businesses in Vermont. They can guide strategic hiring decisions and ensure the recruitment of talent best suited to the specific business needs within the state.

Top Areas of Skilled Workers for Residents of Vermont

In Vermont, several sectors are vibrant with opportunities for skilled workers. Each industry presents unique opportunities for residents, allowing them to utilize their talents in different yet impactful ways.

The Healthcare sector, which includes positions in hospitals, outpatient care centers, and nursing homes, is a key area of employment for Vermont residents. As the demand for healthcare services continues to grow, particularly given the state’s aging population, this sector offers a variety of roles for skilled workers. From medical practitioners to healthcare administrators, there’s a vast range of opportunities for those with appropriate qualifications and interests in this field.

Another area is the field of Education. With a network of respected public and private schools, colleges, and universities, Vermont provides plentiful opportunities for educators at all levels. Professionals in this sector can find roles in teaching, administration, counseling, and other support services. Moreover, the state’s focus on education reform and development signifies future growth in this sector.

Advanced Manufacturing is also a significant sector in Vermont, offering opportunities for those with mechanical and electrical engineering skills and related fields. As the industry continues to embrace innovative technologies, skilled workers with a background in STEM (Science, Technology, Engineering, and Mathematics) are in high demand.

The Tech industry, particularly in software development and cybersecurity, is an emerging sector in Vermont. The state is home to many tech startups, offering opportunities for software engineers, data analysts, cybersecurity experts, and other tech professionals.

Lastly, the Green Energy sector in Vermont is also flourishing, focusing on renewable energy sources and energy-efficient technologies. This sector provides opportunities for individuals with skills in environmental science, engineering, and other related disciplines.

Overall, Vermont offers a wide array of opportunities for skilled workers. Its diverse economy means that professionals from all backgrounds and areas of expertise can find fulfilling and meaningful employment in the state.

You Can Write a Great Business Plan - cover of 60 page booklet

Ready to complete your business plan in just 1 day?

Click GET STARTED to learn more about our fill-in-the-blank business plan template.  We'll step you through all the details you need to develop a professional business plan in just one day!

Successfully used by thousands of people starting a business and writing a business plan.  It will work for you too!