How to Start an LLC in West Virginia? (Step-By-Step Guide)
LLCs are an excellent structure for many reasons and can benefit your organization. Starting one in West Virginia is also a simple process when you have the right information at your fingertips.
With a deep understanding of West Virginia's business regulations and legal requirements, our expert team has compiled the necessary steps and resources to successfully start your Limited Liability Company LLC.
In this guide, you’ll learn about LLC formation in West Virginia. We'll go over each step and the requirements to enable you to establish your West Virginia LLC easily and according to the state’s regulations.
In addition, if you'd like a professional to take care of starting your LLC, we suggest examining these specialized West Virginia LLC formation services.
Quick Summary
- To start an LLC in West Virginia, one must understand the state-specific legal requirements and complete the necessary documentation, like an Articles of Organization.
- Filing an annual report with the West Virginia Secretary of State is mandatory for all LLCs to maintain their good standing.
- In West Virginia, small businesses, which account for 98.8% of all businesses, employ 269,473 workers, representing 48.6% of the state's labor force, highlighting the critical role of small enterprises in the local economy.
- In my view, the process of establishing an LLC in West Virginia is a wise decision for entrepreneurs and small business owners, given the benefits of limited liability and pass-through taxation, which serve to protect personal assets and simplify tax obligations.
How to Form an LLC in West Virginia
Here is a step-by-step guide you’ll follow to form your West Virginia LLC.
1. Choose the Type of Your West Virginia LLC (Mandatory)
In West Virginia, selecting the right LLC structure is pivotal. The two primary types are Single-Member LLCs and multi-member LLCs.
Single-Member LLCs
Advantages: Ideal for solo entrepreneurs, offering simplicity in management and decision-making. There's less paperwork and relatively straightforward tax filing processes.
Disadvantages: Limited growth potential and personal liability risks, as debts and legal actions against the LLC may impact the owner's personal assets.
Multi-Member LLCs
Advantages: Suitable for partnerships, bringing diverse skills and resources. Shared responsibility can lead to better business decisions and growth potential.
Disadvantages: More complex management structure and potential for internal conflicts. Tax filing and profit distribution can become complicated, requiring clear agreements and understanding among members.
In my experience advising clients, Single-Member LLCs are often chosen by solo entrepreneurs for their simplicity, while Multi-Member LLCs are favored by partnerships seeking shared responsibility and diverse skills.
Your choice should align with your business goals, operational simplicity, and the level of liability protection you seek.
2. Choose a Name for Your West Virginia LLC (Mandatory)
Choosing a business name for an LLC in West Virginia doesn’t have to be complicated.
These are the simple steps you can take when it comes to naming your LLC:
- Look up an LLC in West Virginia - make sure the name is unique and available on the state's website by searching through their business search engine tool (this will also ensure your chosen name complies with all other rules)
- Check your local county's business office for any rules or regulations they have regarding naming a business.
- Once you've double-checked to ensure the business name is available, it will be time to complete a formal document with the state. This can be done through an online service, so no complicated forms or fees are involved.
To avoid confusion, naming requirements for West Virginia LLCs stipulate that a business name must include the words "limited liability company" or abbreviations of these terms.
Restricted terms include "bank," "insurance," and other similar words. Words that can be associated with a government agency can't be used either.
You can visit the West Virginia Secretary of State business portal to get more information about your LLC name requirements [1].
Suppose your selected LLC name is not available on the state website. In that case, you can file a form with the West Virginia Secretary of State Business Division and pay a $100 filing fee to reserve it for 120 days.
If the business is already running, it cannot be changed once the state approves it.
Learn how to change an LLC name in West Virginia, if you need to.
3. Select a Registered Agent (Mandatory)
The state of West Virginia requires all LLCs to appoint a registered agent or a registered agent service.
An LLC registered agent is an entity or an individual that agrees to receive documents and other mail on behalf of the limited liability companies.
I often guide my clients to choose a registered agent wisely, typically suggesting they consider their attorneys or accountants due to existing business relationships and their ability to handle legal documents.
You can opt to hire a professional registered agent service in West Virginia if you don't have anyone to appoint as your agent.
These business entity services are designed to receive and forward legal documents on behalf of their clients. It includes the operating agreements and State tax department-related papers.
When choosing a registered agent service, thoroughly research the company. Make sure they are reputable and have a good track record.
An agent must:
- Have a physical address in West Virginia
- Be of legal age and integrity
- Be available during normal business hours
- Have the authority to accept legal documents on behalf of the business
You must complete the Appointment of Registered Agent form to appoint an agent. This form can be found on the West Virginia Secretary of State's website [2].
4. File West Virginia Articles of Organization (Mandatory)
The West Virginia Articles of Organization are a document that legally creates a limited liability company in West Virginia. They must be filed with the West Virginia Secretary of State's office. The filing fee is $100.
The Articles of Organization must include the following:
- The name of the LLC
- The registered agent for the LLC
- The principal office address for the LLC
Without the Articles of Organization, West Virginia LLC does not exist. Therefore, it is important to file them as soon as possible so your business is protected under West Virginia law.
The Secretary of State's office offers an online filing system that makes creating a limited liability company in West Virginia easy and fast.
The West Virginia LLC processing time for online filings is usually a few business days. However, you can opt for expedited filing to create the LLC even faster.
The Secretary of State's office sends confirmation emails when online filings are complete.
If you chose expedited processing, an additional email is sent confirming that your filing was received by the West Virginia Secretary of State's office and processed within 24 hours.
The cost of expediting fee will vary depending on whether you want your West Virginia LLC registration to be completed within the next hour ($500), within the next 2 hours ($250), or the following day ($25).
Steps to Take After Forming an LLC in West Virginia
5. Create a West Virginia LLC Operating Agreement (Optional, but Recommended)
I advise clients on the importance of an operating agreement for defining member roles and responsibilities, even though it's not required in West Virginia.
This document can help prevent member disputes and ensure everyone is on the same page. The law will govern how your LLC is run if you do not have an operating agreement.
"If the members had proactively planned, addressed potential issues, and formalized their agreement in writing, they could have sidestepped costly litigation, conserving resources for more productive business endeavors. Hence, a wise business owner would certainly implement and uphold an operating agreement."
- Jon Morgan, Co-Editor & Co-Founder of Venture Smarter
Operating agreements specify:
- How business decisions are made
- How profits and losses are allocated among the members
- Whether member investments will be returned in the event of withdrawal or dissolution
- Who has the authority to sign contracts on behalf of the LLC (and what their duties and responsibilities are)
The WV default rules govern your LLC under the Limited Liability Company Act without an operating agreement in West Virginia.
While these rules provide a framework for how an LLC should operate, they can be quite restrictive and may not reflect the wishes of all the members.
If you want to customize your LLC's operations, you must create and agree to an operating agreement. This document is not filed with the Secretary of State but should be kept in your LLC's records.
6. Apply for an Employer Identification Number (EIN) (Optional, but Recommended)
Before you can set up an LLC bank account, you will need to obtain an EIN, also known as a Federal Employer Identification Number, Employer Identification Number, or Federal Tax Identification Number.
This unique nine-digit number will be used to identify your LLC with the Internal Revenue Service and its bank account for tax purposes. EIN is equally critical if you plan to hire employees or contract with other businesses.
You can go through the IRS website or call them directly to apply for an EIN. The application is free of charge, and the EIN will be issued immediately.
To fill out your application, you must provide the name of the LLC as it appears on your bank account, your business address, and information for each owner (combine all owners if married).
7. Open an LLC Bank Account (Optional, but Recommended)
After setting up your operating agreement, opening an LLC bank account is important for setting up your LLC.
I counsel clients on the importance of a dedicated LLC bank account for managing business finances and how it aids in tax breaks and expense tracking.
When choosing a bank, be sure to compare the fees and features offered by different institutions.
Some banks offer free checking accounts for small businesses, while others may charge a monthly maintenance fee.
Many different types of accounts are available to LLCs, and you'll need to decide which is most appropriate for your business needs.
For example, you might consider opening a "business savings account" or a "commercial checking account," depending on how frequently you conduct business using the account.
A separate business bank account is critical because you might pierce your corporate veil if you don't separate personal assets from business assets.
That means that your personal creditors could go after your business assets if something goes wrong.
To avoid commingling personal and business expenses, be sure to keep all business finances and transactions separate from your personal accounts.
8. File your West Virginia LLC Annual Report (Mandatory)
Maintaining compliance for your LLC in West Virginia requires the submission of an annual report to remain in good standing.
Key Aspects of Filing the West Virginia LLC Annual Report:
- Deadline: The report must be filed by July 1st of each year.
- Filing Fee: A fee is associated with the report submission.
- Content Requirements: The report typically requires information about the LLC’s current address, management, and any changes in membership.
- Consequences of Non-Compliance: Failing to file can lead to penalties or the potential dissolution of the LLC.
It is imperative to stay informed about the specific requirements and deadlines for annual report filings in West Virginia. This information is available through the West Virginia Secretary of State's office. Regular compliance ensures the legal and operational integrity of your LLC in the state.
9. Obtain business licenses and permits
Business licenses are required by West Virginia law for all businesses. However, the requirements vary by city and county.
There will be different types of licenses, depending on whether or not you choose to work with employees or just yourself.
A business registration certificate is the most common type of license in West Virginia.
This license is obtained from the Secretary of State's One Stop Business Portal and can be used in all cities throughout West Virginia.
The local government regulates local business licenses, which can vary greatly from one locality to another. Make sure you contact your local municipality for specific information about obtaining a license in your area.
A professional limited liability company in West Virginia will probably need additional permits to conduct business in the state.
Once you have all the necessary permits and licenses, keep them up-to-date and display them prominently on your business website.
10. Choosing your Tax Structure
LLC in West Virginia are required to pay West Virginia LLC business taxes.
LLCs in West Virginia pay their own business income tax, making it easier for small businesses. As an LLC, you must file your federal and state taxes on a personal tax return.
A few different business tax rates in West Virginia are based on the amount of income your LLC makes.
Generally, LLCs are regarded as pass-through entities, which means their profits and losses are "passed through" to the individual LLC members [3]. The members will then report this information on their personal income tax returns.
This is different from a C-Corp taxed separately from its owners.
I find the pass-through taxation feature for LLCs in West Virginia particularly beneficial for small businesses, as it simplifies tax filing and can potentially reduce overall tax liabilities. This approach aligns well with the financial structures of smaller entities, making it a preferable option compared to the separate taxation system of C-Corporations.
Sales tax applies to LLCs selling goods and services at a flat rate of 6% [4]. The West Virginia State Tax Department oversees all sales tax filings and payments.
Property tax is assessed on the value of business property in West Virginia. The rate varies depending on the county, and several exemptions may apply.
There are a few other taxes your LLC might be subject to, so it's important to speak with a business accountant or tax specialist to ensure you're staying up to date with West Virginia LLC taxes.
Benefits and Drawbacks of an LLC in West Virginia
Benefits:
- Limited liability for owners: Owners are shielded against personal liability for the debts and obligations of the company. If the company goes bankrupt, the owners are not responsible for paying its debts.
- Pass-through taxation: Business owners are not obligated to pay double taxation on company earnings like they would with a C Corporation or S Corporation. This simplified tax structure is especially beneficial in a state where small businesses, which constitute 98.8% of all businesses, play a pivotal role in the economy by employing 269,473 workers or 48.6% of the state’s labor force, underscoring the critical economic contribution of these enterprises [5].
- Flexible management: Owners can choose to manage the company themselves or appoint managers on their behalf. This gives business owners much control over how their company is run.
Forming an LLC in West Virginia is particularly advantageous for the vast majority of entrepreneurs, given that small businesses represent a staggering 98.8% of all businesses in the state, totaling 111,614, according to U.S. Small Business Administration data [6].
Drawbacks:
- Eligibility Restrictions: Individuals who are part of a corporation might not be eligible to form an LLC in West Virginia.
- Approval Requirement: There's a necessity to obtain permission from the West Virginia Secretary of State of Corporations for using a company's name.
- Higher Setup Costs: The cost of establishing an LLC in West Virginia is higher compared to other states.
DIY vs. professional LLC formation
DIY LLC Formation
Pros:
- Cost-Effectiveness: Typically, the DIY route is less expensive. You save on professional fees by handling the formation process yourself.
- Learning Experience: Doing it yourself offers a hands-on learning opportunity about the legal and administrative aspects of setting up an LLC.
Cons:
- Time-Consuming: The DIY approach can be time-intensive, requiring you to research, understand, and complete all steps correctly.
- Risk of Errors: Without expert guidance, there's a higher risk of making mistakes in the paperwork or missing critical legal requirements, which could lead to future complications.
Professional LLC Formation Services
Pros:
- Expertise and Accuracy: Professionals are knowledgeable about state-specific regulations, ensuring accurate and compliant filing.
- Time-Saving: Delegating the formation to experts saves you time, allowing you to focus on other aspects of your business.
- Customization and Comprehensive Services: Professionals can provide tailored advice and additional services like drafting operating agreements or obtaining EINs.
Cons:
- Higher Cost: Professional services come at a cost, which might be a significant factor, especially for small startups or individual entrepreneurs.
- Less Hands-On Involvement: You might have less involvement in the process, which could limit your understanding of your LLC's legal framework.
Deciding between DIY and professional LLC formation hinges on your budget, time, legal comfort, and business needs. Opt for professional services if time is scarce and expert guidance is essential. Choose DIY if you're budget-conscious and eager to learn.
The key is finding a balance that suits your specific business situation and ensures a proper LLC setup.
FAQs
Do West Virginia LLCs Need Business Insurance?
Most West Virginia businesses will need general liability insurance that guarantees their owners' and employees' personal liability protection.
If you are running a professional LLC in West Virginia, business insurance is a must because it can cover property damage, bodily injury, and personal injury.
How Do I Get a Certificate of Existence in WV?
You can obtain the Certificate of Existence for your LLC in West Virginia by filing a simple form with the West Virginia Secretary of State. The filing fee for this service is $10 and is valid for one year from your incorporation date or until you get an annual report filed.
Reference
- https://business4.wv.gov/Pages/default.aspx
- https://www.zenbusiness.com/west-virginia-registered-agent/
- https://www.corpnet.com/blog/what-is-a-pass-through-entity/
- https://tax.wv.gov/Business/SalesAndUseTax/Pages/SalesAndUseTax.aspx
- https://advocacy.sba.gov/wp-content/uploads/2022/08/Small-Business-Economic-Profile-WV.pdf
- https://advocacy.sba.gov/wp-content/uploads/2022/08/Small-Business-Economic-Profile-WV.pdf
