West Virginia is home to over 109,000 small businesses that account for 98.8% of the businesses in the state, employing 48.5% of West Virginia's workforce. West Virginia offers opportunities for businesses in sectors like energy, tourism, and manufacturing. The largest industries last year (2023) included services (excluding services like professional, scientific, technical, education, or food that fall into their own category), retail, and construction. Business ownership amongst veterans is slightly higher in West Virginia compared to other states, at nearly 9%, likely due to the proximity of the national capital and government facilities. The state’s low cost of doing business and competitive tax structure create a favorable environment for all entrepreneurs.
Here's a primer on how to start a business in West Virginia.
Costs associated with forming a business varies by business entity type and by state the business was formed in. We aim to cover here the basic costs specific to the state for starting a business. We also touch upon other costs in order to stay compliant and continue to doing business in the state, such as paying various state taxes or complying with local minimum wage laws when hiring in-state.
We cover in broad strokes the following costs:
There are several types of business structures you can choose from when forming your business. Which is best for your business depends on a variety of factors, like ownership in the business, taxation, and more.
No State Filing: There are two types of structures which can be automatically formed without any filing with the state. Sole proprietorship and general partnership falls into this category, and they are a popular form of self-employment.
Formed or Incorporated: Three most common business entities that require some formation or incorporation with the state are corporation, limited liability partnership (LLP), and limited liability company (LLC). Each structure has its own one-time formation or set-up cost.
West Virginia offers the basic entities found in most states and more. Commonly known entities that can be formed through filing with the Secretary of State include: LLC, PLLC, Limited Partnership (and LLP), Corporation (for and non-profit), and Co-op Association (for and non-profit). Some lesser known entities include Voluntary Association, business trust, and unincorporated non-profit association. Refer to West Virginia's Comparison Chart for more information.
Professional corporations may be started for the following servicers:
The words “Professional Corporation” must be spelled in their entirety for the business name to be approved by SoS. The abbreviations “PC” and “P.C.” are NOT permitted. However, the name-ending abbreviations, “AC” or “A.C.,” indicating “Accounting Corporation,” are permitted for use in the name per the WV Accounting Code.
A professional limited liability company may be organized for the purpose of rendering a professional service. Those services are limited to attorneys-at-law, physicians and podiatrists, dentists, optometrists, accountants, veterinarians, architects, engineers, osteopathic physicians and surgeons, chiropractors, psychologists, social workers, acupuncturists and land surveyors. The name of the professional limited liability company should contain the words “professional limited liability company” or the abbreviation “P.L.L.C.,” “PLLC,” “Professional L.L.C.,” or “Professional LLC.”
Entity formation can be done predominantly online at West Virginia's One Stop Portal. The Secretary of State website offers a business set-up wizard to help new business owners through the process and more information here.
Across all US states, the average cost of formation is roughly $100 with some states costing as little as ~$50 to create a corporation and some as high as $500+ to form an LLC.
Here are the formation costs (up to date at the time of this writing) for three most common entity types for businesses filed with the state:
Franchise taxes are state fees that businesses pay in order to have the right to operate in those states. They are paid in addition to state and federal income taxes. Failure to file can cause a business to lose its good standing with the state, making it difficult to operate, get loans, and may cost the business clients if clients require this information.
Here are the franchise tax fees for each business entity structure in this state as of the time of this writing.
Taxes, taxes, and more taxes. Although income taxes may seem far off concern when starting a business, the truth is that not withholding enough for income taxes is a material cost to business owners. Here we briefly cover state income taxes. For a better overview of self-employment taxes, you can read more on Small Business Tax Planning.
Pass-Through Entities: Pass-through entities are boon to small business owners. A pass-through entity is a business structure where income passes directly to the owners or investors, and they report it on their personal tax returns. This allows the business to avoid paying corporate taxes, making it a more tax-efficient option for small businesses. This also makes filing taxes significantly simpler as only one return is needed.
By default, sole proprietorships, LLCs, and partnerships are considered pass-through entities. In the case of LLCs, LLCs are usually referred to as disregarded entities. However, owners can choose to get their LLC be recognized and treated differently for tax purposes with the IRS.
Corporate Income Tax: Most states (44 out of 50) levy a corporate income tax.
C-Corps pay a C-Corp state income tax rate. If the income tax is pass-through, as with S-Corps, use your personal income tax rate.
Limited Liability Companies: For LLCs, the tax rate depends on the how you set up the LLC business structure.
Business owners who sell goods or services within a state are typically required to collect and remit state sales tax. Each state has different rules regarding what is taxable, so it’s crucial to understand the state’s specific requirements. Most businesses aren't at significant risk of non-compliance with sales tax until they reach the state's economic nexus threshold.
Economic nexus refers to the threshold of sales or transactions in a state that, once exceeded, obligates a business to collect sales tax, even if they don't have a physical presence there. Once a business achieves economic nexus, they must register with the state’s tax authority and start collecting sales tax on applicable sales. Failing to comply with these requirements can result in penalties and back taxes. Economic nexus is particular important when it comes to online sales for e-commerce companies.
With the addition of some local sales tax combined with the state sales tax, percentages can reach up to 7%.
If you're considering hiring employees for in-person work, then knowing your state's employment laws are important.
One important to factor is knowing the local minimum wage, which varies depending on state and sometimes even by city or county. Note that in addition to the hourly rate, employers should also consider payroll taxes, workers’ compensation insurance, and potential benefits costs.
Here we just provide a review in the table below costs specific to the state, namely the state's specific minimum wage, any applicable exceptions to the minimum wage, and recurring payroll taxes.
Young Entrepreneur Waiver: Entrepreneurs who are under the age of 30 that start a business in West Virginia can get their filing fee waived. The benefit was enacted as part of the Young Entrepreneur Reinvestment Act.
Veterans Waiver: Similarly, veterans can have their filing fee and first four years of annual report filing fees waived if the business is majority owned by current or former members of the military, including spouses.
Annual Reports can be submitted through West Virginia's One Stop Portal. Reports and fees are due between January 1 and June 30 of each year following the calendar year in which the business was originally registered with the state.
Business name availability can be searched for here, and naming regulations are outlined here. Businesses can hold a name for 120 by filing this form.
Certificates of Good Standing from the Tax Division can be requested here. Certificates of Existence can be requested in a few formats (in-person, mail, etc), with more details outlined by West Virginia here.
The idea of starting a business can be exciting, but the plethora of choices, jargon, and costs associated with the pure act of setting up a business with the state can be an unnecessarily daunting and time-consuming process.
Although this guide can't setup your business entity for you, it provides an overview so you can get a head start. We hope this article has sheds light on the essential costs involved and provides guidance on how to manage them effectively, setting you on a path towards entrepreneurial success.
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