Virginia LLC Taxes: Form 502, the Pass-Through Entity Tax and Estimated Payments

The short answer: Virginia has no separate LLC income tax. A single-member LLC is disregarded for tax purposes, so its income goes on the owner's return. An LLC with two or more members is a pass-through entity that files Virginia Form 502. Optionally, the entity can use Form 502PTET to pay tax at 5.75 percent at the entity level instead of each owner paying individually. This is the Virginia LLC tax return guide you need before your first tax year closes, and it covers the filing steps, the deadlines and the rules most new owners miss.

Which Virginia return does your LLC file?

Virginia Tax treats the following as pass-through entities: S corporations, general and limited partnerships, LLPs, LLCs, electing large partnerships and business trusts. Individual trusts, individual estates, investment pass-through entities and single-member LLCs are not pass-through entities for Virginia purposes.

• Single-member LLC (disregarded for tax): Reports on the owner's return. Federally, the income goes on Schedule C. For Virginia, it goes on the owner's individual return.
• Multi-member LLC: Files federal Form 1065 and Virginia Form 502.
• C corporation: Files Virginia Form 500. Form 500 is the C corporation return, not an LLC form. A C corporation pays a flat 6 percent under Va. Code 58.1-400.

If your LLC has one owner, you do not file Form 502 at all. The entity-level filing begins only when a second member is admitted. If you change ownership partway through a year, confirm with a CPA how the change affects that year's filings.

Individual owners pay Virginia income tax at these rates: 2 percent on the first $3,000, 3 percent to $5,000, 5 percent to $17,000, and 5.75 percent above that (Va. Code 58.1-320). Those rates apply to the owner's share of Virginia income, whether the entity files Form 502 or the owner reports on the individual return.

Form 502 deadlines, extensions and penalties

Form 502 is due on the 15th day of the fourth month after the tax year ends. For a calendar-year entity, that is April 15. If the date falls on a weekend or holiday, the due date moves to the next business day.

Virginia grants an automatic six-month filing extension with no application required. For a calendar-year return, that means the filing is timely through October 15. The extension does not extend the payment date for withholding tax. Withholding tax is paid with Form 502W by the original due date, even if you file late.

The penalties that catch most entities are these:

• Extension penalty: 2 percent per month, up to 12 percent, when less than 90 percent of the withholding tax was paid by the original due date.
• Late payment penalty: 6 percent per month, up to 30 percent.
• Late filing penalty: Up to $1,200 if the return is filed after the extended due date.

Penalty rules change, so check the Form 502 instructions for the current penalty rules before you rely on these figures. The forms and instructions are published by Virginia Tax at https://www.tax.virginia.gov/.

Nonresident owners: withholding or a composite return

If your LLC has owners who live outside Virginia but earn Virginia-source income from the entity, the entity has two options.

1. Withhold tax for nonresident owners. The entity withholds Virginia tax on their share and reports it on Form 502W. Check the Virginia Tax pass-through entity withholding guidelines for current rates and exceptions. Do not assume a rate without confirming it.
2. File a composite return on Form 765. This option is available when two or more qualified nonresident owners are involved. A qualified owner is a natural person who is a direct owner, is a nonresident, and has Virginia-source income from the entity. The composite tax is computed at the highest individual rate, 5.75 percent, without deductions or credits. Each participating owner signs a consent, and the entity makes estimated payments on their behalf.

A composite return does not replace Form 502. Your LLC still files Form 502 for the entity. Review the composite rules with a CPA before the first filing season.

The elective pass-through entity tax (Form 502PTET)

The pass-through entity tax (PTET) is an election, not a requirement. Under Va. Code 58.1-390.3, an entity may elect each year, on a timely filed return including any extension, to pay tax at 5.75 percent at the entity level. The election applies to the Virginia taxable income that belongs to eligible owners. Eligible owners are natural persons, estates and trusts subject to Virginia income tax.

Here is how the mechanics work:

• The return: Form 502PTET must be filed electronically. It follows the same April 15 original due date and six-month automatic extension as Form 502.
• Payment timing: The extension does not extend the payment date. Pay on time.
• Owner benefit: Each eligible owner claims a refundable credit equal to the tax the entity paid for that owner.
• Estimated payments: Entities must make estimated payments, usually quarterly, beginning with tax year 2023. Payments are made through the PTET payment eForm or by ACH credit. See Virginia Tax Bulletins 23-8 and 23-3 for the details.

The statute does not state an end year for the election. Older Virginia Tax instructions describe tax years 2021 to 2025, so verify the current-year instructions before you elect. Whether electing saves an owner money depends on that owner's federal deduction for state taxes, which varies by person and by year. Ask a CPA to run the numbers for your owners before you make the election.

For illustration only: if $200,000 of Virginia taxable income belongs to eligible owners, the 5.75 percent entity-level tax on that income is $11,500. Your actual figure depends on the taxable income that belongs to eligible owners, and the credit each owner claims depends on the tax paid for them.

Owner estimated tax payments

Individual owners pay Virginia income tax through estimated payments, which are due on different dates than the entity return. Individual estimated payments are due on May 1, June 15, September 15 and January 15 of the following year. They are not due on April 15.

• January exception: If you file and pay your full return by March 1, the January payment is excused.
• Required amount: Virginia expects at least 90 percent of the current year's tax to be paid during the year. Virginia Tax lists other exceptions, so check the current instructions if you think one applies.
• Electronic payment: Payments must be made electronically if any installment exceeds $1,500, if an extension payment exceeds $1,500, or if total liability exceeds $6,000.

Federal items that affect your LLC

Owners who actively work in the business generally owe federal self-employment tax at 15.3 percent. That is 12.4 percent for Social Security, applied up to the 2026 wage base of $184,500, plus 2.9 percent for Medicare. Self-employment tax is a federal obligation, separate from Virginia income tax. Confirm your federal treatment with a CPA, because the answer depends on how each owner participates.

Virginia taxes and fees that are not income tax

Several Virginia charges are often confused with LLC taxes. Keep them separate in your records:

• No state franchise tax: Virginia does not levy a franchise tax on LLCs.
• No state gross receipts tax: Virginia has no state-level gross receipts tax.
• Business license tax (BPOL): This is a local tax under Va. Code 58.1-3700 et seq., not a state tax. Virginia has no general statewide business license. Each locality decides whether it levies a general BPOL tax, and some do not, under Va. Code 58.1-3704. Localities set their own rates and filing deadlines. For a population-based minimum, a locality over 50,000 people cannot require a license for gross receipts under $100,000. A locality with 25,000 to 50,000 people cannot require one for gross receipts under $50,000, and no floor applies under 25,000. Localities over 50,000 may waive the license up to $200,000, but verify that ceiling with your Commissioner of the Revenue.
• $50 annual registration fee: This is paid to the State Corporation Commission. It is a fee, not a tax, and Virginia LLCs file no annual report.
• Sales tax: If your LLC sells taxable goods or services, the base state-plus-local rate is 5.3 percent. Regional-tax localities charge 6 percent, eight localities charge 6.3 percent, and the Historic Triangle charges 7 percent. The grocery rate is 1 percent. Register for a sales tax permit through Virginia Tax.

Your LLC needs a federal Employer Identification Number (EIN) before it can file most tax returns. Get the EIN before you open a business bank account and before you file any tax return.

Official Virginia resources

• Virginia Department of Taxation (Virginia Tax): https://www.tax.virginia.gov/
• Sales and use tax permits: https://www.tax.virginia.gov/sales-and-use-tax
• State Corporation Commission, Clerk's Office: https://www.scc.virginia.gov/businesses/
• SCC Clerk's Information System (CIS): https://cis.scc.virginia.gov/

Disclaimer: This article is informational content, not legal or tax advice. Tax rules, rates and deadlines change. Your LLC's situation may involve federal, Virginia and local rules that depend on facts not covered here. Consult a qualified CPA or attorney before you make an election, file a return, or rely on any figure in this guide.