The most critical decision that the founders must make when forming a new company is deciding on a corporate entity. Forming as an LLC is also the best choice for most companies with more than one founding member for a variety of reasons.
An LLC is a simple business arrangement that provides legal security to business owners by distinguishing personal assets from business debts. Furthermore, an LLC also pays lower tax rates than companies.
However, depending on where you live, forming an LLC can be difficult, with the formation process, filing costs, and ongoing legal responsibilities varying from state to state.
The formation of an LLC in West Virginia follows a standard procedure that is followed in both states. However, before doing business in West Virginia, all companies must receive a business registration certificate from the State Tax Department.
To avoid making a mistake during the filing process, follow these steps to start an LLC in West Virginia, and consult the checklist at the bottom of the post to become acquainted with the state’s legal and financial specifications for an LLC formation.
Why Form West Virginia LLC?
West Virginia is a beautiful state with a rich past. It is situated in the heart of the East Coast, within eight hours of several major metropolitan areas. About half of the United States’ population is easily accessible within a day’s drive from the Mountain State.
West Virginia actively embraces young entrepreneurs and U.S. military veterans, because the state makes it easier for them to establish a limited liability company (LLC) in West Virginia. West Virginia citizens under the age of 30 who own a company qualify for a free filing of their LLC Articles of Organization. To apply, proof of age and residency will be needed.
The Boots to Business waiver is a state measure designed to assist veterans in transitioning from military to civilian life. To be eligible for a veteran-owned LLC, the veteran must have been honorably discharged or discharged under honorable circumstances.
A veteran must also own at least 51 per cent of the company, according to state law. Follow the directions on your Articles of Organization form to register as a veteran-owned LLC, as you may need to include additional documentation to apply for your LLC.
Other advantages of establishing a West Virginia LLC include:
- There will be no double taxation
- Personal resources safeguarding
- Management should be more flexible
Types of LLC in West Virginia
Before you begin the legal process of registering your LLC, you must first decide the form of LLC you need. Depending on the form of company and partners, you have three choices for an LLC:
- Single-Member LLC
This type of LLC is created by a single person. You don’t have any other members.
- Multi-Member LLC
A multi-member LLC is formed when the organization has more than one member. These numerous representatives want to name one or more managers to oversee the company’s day-to-day operations.
- Multi-Member LLC
A multi-member LLC has more than one member. However, it differs from a multi-member LLC in that they plan to run the business together.
Steps to Form an West Virginia LLC
In West Virginia, there are six basic steps to forming an LLC. To meet all of the law’s criteria, you’ll need to register with more than one state agency. First, you must register with the West Virginia Secretary of State’s office. Then you must apply to the Department of Taxation and Revenue. Depending on your business practices and the location of your operations, you can require additional licenses and permits.
1. Name your West Virginia LLC
You’ve given some thought to how to call your LLC if you’re ready to start a new company. Now is the time to decide which name you want to use for your West Virginia LLC. In West Virginia, state law regulates company naming, so make sure the name you choose complies with the following requirements:
- The name must be distinct from any other corporation that has already been registered with the state.
- The name cannot be the same as any other reserved or registered name.
- The name must include the terms “Limited Liability Company,” “Limited Company,” “L.L.C.,” “LLC,” “L.C.,” or “LC.” Other appropriate abbreviations include “Ltd.” for “Limited,” and “Co.” for “Business.”
To see if your LLC name is open, use the Business Organization Search to perform a name availability search online. This quest compares what you’ve entered to the West Virginia Secretary of State’s records of registered names. You can also get help from the Secretary of State’s Business Division at (304) 558-8000. The staff will run a fast, non-binding name check for you.
Until you’ve confirmed that your LLC name is available in West Virginia and on the internet, you can reserve it so that no one else can use it until you can officially launch your business. A reservation of an LLC name with the Secretary of State preserves the company’s name for 120 days.
The filing fees for an LLC name reservation is $15. It is critical to understand and recall a West Virginia requirement: the person who reserves the name on the state’s application must also sign the initial business startup papers.
After you’ve registered your LLC name, you should think about whether you want to use a trade name. A trade name in West Virginia is any name by which you do business that is distinct from the official and legal name of your LLC. This is also known as a “doing business as” (DBA) name, true name, or fictitious name.
A trade name is only needed for an LLC if you want to:
- Use an entirely different name to do business.
- Use a condensed version of the full name.
- Remove the phrase “Limited Liability Company” or any abbreviation of it.
There are no restrictions on the number of trade names that a company or person can register. The expense of registering a trade name with the state is $25. The registration allows you to do business under this name, but it provides no defense against those using the same name.
To protect your brand name or trade name once it is in use, you may want to apply for a West Virginia trademark or service mark registration. It costs $50 for up to two classifications, with an additional $50 fee for each additional classification. To register with Secretary of State, you must first:
- Determine who has the legal authority to record the label.
- Determine if the mark is appropriate in the state.
- Check the state database to see if the trademark is still valid.
- Finish and submit the trademark application
It’s also a good idea to consult with the United States Patent and Trademark Office (USPTO) and see whether the trademark has already been licensed at the federal level. This is the government office where you can register your trademark or service mark on a national scale.
Although it is often easier and faster to register a trademark at the state level, the federal level may provide broader protection, especially if you plan to do business outside of West Virginia.
2. Appoint a Registered Agent for your West Virginia LLC
As in every U.S. state, forming an LLC in West Virginia requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf. Your LLC registered agent only receives taxes, service of process (lawsuits), and other legal documents during regular business hours. It is their responsibility to be available to accept updates, which assists the LLC in remaining in compliance.
You have the choice of becoming your own LLC registered agent, but you may not want to. Having to be available to receive legal correspondence at all times will keep you confined to the workplace, preventing you from meeting with clients or taking holidays, and being served with a complaint in front of clients is never good for business.
As illustrated in the following step, you will name your registered agent and include their contact details when you file the Articles of Organization.
If you do not select a registered agent, the West Virginia Secretary of State may serve as your registered agent service for your LLC. This ensures that the Secretary of State collects all files and notices from your organization and forwards them to you at their office in East Charleston, WV.
It is best to choose a service that can accept essential documents on your behalf. A professional service is one low-cost way to handle all of the company’s government filings. When you form an LLC, a registered agent service is usually less expensive than the annual costs of other alternatives.
3. File the Articles of Organization for your LLC
Your Articles of Organization form is a legal document that you must complete and file with the Secretary of State in order to legally establish your West Virginia LLC. You will need the following information to file your LLC Articles of Organization:
- The name of West Virginia LLC
- If the company would be a limited liability company (LLC) or a competent limited liability company (LLC)
- The address of the company’s main office, including the county
- The address of the company’s first physical office in West Virginia (if any)
- If different from the office addresses, the mailing addresses of the principal and physical offices
- The registered agent’s name and address
- Email address for professional correspondence
- Company’s website address (if any)
- Information on any other businesses you own or run in the state
- The organizer’s name(s) and address(es)
- If the LLC will be active indefinitely or for a limited time
- If the LLC will be member managed or manager managed, include the names and addresses of all members (if member-managed) or managers (if manager-managed)
- If the company’s LLC members are responsible for the company’s debts, commitments, and liabilities (most choose to have the company be liable)
- The intent or objectives of your LLC formation (describes the types of business activities you plan to engage in)
- If your LLC goal is to be a consumer litigation financier
- Whether the company is a scrap metal dealer
- Provisions that should be included in the Operating Agreement
- The papers’ requested effective date
- If the LLC is veteran-owned, the contact person should be contacted if there are any issues with the application
A foreign LLC in West Virginia is a limited liability company established in a state other than West Virginia that intends to do business in the state. For example, if you created an LLC in Ohio but decided to do West Virginia business, you would register as a foreign LLC with the West Virginia Secretary of State by filing an Application for Certificate of Authority. Foreign LLC, like domestic LLC, must file annual West Virginia annual reports.
To conduct business in West Virginia as a foreign LLC, follow these steps:
- Comply with West Virginia LLC naming rules and use the West Virginia Secretary of State Business Organization Search to ensure that the LLC name is eligible
- Appoint a registered agent for your West Virginia LLC
- Apply for a Certificate of Authority of a Limited Liability Corporation with the Secretary of State online or by mail. There is a filing fee of $150. The application must include a Certificate of Good Standing or a Certificate of Existence from the state in which the LLC was established.
The Articles of Organization of your LLC can be submitted by email, fax, in person, or online.
Mailed filings for your LLC must be submitted to the following address:
Secretary of State
One-Stop Business Center
1615 Washington Street
East Charleston, WV 25311
4. Make an Operating Agreement
An LLC Operating Agreement is a contract that specifies specific terms such as the company’s financial and practical decision-making structure of your West Virginia business. It specifies all of the guidelines, processes, and regulations that must be followed by all participants and/or managers of your LLC.
While West Virginia law does not require you to file an operating agreement for your LLC, creating one and making all members sign it will help protect your personal assets as well as your business. The agreement can also assist in the settlement of potential conflicts between members of your West Virginia LLC.
An LLC Operating Agreement will contain the following information:
- The initial investment made by of member in the business
- Benefit and loss distribution
- Plans for member succession
- What events could lead to the LLC dissolution, and how should the dissolution be handled
5. Obtain an EIN
A Federal Employer Identification Number (FEIN) is another name for an Employer Identification Number. This number is similar to your Social Security Number (SSN), but it is exclusive to your business. An EIN helps the Internal Revenue Service (IRS) to monitor the company’s tax reporting, and it is available on the IRS website.
It is essential to your LLC formation before obtaining an EIN. This is due to the fact that you are required to provide the federal government with the date your LLC was created.
Before applying for an EIN, you should also make sure that your LLC has been accepted. If your company is a sole proprietorship with no employees and no duty to file pension plan tax returns, you are not allowed to obtain a business license.
You will select how the entity will be taxed for federal income tax purposes when you apply for the Employer Identification Number for your LLC.
6. Fulfill Your West Virginia LLC Legal Requirements
If an LLC is formed, its members must focus their efforts on meeting the legal specifications that will apply for the duration of the company’s life.
File an annual report
Any LLC doing business in West Virginia is required to file an annual report with the West Virginia Secretary of State and pay a $25 filing fee. This involves international limited liability companies doing business in the state of West Virginia.
The first annual report of an LLC is due between the dates of January 1 and July 1 of the year following its creation, and each subsequent annual report is due between the same dates. The annual report of your LLC may be submitted online or by mail.
Obtain the necessary business licenses and permits
Depending on the form of company and venue, LLC operating in West Virginia may be required to obtain state or local business licenses or permits. Learn about state occupational licenses by visiting the WV One Stop Business Center Page, and then contact a county or city clerk in your area for more information on local licensing requirements.
Register with the West Virginia State Tax Department
To legally operate in the state of West Virginia, all LLCs are required to register with the West Virginia State Tax Department and receive a business registration certificate. Using the WV One Stop Business Portal, you can register with the Tax Department online. There is a $30 registration fee.
Difference between Sole Proprietorships & Limited Liability Office
Forming a Sole Proprietorship vs LLC
Creating a sole proprietorship is as simple as going to work. You will need to obtain licences, approvals, zoning clearances, or other permissions from your municipal government, depending on the type of work you do.
If you have any workers, you can form a legal entity and register an assumed business name, as well as obtain an employer identification number to make tax season easier. Forming an LLC is a little more complicated, but it’s still an easy procedure.
You must name your LLC, and you must double-check your proposed name before filing; you must choose a name that is specific to your company. You’ll need to pick a registered agent for legal and tax purposes. If you have a single-member LLC, this could be you, or if you have a multi-member LLC, it could be one of your business partners.
Keep in mind that when it comes to taxes, the IRS treats single-member LLCs as sole proprietorships. After that, you’ll need to file a certificate of incorporation (the exact name of this document varies by location) and establish an operating agreement, as well as pay a filing fee. Having a business plan in place will make this process of forming an LLC a lot easier.
Funding a Sole Proprietorship vs LLC
Funding will almost certainly be a hot topic and an obstacle, regardless of the legal organisation you want to form. Small business experts would likely advise you to retain your full-time job when you start your company; this personal income will provide a steady source of capital while you get your business up and running.
If you decide to register your company as a separate entity, do so right away and open a business bank account. Depending on how you do it, having your company as a separate legal entity and separating your personal and business income will provide you with legal security and keep your personal assets secure.
Furthermore, some lenders may refuse to accept a business loan application if you do not have a business bank account. For a small company, getting a startup loan can be challenging, but there are other financing options.
You can use crowdfunding, which is becoming increasingly popular. A variety of non-profit lenders also provide microloans to new companies. These are designed a little differently than traditional financing, so do your homework before proceeding. Some can have tax advantages or have more wealth security than others, so consult an accountant before proceeding. Some also charge zero or very low interest.
Taxes for a Sole Proprietorship vs. LLC
If you run a sole proprietorship or a limited liability company, your taxes will adjust. When you first start out, the most important thing to do is differentiate your personal and company finances and keep your paperwork in order.
Personal tax returns and other income tax documents, as well as information on any debts you may have, are included. As a sole proprietor, you might be eligible for pass-through taxation, which would save you money on self-employment taxes.
Since your tax rate varies depending on the type of company you operate, having the correct NAICS code on hand is also important. Filing taxes is a little easier for a sole proprietor. You’ll want to keep the paperwork and finances separate, just as you’ll want to keep the company as a separate legal entity.
Receipts, mileage, 1099s, annual fees, and so on. When it comes to taxes, keeping track of money coming in and going out would be critical. The self-employment tax rate is currently 15.3 percent. Single proprietors are solely responsible for the remaining balance.
Keep in mind that one-member LLCs are treated as sole proprietorships for tax purposes, but creating an LLC with multiple members could lower your tax bill. Only those forms of income qualify for the C-federal corporation’s tax rate, so you may pay less than if you filed as a sole proprietorship or single-member LLC.
Consult the accountant to see how much money you will save. It’ll be critical to keeping track of your income and expenses, payroll taxes, and any forms related to real estate owned by your company.
Prepare yourself. Since your LLC will not pay taxes on its own, the gains and losses will be reported on your personal tax return, having proper financial division will benefit you in the long run.
Personal Liability For a Sole Proprietorship vs. LLC
Legal security can be crucial to your well-being and the long-term viability of your venture as a new company. You can shield yourself from personal responsibility by forming LLC. Think about the company’s existence and what’s at stake.
Your liability is limited when you form a limited liability corporation. You would not be directly responsible for the debts or liabilities of your LLC if you are the owner. A sole proprietorship, on the other hand, cannot be said to be the same.
As a sole proprietor, you will be personally liable for any debts the company suffered. Depending on your case, this risk can be insignificant, but consider the benefits and drawbacks before proceeding. As a general rule, you can obtain liability insurance for your company for added security and peace of mind.
Managing and Operating a Sole Proprietorship vs. LLC
Running a sole proprietorship is as easy as going to work and keeping track of your earnings. Since you own the company and are the boss, you have complete control over all decisions. Working with someone else and sharing decision-making can be preferable depending on your preferences and the type of company you own.
Frequently Asked Questions (FAQs)
How long would it take to shape my West Virginia LLC?
You can shape your West Virginia LLC by mail or in person, but doing so online is quicker and easier. The Secretary of State’s office allows filers to use the One-Stop Business Portal to file their paperwork. As your forms are processed, you can receive real-time alerts. The office also has expedited processing times for the following fees: $25 for 24 hours, $250 for two hours, and $500 for one hour.
Is it required for me to file an Operating Agreement with the state of West Virginia?
No, you do not have to register your LLC Operating Agreement with the state; however, it is recommended that you do so in order to run your company and protect your properties. In the absence of an operating agreement:
- In the case of a lawsuit, the LLC could be subject to generic state regulations, which could be harmful.
- Personal liability insurance for members of LLC could be reduced.
- Members’ duties and obligations might not be completely understood, which may lead to expensive conflicts in the future.
What’s the difference between an LLC and a PLLC?
“PLLC” is an abbreviation for a professional limited liability company. To form a PLLC, all members must be licensed to provide the professional service that the organization provides. Attorneys-at-law, dentists, accountants, social workers, social workers, and psychologists are among the professions that include a PLLC agency designation.
What is the best tax structure for my West Virginia LLC?
As a West Virginia LLC, you have the choice of being taxed as a partnership or a corporation. Whichever choice you choose, you must be taxed as such at the federal level. Each tax structure has advantages and disadvantages. It is best to consult with an expert to determine which tax system is best for your situation.
Is a Series LLC permitted in West Virginia?
No, West Virginia does not permit the formation of a Series LLC. Multiple LLC can be grouped under one key LLC in this business structure.
Is an EIN needed for a West Virginia LLC?
Do you want to hire workers, be taxed as an S corporation, or pay such federal excise taxes? You must obtain an employer identification number for your LLC. There are numerous other reasons to obtain an EIN. West Virginia is a territory that is obsessed with paperwork.
You’ll be questioned for your EIN repeatedly, from your Company Registration Certificate to local licenses (and even to open a business bank account). Sure, you might use your personal social security number in some of these scenarios, but why jeopardize your personal information?
Is a West Virginia LLC required to have a business license?
Though West Virginia does not have a state-level business license, some cities and counties do. All companies operating within the city limits of Charleston, for example, are required to have an annual business license.
What is the procedure for dissolving my West Virginia LLC?
To dissolve your West Virginia LLC, you must file the Articles of Termination form with the Secretary of State’s office. It will cost you $25 to do so.
Do I need to get a DBA or Trade Name for my business?
Most limited liability company (LLC) do not require a DBA. The name of the limited liability company LLC can serve as your business name. Similarly, you can accept checks and other payments under that LLC name too. However, if you’re looking forward to register a DBA if you would like to conduct business under another business name.
Although there are several crucial steps in the process of forming an LLC in West Virginia, these steps aren’t particularly complicated when taken individually.
When you consider the whole process at once, it may feel daunting, but if you break it down and take care of each step one at a time, it becomes much more manageable.
Remember that you don’t have to go it alone with the DIY choice if this phase becomes daunting, or if you really don’t have the time and energy to commit to these measures.
Starting a business correctly doesn’t have to be difficult. With over 15 years of experience consulting new businesses and start ups, Matthew is probably the best person to help you set a strong foundation for your business.