In this guide, you will learn about LLC formation in West Virginia. LLCs are a great structure for many reasons and can provide many benefits to your organization.
However, they also have their downsides that should be considered before making a move to form a West Virginia LLC.
We'll go over all of these things so that you can decide if forming an LLC is right for your business.
What is a West Virginia LLC?
A limited liability company in West Virginia is a business structure that offers limited liability protection to its owners.
This means that the business owner's personal assets are protected in the event that the company is sued. LLCs also provide a lot of flexibility in terms of management and taxation.
There are three types of West Virginia LLCs: single-member, multi-member, and series LLCs. The type of LLC you choose will depend on the number of owners, the business structure, and the taxation method you find most suitable for your business needs (S or C corporation).
Single-member LLCs are owned by a single owner and are the simplest type of LLC (much like a sole proprietorship).
Multi-member LLCs have two or more members and offer more flexibility than single-member LLCs. By default, these business entities are taxed like partnerships. Series LLCs are a new type of LLC that was created in 2017.
They offer liability protection for each "series" within the company, which can be helpful for businesses with multiple divisions or subsidiaries.
If you're not sure which type of LLC is right for your business, you can consult a business lawyer to help make the decision.
What are the Benefits of West Virginia LLCs?
LLCs are a great option for many businesses because they offer a number of benefits that other business structures do not. Some of the key benefits of LLCs include:
- Limited liability for owners: This is one of the biggest benefits of an LLC. Owners are shielded against personal liability for the debts and obligations of the company. This means that if the company goes bankrupt, the owners are not responsible for paying its debts.
- Pass-through taxation: LLCs are known as "pass-through" entities, meaning that the profits and losses of an LLC pass directly to their owners' personal income taxes. Because of this, business owners are not obligated to pay double taxation on company earnings like they would with a C Corporation or S Corporation.
- Flexible management: LLCs offer a high degree of flexibility in terms of management structure. Owners can choose to manage the company themselves or appoint managers to do so on their behalf. This gives business owners a lot of control over how their company is run.
If you are considering starting a West Virginia LLC, this business structure is a great option to consider.
What are the Downsides of West Virginia LLCs?
Limited liability companies in West Virginia have a few downsides you have to consider before making a final decision.
First, you might not be eligible to form an LLC in West Virginia if you are a corporation. This means that anyone using the name of their company needs to have permission from the West Virginia Secretary of State of Corporations before doing so.
Secondly, the cost of setting up an LLC in West Virginia is higher than in some other states. There are also annual fees that need to be paid, and the process of filing taxes can be more complicated for LLCs than for corporations.
Finally, there are restrictions on the types of activities an LLC in West Virginia can engage in. For example, an LLC cannot engage in banking or insurance activities.
However, if you are planning to open a business in West Virginia and will be the only owner, an LLC is probably your best option. It gives you many of the same advantages as a corporation.
Step 1: Choose an LLC name
Choosing a business name for an LLC in West Virginia does not have to be complicated.
There are several simple steps you can take when it comes time for this step:
- 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 make sure the business name is available, it will be time to fill out a formal document with the state.
This can be done through an online service, so no complicated forms and fees are involved.
Naming requirements for West Virginia LLCs stipulate that a business name must include the words "limited liability company" or abbreviations of these terms in order to avoid confusion.
Restricted terms include "bank," "insurance," and other similar words. Words that can be associated with a government agency can't be used either.
Make sure you also check for any rules or regulations your county may have in regard to naming a business, as this can vary from location to location.
The West Virginia Secretary of State business portal has all the information you need when it comes to LLC name requirements, so make sure to
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 (this will give you enough time to decide on something else if you can't get approval for your first choice).
If the business is already up and running, it cannot be changed once the state has approved it.
Step 2: Hire a West Virginia Registered Agent
The state of West Virginia requires all LLCs to appoint a registered agent or a registered agent service.
A registered agent is an entity or an individual that agrees to receive documents and other mail on behalf of the limited liability companies.
Many businesses choose their attorneys, accountants, insurance agents, property managers, etc., as their registered agents because they already have a business relationship with these individuals or businesses.
You can 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.
They typically charge a nominal annual fee and can save you the hassle of having to monitor your mail for important documents constantly.
When choosing a registered agent service, thoroughly research the company. Make sure they are reputable and have a good track record.
Also, be sure to ask the company about its security measures. They should have comprehensive disaster recovery plans in place in case of an emergency.
An agent has to have a physical address in West Virginia, be of legal age and integrity, be available during normal business hours, and have the authority to accept legal documents on behalf of the business.
To appoint an agent, you will need to complete the Appointment of Registered Agent form. This form can be found on the West Virginia Secretary of State's website.
Step 3: File West Virginia LLC Articles of Organization
West Virginia Articles of Organization are the 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 name of the LLC
- The registered agent for the LLC
- The principal office address for the LLC
Without the Articles of Organization, the 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 processing time for online filings is usually a few business days. However, you can opt for expedited filing, which will get the LLC created even faster.
The Secretary of State's office sends out confirmation emails when online filings are complete. If you chose expedited processing, then 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).
This is the sum you have to pay on top of the regular $100 filing fee.
Step 4: Draft Your LLC Operating Agreement
Operating agreements are not required in West Virginia, but they are highly recommended. An operating agreement is a document that spells out the rights and responsibilities of the members of your West Virginia LLC.
This document can help prevent disputes among members and ensure that everyone is on the same page. If you do not have an operating agreement, the law will govern how your LLC is run.
Operating agreements specify how business decisions are made, how profits and losses are allocated among the members, whether member investments will be returned in case of withdrawal or dissolution, who has the authority to sign contracts on behalf of the LLC (and their duties and responsibilities are), etc.
The WV default rules govern your LLC set out in 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'll need to create and agree to an operating agreement. This document is not filed with the Secretary of State, but it should be kept in your LLC's records.
Business owners with little to no experience in these matters should hire an attorney to draft their operating agreement.
Step 5: Open a business bank account
After setting up your operating agreement, opening an LLC bank account is important in setting up your LLC. This account will help track your business expenses and income and can also help you qualify for certain tax breaks.
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.
There are many different types of accounts available to LLCs, and you'll need to decide which is most appropriate for your business needs.
For example, you might want to consider opening a "business savings account" or a "commercial checking account," depending on how frequently you conduct business using the account.
It is critical to have a separate business bank account 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.
Step 6: Obtain an EIN
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 is a unique nine-digit number that 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.
To apply for an EIN, you can go through the IRS website or call them directly. The application is free of charge, and the EIN will be issued immediately.
To fill out your application, you will need to 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).
Step 7: Obtain a business license
Business licenses are required by West Virginia law for all businesses. However, the requirements vary by city and county.
After you have completed your business plan, it is time to research what type of licenses (or licenses) are needed in your area.
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 it can be used in all cities throughout West Virginia.
You might need a license if you operate a company or intend to start one. A license is required by law in order to conduct your firm's operations legally.
Whether your company sells items or services, you'll need to obtain a license from the appropriate licensing and regulatory agency.
If your LLC engages in activities that the federal government regulates, you'll need to acquire a valid business license or permit.
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 of the necessary permits and licenses, make sure to keep them up-to-date and display them prominently on your business website.
West Virginia LLC Taxes
A business entity in West Virginia is required to West Virginia business taxes.
LLCs in West Virginia pay their own business income tax, making it easier for small businesses. As an LLC, you will need to file your federal and state taxes on a personal tax return.
There are a few different business tax rates in West Virginia, which 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, who then report this information on their personal income tax returns.
This is different from a C-Corp taxed separately from its owners.
Self-employment taxes are due on the net income from your LLC. This is a Social Security and Medicare tax that business owners and independent contractors pay.
Sales tax applies to those LLCs that engage in selling goods and services at a flat rate of 6%. The West Virginia State Tax Department is in charge of 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 that your LLC might be subject to, so it's important to speak with a business accountant or tax specialist to make sure you're staying up to date with West Virginia LLC taxes.
Does West Virginia Require an Annual Report?
Yes, LLC in West Virginia must file an annual report. Annual reports are due in the state Secretary of State office on or before July 1st every year. There is a $25 filing fee for each report.
The Secretary of State's office sends a reminder postcard before the annual report filing date. If you fail to file an LLC's report, then your LLC will be administratively dissolved by default.
Does West Virginia Allow Foreign LLCs?
Yes. Domestic and foreign LLCs are recognized as legal entities in West Virginia. You need to file a West Virginia Application for a Certificate of Authority with the SOS Corporations Division to register a foreign LLC.
On this occasion, you are required to pay a $150 filing fee. You will also need to appoint a registered agent who has an address in West Virginia.
The process of establishing your foreign LLC is similar to that for forming any other domestic LLC, but you are required to file additional documents with the SOS Corporations Division.
Do West Virginia LLCs Need Business Insurance?
Most West Virginia businesses will need general liability insurance that guarantees the personal liability protection of its owners and employees.
If you are running a professional LLC in West Virginia, business insurance is a must because it can provide coverage for things like property damage, bodily injury, and personal injury.
What is an Agent of Process in West Virginia?
A West Virginia agent of the process is another term for a West Virginia process server or a registered agent.
An agent of the process is an individual who delivers legal documents on behalf of a party to a lawsuit, usually the plaintiff or their attorney.
These agents are tasked with serving summonses and complaints directly to defendants in order for them to be informed about any pending lawsuits against them as soon as possible.
Can I Be My Own Registered Agent in West Virginia?
Yes. Any individual or business entity can perform the role of a registered agent in West Virginia, as long as they are a West Virginia resident or have a business address in the state.
If you choose to be your own registered agent, you will need to keep up with annual filings and list yourself as the registered agent on your company's formation documents.
Keep in mind that this role can be demanding, as you will be responsible for receiving and handling legal notifications on behalf of your company.
If you don't feel comfortable serving as your own registered agent, plenty of third-party services are available that can take on this responsibility for a humble fee.
They will even help with matters relating to the West Virginia State Tax Department.
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 it will be valid for one year from your incorporation date or until you get an annual report filed. You can file by mail, fax, email, phone, or in person.
Starting an LLC in West Virginia is a straightforward process, but it can lead to costly mistakes if anything is skipped.
If you are starting your own business and want the security of being incorporated while also saving money on taxes for yourself or your company, then setting up a limited company should be one of your first steps.
To help you avoid any potential pitfalls that may arise when starting an LLC, we recommend that you consult with ZenBusiness.