How to Incorporate in West Virginia vs.
How to Start a West Virginia LLC
A Guide to Choosing the Best Business Entity in West Virginia
Have you dreamed of starting a business in West Virginia, but not sure if you should form an LLC or start a corporation? Active Filings has the guide for you! We’ll walk you through the advantages and disadvantages of incorporating or forming an LLC in West Virginia. Throughout this state-specific corporation and LLC formation guide, you’ll discover exactly how to form either an LLC or corporation in West Virginia, and learn the disadvantages and advantages of each business type.
Sure you can sign up with a more expensive company managed by hedge fund billionaires where you’ll just be a number, or you can choose Active Filings, a small company like yours. Our professional staff will ease you through the business formation process, and pretty soon you’ll see why Active Filings is America’s most reliable business incorporation service.
LLCs vs. Corporations
Ease of maintenance
The simple fact that LLCs require less maintenance is the leading reason why many new business owners choose LLCs over corporations. Corporations involve holding annual meetings, directors meetings, resolutions, meeting minutes, and maintaining a significant amount of paperwork. LLCs require little to no maintenance by comparison. Unlike corporations, LLC members and owners can make executive decisions whenever necessary and seldom need resolutions.
Desired tax structure
By default, corporations are taxed as C corps. When the net income is taxed and profits are distributed to the shareholders (owners), the distributions are taxed again as personal income, resulting in double taxation. This aspect of corporations may seem negative, but this structure can provide positive advantages, as well, such as reinvesting profits into the company. LLCs are considered “pass-through” entities, where profits are passed directly onto the owners and members and taxed as personal income, making your life a bit easier come tax time.
Investors love the corporate structure. With a corporation they can buy shares of the company, and receive dividend payments, as well as increased value for their stock as the company grows and becomes more profitable. Some investors, such as venture capital funds, can’t invest in pass-through companies such as LLCs, because the particular venture capital fund has tax-exempt partners that can’t receive active trade or business income due to their tax-exempt status. If the business has an active trade or business in other states, passive investors may become subject to income tax in those other states. A similar thing happens when non-US persons invest in US LLCs. This is a major turn-off for investors.
Another thing to consider is prestige. According to the IRS, at over 2.5 million and counting, LLCs are the fastest growing entity in the US. They are almost universally considered an excellent vehicle for starting a small business, and yet one of the drawbacks is that a business with an LLC attached to the title just doesn’t hold the same prestige as a company with an Inc. Inc. just sounds official, but as noted above, LLC’s are quickly gaining in popularity, and their ease of use and ease of formation may soon overtake the corporation as most popular entity.
WV LLCs vs. WV Corporations
The US is a big country and each state treats LLCs and corporations different. While we’ve already investigated three general areas where LLCs and corporations differ, allow us to dig a bit deeper with regards to how West Virginia treats both entities.
Are you a veteran? Is your business partner? For LLCs, if you meet the criteria listed in the West Virginia Code §59-1-2a and attach a Veteran Affairs Form to your Articles, some of your state filing fees will be waived. For corporations, if you meet the qualifications of a veteran-owned business, your registration fee will be waived (a $100 savings), as well as your first four Annual Report fees (also a $100 savings).
Flat Corporate Tax
West Virginia taxes corporations at a flat rate of 7.75%, which means only 19 states tax corporations at a higher rate. However, a flat tax does have it’s benefits.A flat tax has one tax rate, which means that every business carries the same responsibility, and not one single entity is unduly burdened by being in a higher tax bracket. Some economists feel that a flat tax helps to reduce tax preparation costs by eliminating multiple layers of government bureaucracy, while also encouraging economic growth.
West Virginia has one of the lowest property taxes in the country. The state ranks 44th in property taxes, with an average effective property tax rate of 0.59%. That rate is also about half the national average. Low property taxes are good for businesses. The money they save can be used to hire more employees or invest and expand the business.
West Virginia’s top rate of 6.5% hits incomes of over $60,000. Compared to some nearby states like New Jersey, Maryland, and Virginia, who tend to offer more favorable taxation for those that hit the $60k threshold.
West Virginia LLC or West Virginia Corporation? Final Answer.
The West Virginia LLC takes the cake by giving you everything you need in terms of keeping you and your property safe from lawsuits, but legally defined enough by the state to run as an income producing entity. If you want to take your company public and attract investors, you’ll want to incorporate, but the LLC is perfect for it’s flexibility, and the way in which it allows small businesses superior protection without all the tedious paperwork.
How to Incorporate in West Virginia
For $130.68 (or pay an extra $25 for a 1 day expedited filing option for a total of $155.68) you can file your West Virginia Articles of Incorporation with the state’s Business Division. You can file the document online, by mail, by fax, or by email. As with everything in life, nothing is simple, and you’ll need to complete several additional steps before your corporation is ready to do business. If you choose Active Filings, we’ll make sure the process of incorporation is as painless and straightforward as possible.
Your West Virginia Articles of Incorporation must include the following details:
Your name must include “Corporation,” “Company,” “Incorporated,” “Limited” or an abbreviation for one of these words. Tip: Most corporations keep it short and sweet with “Corp” or “Inc.”
How to Start an LLC in West Virginia
To start an LLC in West Virginia, you must file Articles of Organization with the Business & Licensing Division. You can file the document online, by mail, in person, by fax, or even by email. It costs $130.68 (or pay an extra $25 for a 1 day expedited filing option for a total cost of $155.68) to file your West Virginia Articles of Organization.
Your name must include “Limited Liability Company” or an abbreviation. Tip: Most businesses keep it short and sweet with “LLC.”
WV Annual Report Requirements
What is the Annual Report?
WV Code §59-1-2a requires organizations registered through the West Virginia Secretary of State to file an annual report, and pay the annual report $25 filing fee between January 1st and July 1st of each year following the calendar year in which the business was registered with the Office of the Secretary of State. Charities pay $15 to $50 depending on their revenue.
When do I need to file?
July 1st is the due date. Failure to file by the July 1st deadline may result in monetary penalties as well as administrative dissolution or revocation.
How do I file?
West Virginia encourages business owners to file their company’s annual report through the it’s One Stop Business Portal. Online filing saves time and provides immediate and “accurate integration of customers’ updates into the Secretary of State’s database.” You will also receive an electronic confirmation when any business filing is approved by our office. Or, hire Active Filings and we’ll make sure all your paperwork is filed on time.
West Virginia Business Taxes
Let’s be honest, taxes are like Lima beans. Not everyone enjoys them. They are, however, an integral part of successfully doing business in America. While we’re not tax professionals, we definitely will do our best to try and explain what kind of taxes your business will be expected to pay.
Corporations: The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This is what we mean when we say corporations face “double taxation.” If you are forming a corporation, you’ll want to pay attention to not only the state’s corporate tax, but also it’s income tax rate, as you will be on the hook for both.
LLCs: For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity. One of the most significant benefits of an LLC is that of pass-through taxes. LLC owners don’t have to file a corporate tax return. An owner simply reports their share of profit and loss on their individual tax return. This prevents double taxation, your business paying taxes and you paying taxes. It should be noted that an LLC can elect to be taxed as a corporation under Subchapter C, by filing IRS Form 8832 (Entity Classification Election), or as a corporation under Subchapter S by filing IRS Form 2553 (Election by a Small Business Corporation).
What if my LLC has more than one member?
As with a single member LLC, the IRS will view your multi-member LLC as a pass-through entity for tax purposes. It will also designate you as a partnership, which means each member will have to file Ia Return of Partnership Income form (IRS Form 1065). This document lets the IRS check and make sure each owner is reporting their income properly. Beyond that, each LLC owner will attach a Schedule K-1 (Partner’s Share of Income, Deductions, Credits, etc.) to their Form 1040. This form shows the IRS each member’s share of the LLC’s profits and losses.
Here’s a tip: If your LLC is going to have more than one member, it would be a good idea to draw up a simple operating agreement. Most states don’t require an LLC to have one, but with so many cooks in the kitchen, you’ll want clear documentation with regards to ownership percentage, voting rights, distribution of profits and losses, as well as rules for buying out a member. You won’t be require to file the agreement, but it should be signed by each member and kept with the LLC’s important documents.
Beyond the basic information you’ll also need:
• payroll documents
• bank and credit card and interest statements
• accounting documents
• partnership agreements
• depreciation schedules
• gross receipts
What’s the West Virginia corporate income tax rate?
West Virginia has a flat corporate income tax rate of 7.75%.
What’s the personal income tax rate in West Virginia?
$0 – $10,000 3.00%
$10,000 – $25,000 4.00%
$25,000 – $40,000 4.50%
$40,000 – $60,000 6.00%
What tax forms do I need to file?
Corporations file Form CNF-120
Partnerships file Form 502
LLCs file Form Form IT-140
When are my tax returns due?
West Virginia corporation tax returns are due by the 15th day of the 3rd month following the end of the tax year. For calendar year filers (January to December), this date is March 15th. If you cannot file on time, you can get a West Virginia tax extension.
What if I need an extension?
The State of West Virginia recognizes the Federal tax extension (IRS Form 7004). If you have a valid Federal extension, you will automatically be granted a corresponding West Virginia tax extension for the same amount of time. A Federal extension gives you 6 extra months to file, which means that the deadline for filing your West Virginia tax return will be extended to September 15th for calendar year filers.