How to Start an S Corp in West Virginia
West Virginia has a lot to offer visitors, residents, and entrepreneurs. With a picturesque mountain backdrop, a low cost of doing business, and a central location to many of the major markets, West Virginia is an attractive place to start a business in the United States.
Deciding how to structure your business can seem complex and overwhelming given the various impacts of each option. By forming your business in West Virginia as an S corporation (S corp), you could save your business a lot of money come tax season. This guide will walk you through the process of forming your S corp in West Virginia and what you must do to stay compliant.
Not in West Virginia? Check out our other How to Start an S Corp guides to learn more.
We recommend using a professional formation service like Northwest to get your S corp up and running in no time.
Factors to Consider Before Starting an S Corp in West Virginia
Before forming an S corp, you have to consider the following factors:
- Is an S corporation the best strategy for your business?
- S corporation restrictions
- Are S corp tax advantages right for you?
Is an S Corporation the Best Strategy for Your Business?
For help with choosing the right structure for your business, visit our Choosing a Business Structure guide.
S Corporation Restrictions
S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read our What Is an S Corporation guide for full details.
Are S Corp Tax Advantages Right for You?
An S corporation is a tax designation that can be elected by an LLC or corporation. With an S corp, business owners are considered employees of the company and must receive a reasonable salary. Since all S corps technically have employees, the s corp must run payroll.
In order to benefit from a West Virginia S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take large distributions in addition to their salary.
How to Form a West Virginia S Corp
There are two main ways to start an S corp:
- By forming an LLC and electing S corp tax status from the IRS when you request your employee identification number (EIN)
- By forming a corporation and electing S corp status from the IRS
We recommend forming an LLC because it’s simpler and more cost-effective.
Recommended: If you have an existing LLC, visit our How to Convert an LLC to S Corp guide.
Steps for Forming an LLC and Electing S Corp Status in West Virginia
Starting a West Virginia LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider like Northwest to guide you through this process.
There are five basic steps to start an LLC and elect S corp status:
Step 1: Name Your LLC
Step 2: Choose a Registered Agent
Step 3: File the Articles of Organization
Step 4: Create an Operating Agreement
Step 5: Get an EIN and File Form 2553 to Elect S Corp Tax Status
Step 1: Name Your LLC
Choosing a company name is the first and most important step in starting your LLC in West Virginia.
Be sure to choose a name that complies with West Virginia naming requirements and is easily searchable by potential clients.
1. Follow the naming guidelines for a West Virginia LLC:
- Your name must include the phrase “limited liability company” or “limited company” or one of their abbreviations (LLC, L.L.C., LC, or L.C.). "Limited" may be abbreviated as "Ltd." and "company" may be abbreviated as "Co."
- Your name cannot include any of the following: incorporated, corporation, company, limited, inc., corp., co., or ltd.
- Your name cannot contain any word or phrase that implies that the LLC is organized for any purpose other than the one stated in its articles of organization.
- The terms “banking” and/or “insurance” cannot be used in the business name if the business activity does not include “banking” and/or “insurance.”
- Words such as “engineer” or “engineering” may only be used if the purpose is to practice professional engineering and one of the principals is a registered West Virginia professional engineer.
- Some other licensed professions have specific requirements and prohibitions.
- Your name cannot include “911.”
- Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
- Your name must be distinguishable from any existing business in the state. This includes West Virginia reserved names.
You can also read the West Virginia state statute about LLC naming guidelines for more information.
2. Is the name available in West Virginia? Make sure the name you want is available by doing a business organization search on the West Virginia Secretary of State website.
3. Is the URL available? We recommend checking to see if your business name is available as a web domain. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.
Find a Domain Now
Step 2: Choose Your West Virginia Registered Agent
You must elect an agent for service of process, also known as a registered agent, for your West Virginia LLC.
An LLC registered agent will accept legal documents and tax notices on your LLC's behalf. You will list your registered agent when you file your LLC's Articles of Organization.
Many business owners choose to hire a registered agent service. Many of these services will form your LLC for a small fee and include the first year of registered agent services for free.
Step 3: File the West Virginia LLC Articles of Organization
The West Virginia Articles of Organization is used to officially register an LLC.
File Your West Virginia Articles of Organization
OPTION 1: File Online With the West Virginia Secretary of StateFile Online
- OR -
OPTION 2: File Form LLD-1 by Mail, by Fax, by Email, or In PersonDownload Form
State Filing Cost: $100, payable to the Secretary of State (Nonrefundable)
One-Stop Business Center
1615 Washington St. E.
Charleston, WV 25311
North Central WV Business Center
200 W. Main St.
Clarksburg, WV 26301
Eastern Panhandle Business Center
229 E. Martin St.
Martinsburg, WV 25401
Fax: (304) 558-8381
Step 4: Create an LLC Operating Agreement
An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC.
For more information, read our West Virginia LLC Operating Agreement guide.
Our operating agreement tool is a free resource for business owners.
Step 5: Get an EIN and Complete Form 2553 on the IRS Website
An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business.
EINs are free when you apply directly with the IRS.
If you are filing your LLC online, getting an EIN is included in the registration process on the WV One Stop Business Portal.
Elect S Corp Tax Status
During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form.
Visit our Form 2553 Instructions guide for detailed help with completing the form.
This is the form to elect S corp tax status for your LLC:
Keep Your West Virginia S Corp Compliant
After you successfully elect S corp status for your business, it’s important to keep it in good standing with West Virginia’s state laws and guidelines. Part of remaining in good standing involves paying the required state and local taxes as well as filing an annual report.
West Virginia S Corp Annual Report
Annual reports help to keep your business records updated while providing details on any changes your business experienced in the past year.
Your business must file an annual report with the West Virginia Secretary of State between Jan. 1 and June 30 of every year following the year you formed your business. Failure to meet this deadline may result in fees and penalties, including the possible dissolution of your business.
Visit our West Virginia Annual Report guide for a step-by-step overview of the filing process.
West Virginia S Corp Taxes
S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from their reasonable salary and distributions, and West Virginia S corp owners can expect to pay the following taxes:
Federal Self-Employment Taxes
Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.
Federal Income Taxes
Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.
West Virginia Income Taxes
West Virginia has a graduated state income tax that ranges from 3% to 6.5%, and some local municipalities also collect their own income taxes. A graduated income tax can benefit businesses that elect S corp status because the less income they earn, the lower the percentage of income tax they’ll have to pay.
West Virginia Sales and Use Tax
This state may require your business to file for and pay additional taxes. The West Virginia Tax Division outlines several state-specific taxes, including:
- Beer/Wine Tax
- Tobacco Tax
- Soft Drink Tax
- Hotel Occupancy Tax
- Severance Tax
Visit the West Virginia Tax Division website for more information.
West Virginia Local Taxes
The taxes you must pay may vary, depending on your business’s location. Whether you open your business in Huntington, Charleston, or one of the state’s smaller cities, remember to check with the local government to ensure you understand the requirements to stay in good standing.
Start a West Virginia S Corp FAQ
No. The default taxes for an LLC and taxes for an S corp are not the same.
With an S corp, owners pay personal income tax and self-employment tax on a predetermined salary. They may then withdraw any remaining profits from the business as a “distribution,” which isn’t subject to self-employment tax.
With an LLC, all company profits pass through to the owners’ personal tax returns, and then the owners must pay personal income tax and self-employment tax on the entire amount.
S corp owners are required to earn a “reasonable” salary, which basically means a fair market rate based on the individual’s qualifications as well as their duties and responsibilities at the company. The purpose of this requirement is to prevent S corp owners from paying themselves an artificially low salary in order to pay less self-employment tax.
A distribution is a dividend that a shareholder/owner can take from the business profits that remain after a company pays all of its employee salaries. Shareholders must pay personal income tax on distributions, but distributions aren’t subject to self-employment tax.
West Virginia is home to many major industries, including aerospace, telecommunications, manufacturing, and more. You can save money on your taxes by electing S corp status for your business regardless of its industry. You just need to ensure your business meets the requirements of the S corp tax designation.
You may benefit from starting your business as an S corp in West Virginia. With the state’s graduated income tax and incredibly low cost of doing business, S corp status can save you money that you can then reinvest in your business to help drive growth.