How to Start an S-Corporation in West Virginia (2024 Guide)

Start an S-Corporation in West Virginia

If you want to start an LLC in West Virginia, there are things that you should consider. West Virginia is the home to a thriving business community, making it an attractive location for entrepreneurs. One popular business structure is the S-Corporation, which offers several tax and operational advantages. This comprehensive guide will explore the process of starting an S-Corporation in West Virginia, including the costs, steps, advantages, and disadvantages associated with this business structure.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before starting your S-corp, all the steps in this article must guide you.

What is an S-Corporation?

An S-Corporation is a type of corporation that elects to be taxed under Subchapter S of the Internal Revenue Code. This tax treatment allows S-Corporations to enjoy pass-through taxation, meaning the corporation’s income, deductions, and credits flow through to the shareholders, who report this information on their individual tax returns. This structure helps to avoid the double taxation experienced by C-Corporations.

An S corporation (S corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other companies. It’s a tax classification that might result in significant financial savings for corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

Limitations and Requirements of S-Corp

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

  • Be a domestic corporation.
  • Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
  • Have just one type of stock.
  • Have a maximum of 100 shareholders or members.
  • Have only permitted individuals, certain trusts, and estates as stockholders or members.

You can apply for an S-Corp in West Virginia if qualified for the limitations and requirements.

Recommended: We recommend a professional service that can launch an S-Corp whether you have plans to crowdfund or go public. We recommend using –

LegalZoom Starts at $149 + filing fees

How to Form an S-Corporation in West Virginia?

To create S-Corp in West Virginia, you must follow the below guidelines that include forming a business name, hiring a Registered Agent, filing your Articles of Organization, creating an operating agreement, requesting an EIN, and filing a form 2553.

Step 1: Register a Business Name in West Virginia

After you have decided on the idea to start an S-Corp in West Virginia, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up an S-Corp, there is a complete guide on West Virginia Business Name Search for a proper business name. Here are some guidelines you must follow while naming your S-corp.

  • Avoid profanities
  • The name should be available, and no other entity should have the same name in West Virginia.
  • Limit of restricted words that need a license in West Virginia
  • Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hire a Registered Agent

The next step in starting an S-corp in West Virginia is hiring a Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents (such as subpoenas), all notices of lawsuits, and other official government correspondence. Forming an LLC with an S-corp will be easier if you have Registered Agent in West Virginia.

However, if you would like to have an easier process in filing the necessary documents, you can get West Virginia Registered Agent Services.

We reviewed some of the Best Registered Agent Services and provided features as an add-on with their packages for you to check out.

LLC Service

Rating & Pricing

Top Features

Learn More

#1 Recommendation

$299 Per Year

  • Free LLC Formation

  • RA service in all states

  • Legal consultation

$125 Per Year

  • Flat price for RA service

  • LLC formation package

  • Fast service

Step 3: File For Articles of Organization

The Articles of Organization is an important document to start your limited liability company (LLC). West Virginia Articles of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. For the Articles of Organization to be filed in WV Secretary of State, you need to pay a filing fee of $100. In West Virginia, the filing fee of forming an LLC is $100 (Online & by mail).

Recommended: Filing formation papers is easy and hassle-free if you hire a professional service. We recommend using –

LegalZoom ($0 + State Fee)

Step 4: Creating an Operating Agreement

After you have filed your Articles of Organization, the next step is to create an operating agreement in West Virginia. The operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following:

  • Article I: Organization
  • Article II: Management and Voting
  • Article III: Capital Contributions
  • Article IV: Distributions
  • Article V: Membership Changes
  • Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure.

Step 5: Request for an EIN

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in West Virginia can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

If you would like to be assisted in getting an EIN in the Internal Revenue Service, LegalZoom can get your EIN for you. Their EIN service is quick and hassle-free. For more details about EIN for your business, check on how to apply for an EIN in West Virginia.

Recommended: With LegalZoom’s EIN service, obtaining your business’s crucial tax ID becomes a breeze, saving you time and effort by handling the complexities so you can quickly set sail on your entrepreneurial voyage. We recommend –

LegalZoom$79 (Standard Fee)

Step 6: File Form 2553 for your S-Corp Business

Once you have obtained your EIN and Articles of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or at most 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS.

In West Virginia, you can file your form 2553 in the Department of the Treasury Internal Revenue Service Center – Kansas City, MO 64999 Fax: 855-887-7734.

Costs of Forming an S-Corporation

There are several costs associated with forming an S-Corporation in West Virginia, including:

  1. Filing Fees: When forming a corporation in West Virginia, you must file Articles of Incorporation with the West Virginia Secretary of State and pay a filing fee of $25 for online and by mail filing.
  2. Statement of Information: After forming the corporation, you must file a Statement of Information (Form SI-550) within 90 days and pay a filing fee (currently $25). This statement must be filed annually after that.
  3. Franchise Tax: S-Corporations in West Virginia are subject to the annual franchise tax, which is the greater of a minimum tax (currently $800) or a calculated tax based on the corporation’s net income.
  4. Other Costs: Depending on the nature of your business, additional costs may include obtaining licenses and permits, registered agent services, and professional fees for legal and accounting services.

Advantages of Forming an S-Corporation

There are numerous advantages to incorporating an S-Corp, but you should be aware of certain problems. Consider the following benefits of an S corporation:

Pass-through Taxation

S-Corporations enjoy pass-through taxation, which helps to avoid the double taxation faced by C-Corporations. This can result in potential tax savings for shareholders. Pass-through taxation is a tax system where the income, deductions, and credits generated by a business entity, such as West Virginia General Partnership, limited liability company (LLC), or S-Corporation, are passed through to individual owners or shareholders instead of being taxed at the corporate level.

In this system, business profits and losses are reported on the owners’ or shareholders’ individual tax returns, and taxes are paid at their individual income tax rates. This avoids the issue of double taxation, which occurs in C-Corporations where income is taxed at both the corporate level and again when distributed to shareholders as dividends. Pass-through taxation is generally advantageous for small businesses and their owners, as it simplifies tax filings and often results in lower overall taxes.

Limited Liability Protection

Shareholders of an S-Corporation have limited liability protection, meaning their personal assets are protected from the corporation’s debts and obligations. Limited liability protection in an S-Corporation refers to the legal separation between the personal assets of the shareholders (owners) and the business assets, which protects shareholders from being personally responsible for the company’s debts and legal obligations.

In an S-Corporation, shareholders’ personal assets, such as their homes, cars, and personal savings, are not at risk if the business faces financial difficulties or lawsuits. The shareholders’ liability is limited to the amount they have invested in the company. This limited liability is a significant advantage of incorporating a business as an S-Corporation, as it provides a safeguard for the personal financial well-being of the business owners.

It is important to note that limited liability protection can only be supported if the shareholders maintain proper corporate formalities, such as keeping separate business and personal finances, holding regular shareholder meetings, and maintaining accurate business records. In such cases, courts may “pierce the corporate veil” and hold shareholders personally liable for the company’s debts and obligations.

Transferability of Shares

Shares in an S-Corporation are more easily transferable than those in an LLC, allowing for greater flexibility in ownership changes. Transferability of shares in an S-Corporation refers to the ability of shareholders to sell, gift, or otherwise transfer their ownership interest in the company to another person or entity. This is an important aspect of an S-Corporation’s structure, as it allows for flexibility in ownership and the potential for raising capital through the sale of shares.

However, there are certain restrictions on the transferability of shares in an S-Corporation, which are imposed by the Internal Revenue Service (IRS) to maintain the company’s eligibility for S-Corp status:

  • Shareholders: The number of shareholders in an S-Corporation is limited to a maximum of 100. Only individuals, certain trusts, and estates can be shareholders; other corporations and partnerships are generally not allowed.
  • Eligible Shareholders: Only U.S. citizens and resident aliens can be shareholders in an S-Corporation. Non-resident aliens are not allowed to hold shares.
  • One Class of Stock: S-Corporations can only have one class of stock. All shares must have the same rights and privileges, such as voting rights and distribution preferences. However, differences in voting rights are allowed if they are not tied to economic rights (e.g., distribution preferences).
  • Perpetual Existence: Perpetual existence refers to the concept that a business entity, such as an S-Corporation, can continue to exist indefinitely, regardless of changes in ownership or management. This means the corporation can outlive its original founders and shareholders and continue to operate even if individual shareholders pass away or decide to sell their shares.

This characteristic of an S-Corporation provides stability and continuity for the business, as it ensures that the corporation’s operations, contracts, and legal obligations remain unaffected by changes in ownership. It also makes it easier for the company to attract investors and raise capital. Potential investors can be confident that the business will continue to exist even if the original owners are no longer involved.

Disadvantages of Forming an S-Corporation

Despite these advantages, moving to an S corporation only sometimes makes sense – or at the very least, necessitates a thorough review of certain situations. The following issues may arise in particular:

Restrictions on Shareholders

S-Corporations are subject to specific restrictions, such as a maximum of 100 shareholders and limitations on the types of eligible shareholders (e.g., only individuals, certain trusts, and estates).

Single Class of Stock

S-Corporations are limited to issuing only one class of stock, which can limit flexibility in raising capital or creating different ownership structures. A single class of stock in an S-Corporation refers to the requirement that the corporation only issues one type of stock with equal rights and characteristics for all shareholders. This means that all shares of stock must have the same economic rights, such as dividend distribution preferences and liquidation rights, as well as voting rights. The single class of stock requirement is one of the key criteria the Internal Revenue Service (IRS) sets for a corporation to qualify for S-Corp status.

Increased Complexity

Forming and maintaining an S-Corporation requires more paperwork, record-keeping, and compliance with state and federal regulations than simpler structures like LLCs.

Franchise Tax

S-Corporations in West Virginia are subject to the annual franchise tax, which can financially burden some businesses.

In an West Virginia S-Corporation context, the franchise tax is usually based on the company’s income, net worth, or a combination of both. Since S-Corporations are pass-through entities for federal income tax purposes, meaning that their income is not taxed at the corporate level but rather passed through to individual shareholders, they may be exempt from or subject to lower franchise tax rates in some states than traditional C-Corporations.

However, S-Corporations must still comply with West Virginia franchise tax requirements, which may include annual filings and tax payments. It is crucial for S-Corporation owners to understand the specific rules and regulations in their state of operation and to consult with a tax professional to ensure compliance and minimize their tax.

FAQs

Can anyone form an S-corporation in West Virginia?
No, only legal US residents or citizens can form an S-corporation in West Virginia.
What is the minimum number of shareholders required to form an S-corporation in West Virginia?
There must be at least one shareholder to form an S-corporation in West Virginia.
Is there a limit on the number of shareholders for an S-corporation in West Virginia?
Yes, an S-corporation in West Virginia cannot have more than 100 shareholders.
Can an S-corporation in West Virginia have other corporations as shareholders?
No, S-corporations in West Virginia cannot have corporations, partnerships, or non-resident alien shareholders.
Can a non-profit organization be an S-corporation in West Virginia?
No, only for-profit businesses can form an S-corporation in West Virginia.
What are the costs of forming an S-corporation in West Virginia?
The filing fee for forming an S-corporation in West Virginia is $100.
Is it necessary to obtain any state licenses or permits to form an S-corporation in West Virginia?
Only certain businesses require licenses in West Virginia. It is best to consult the state authorities for any specific license requirements.
Do S-corporations in West Virginia need to file an annual report?
Yes, every S-corporation in West Virginia must file an annual report with the Secretary of State.
What is the due date for filing an S-corporation’s annual report in West Virginia?
Annual reports for S-corporations are due on the anniversary date of incorporation.
Is it necessary to file a tax return for an S-corporation in West Virginia?
Yes, S-corporations in West Virginia must file a federal tax return along with state tax returns.
What taxes does an S-corporation in West Virginia need to pay?
S-corporations in West Virginia need to pay federal income taxes and state income taxes.
Should West Virginia S-corporations register for a state sales tax permit?
Yes, if an S-corporation plans to sell taxable products in West Virginia, it is required to register for a state sales tax permit.
How does an S-corporation in West Virginia pay employees?
S-corporations in West Virginia can pay employees using various methods, such as direct deposit, check, or pay card.
Is worker’s compensation insurance required for S-corporations in West Virginia?
Yes, S-corporations in West Virginia with employees must have worker’s compensation insurance coverage.
Does an S-corporation in West Virginia need an EIN number?
Yes, S-corporations in West Virginia are required to obtain an EIN number for reporting taxes and other federal filings.
Can a foreign individual or entity form an S-corporation in West Virginia?
Yes, a non-resident who meets West Virginia’s requirements can form an S-corporation in West Virginia.
Can a single owner (or solo) form an S-corporation in West Virginia?
Yes, a single owner can form an S-corporation in West Virginia.
Does West Virginia allow S-corporations to have discounted stocks?
Yes, S-corporations in West Virginia have the flexibility to use different classes of stocks.
Does the state of West Virginia impose franchise taxes on S-corporations?
No, S-corporations in West Virginia are not taxed on their income by the state.
How much of West Virginia’s income tax applies to S-corporations?
S-corporations in West Virginia pay the same rates of West Virginia income tax as individuals.
What types of documents are required for forming an S-corporation in West Virginia?
The articles of incorporation and an S-election form are required to form an S-corporation in West Virginia.
Can legal software assist in forming an S-corporation in West Virginia?
Yes, online legal software may help in forming an S-corporation in West Virginia.
How long before an S-corporation becomes effective after filing in West Virginia?
It takes about five to ten business days for an S-corporation to become effective after filing in West Virginia.
Can S-corporation owners distribute business losses equally in West Virginia?
No, S-corporation owners cannot distribute business losses equally in West Virginia.
What happens to the assets of an S-corporation when it’s formally closed down in West Virginia?
The assets of an S-corporation are liquidated, bills are paid, and any remaining assets are distributed among shareholders when formally closed down in West Virginia.
Can an S-corporation in West Virginia change entity types?
Yes, an S-corporation in West Virginia can change entity types and choose to become an LLC or C-corporation.
Is it possible to operate an S-corporation in West Virginia from outside the state?
Yes, an S-corporation in West Virginia can be located anywhere and operate from any state in the U.S.
How can someone dissolve an S-corporation in West Virginia?
To dissolve an S-corporation in West Virginia, one must file articles of dissolution with the state’s Secretary of State.
Who can I contact for more information on forming an S-corporation in West Virginia?
The West Virginia Secretary of State is the best provider of information on forming an S-corporation in West Virginia and the one to contact.
How do I incorporate an S-corporation in West Virginia?
You can incorporate an S-corporation in West Virginia by filing your articles of incorporation with the Secretary of State.
What are the requirements for starting an S-corporation in West Virginia?
To start an S-corporation in West Virginia, you need to file articles of incorporation, have a registered agent in the state, and have the proper corporate structure.
Can an S-corporation be owned by non-US residents in West Virginia?
Yes, non-US residents can own an S-corporation in West Virginia.
What are the annual filing requirements for S-corporations in West Virginia?
S-corporations in West Virginia must file an annual tax return, an annual report, and other applicable tax forms.
How much does it cost to incorporate an S-corporation in West Virginia?
The filing fee for an S-corporation in West Virginia is $100.
What is the tax rate for S-corporations in West Virginia?
The tax rate for S-corporations in West Virginia is 6.5%.
How many shareholders can an S-corporation have in West Virginia?
S-corporations in West Virginia can have up to 100 shareholders.
What is the minimum number of shareholders required to incorporate an S-corporation in West Virginia?
There is no minimum number of shareholders required to start an S-corporation in West Virginia.
Can a West Virginia S-corporation do business outside of the state?
Yes, a West Virginia S-corporation can do business outside of the state.
What sort of liability protection is offered by an S-corporation in West Virginia?
S-corporations in West Virginia offer limited liability protection to their shareholders.
What is the tax status of an S-corporation in West Virginia?
An S-corporation in West Virginia is considered a pass-through entity for tax purposes.
What are the advantages of incorporating an S-corporation in West Virginia?
The advantages of incorporating an S-corporation in West Virginia include limited liability for shareholders and pass-through tax status.
What is the process for dissolving an S-corporation in West Virginia?
To dissolve an S-corporation in West Virginia, you need to file a statement of dissolution with the Secretary of State.
Can I use a PO Box as my S-corporation’s office address in West Virginia?
No, you must have a physical street address for your S-corporation’s office in West Virginia.
How long does it take to incorporate an S-corporation in West Virginia?
It can take up to 10 business days to incorporate an S-corporation in West Virginia.
What are the fees for filing articles of incorporation in West Virginia?
The filing fee for articles of incorporation in West Virginia is $100.
Do I need to hire an attorney to start an S-corporation in West Virginia?
No, you do not need to hire an attorney to start an S-corporation in West Virginia, but it is recommended.
How often are the annual reports due for an S-corporation in West Virginia?
The annual report for an S-corporation in West Virginia is due on October 1st of each year.
Can an S-corporation in West Virginia carry out activities that are not listed in its articles of incorporation?
Yes, as long as the additional activities are legal and not prohibited by law.
How often do I need to hold meetings of the Board of Directors for my West Virginia S-corporation?
You should hold regular board meetings at least once a year, but you can hold them as often as needed.
Can I have only one shareholder in my West Virginia S-corporation?
Yes, you can have only one shareholder in your West Virginia S-corporation.
Can a West Virginia S-corporation have a foreign corporation as a shareholder?
Yes, a West Virginia S-corporation can have a foreign corporation as a shareholder.
How much money do I need to invest to start an S-corporation in West Virginia?
There is no minimum investment required to start an S-corporation in West Virginia.
What types of businesses can be structured as S-corporations in West Virginia?
Any type of business can be structured as an S-corporation in West Virginia, as long as it meets the eligibility requirements.
Can I change my S-corporation’s name after it has been incorporated in West Virginia?
Yes, you can amend your S-corporation’s articles of incorporation to change its name in West Virginia.
Are there residency requirements for directors or officers of a West Virginia S-corporation?
No, there are no residency requirements for directors or officers of a West Virginia S-corporation.
How do I renew my West Virginia S-corporation?
You need to file an annual report and pay the filing fee to renew your WWest Virginia S-corporation.
Is West Virginia a good state to incorporate my S-corporation in?
West Virginia is a good state to incorporate an S-corporation in because of its low tax rate, affordable filing fees, and pro-business climate.

Also Read

Why You Should Start West Virginia S Corp

So, why should you consider starting a West Virginia S Corporation for your business? The benefits are plentiful, ranging from tax advantages to limited liability protection. Let’s delve into some of the key reasons why this business structure may be the perfect fit for you.

First and foremost, setting up an S Corporation in West Virginia can provide you with significant tax savings. Unlike traditional C Corporations, S Corporations are not subject to double taxation. This means that income earned by the business is not taxed at the corporate level, but rather passes through to the shareholders and is taxed at their individual tax rate. This can result in substantial tax savings for you as a business owner.

Additionally, electing to operate as an S Corporation can also help you avoid self-employment taxes on your profits. While sole proprietors and general partners are subject to self-employment taxes on all of their business income, S Corporation shareholders may be able to pay themselves a reasonable salary and then receive the remaining profits as distributions that are not subject to self-employment tax.

Another compelling reason to consider starting a West Virginia S Corporation is the limited liability protection it offers. By forming a corporation, you can shield your personal assets from the debts and liabilities of the business. This means that if your business encounters financial difficulties, your personal assets such as your home and savings will generally be protected from creditors.

Furthermore, operating as an S Corporation can also enhance your credibility and professionalism in the eyes of clients, customers, and potential investors. Many stakeholders often view corporations as more reliable and stable than other types of business entities, which can help you attract more business opportunities and build trust with your stakeholders.

In West Virginia, forming an S Corporation is relatively straightforward and affordable. You will need to file articles of incorporation with the Secretary of State and pay a nominal fee to establish your corporation. From there, you will need to hold initial and annual meetings, adopt bylaws, issue stock, and comply with other corporate formalities required by state law. While this may sound daunting, the benefits of setting up an S Corporation can far outweigh the administrative requirements.

In conclusion, starting a West Virginia S Corporation can offer numerous advantages for small business owners, including tax savings, limited liability protection, and increased credibility. By choosing this business structure, you can position your business for success and growth while also protecting your personal assets. If you are considering launching a new business or restructuring an existing one, be sure to explore the benefits of forming an S Corporation in West Virginia.

Conclusion

Forming an S-Corporation in West Virginia can be a beneficial decision for small business owners seeking liability protection, pass-through taxation, and easier transfer of ownership. By meeting the requirements set by the IRS and following the necessary steps, business owners can take advantage of an S-Corp’s unique structure and benefits. However, it is essential to consider the potential drawbacks, such as increased paperwork and limitations on ownership, before making a final decision. Consulting with a legal or financial professional can help business owners determine if an S-Corporation is right for their needs and goals.

Leave a Comment