Starting a business in West Virginia? Consider forming an S corp, an excellent choice for entrepreneurs looking to capitalize on this state’s unique advantages. Incorporating online in West Virginia is convenient and a strategic step toward achieving your business goals.

With an S corp, you benefit from limited liability protection, potential tax advantages, and enhanced credibility. West Virginia’s supportive business environment and easy online incorporation with MaxFilings make the S corp formation process straightforward and efficient. 

West Virginia S corp taxation

Unlike a C corp, a West Virginia S corp does not pay income taxes. Instead, when it has more than one shareholder, it files tax returns, and the shareholders must report their share of the corporation’s income or loss on their personal tax returns. This approach is similar to the taxation process in sole proprietorships, partnerships, and Limited Liability Companies (LLCs).

To become an S corp in West Virginia, one must file IRS Form 2553 with the Internal Revenue Service. Additionally, a few states require a separate state election to qualify as a Sub S Corporation. Only Arkansas, New Jersey, New York, Ohio, and Wisconsin mandate this additional state-level filing.

MaxFilings assists in this process by preparing IRS Form 2553 and providing you with complete instructions for its submission to the IRS. This service simplifies the filing process, ensuring that your business meets all necessary requirements for S corp status.

Some points to consider when forming a West Virginia S corp

Overview

• To form a West Virginia corporation, you must file official documents with the state and pay the required state filing fees.
• File Form 2553 with the IRS to elect special tax status for your corporation.
• A West Virginia S corporation is legally recognized as an entity separate from its owners (shareholders).
• Certain business limitations may apply to what a West Virginia S corp can engage in.
• Document and maintain minutes of stockholder and board of directors meetings as a requirement.
• West Virginia S corps are limited to a maximum of 100 shareholders. These shareholders cannot be other corporations, LLCs, partnerships, certain trusts, or non-resident aliens.

Limited liability

• Shareholders of West Virginia S corps typically enjoy limited liability, risking only the amount they invested.
• Shareholders are generally not liable for the corporation’s legal judgments, debts, or obligations.
• Protecting personal assets is a key reason business owners in the state choose to incorporate.
• However, there are situations where shareholders’ limited liability does not apply.

Raising capital

• West Virginia S corps can more easily raise additional capital by issuing and selling stock or other financial instruments.
• Stock sales may be subject to state and federal securities laws.
• Transfer of ownership is possible through the sale of stock.
• Despite possible voting rights variations, only one stock class is permissible.

Taxation

• S corps in West Virginia are less likely to be audited than sole proprietorships and partnerships.
• They benefit from pass-through taxation, avoiding double taxation.
• S corps file informational tax returns but are not subject to corporate income tax.
• Shareholders report their share of income and losses on personal tax returns, which can be used to offset other income.
• Allocation of income and losses is based on ownership percentages.
• Self-employment taxes do not apply to salaries paid to owners by the corporation.

Owners & employees

• There may be restrictions on fringe benefits for major shareholders.
• Owners who work in the business are considered employees and are eligible for certain fringe benefits.
• Corporations often attract employees with the potential for stock options and bonuses.
• The corporation’s existence doesn’t end with the death of a shareholder, ensuring continuity.

Public perception

• The public generally perceives corporations as more substantial than sole proprietorships and partnerships.

How to form a West Virginia S corp

Forming an S corp in West Virginia involves a series of steps that build upon the foundation of either a C corp or an LLC. 

Here is a step-by-step guide to help you through the process:

Step 1: Select a business name

Choose a unique name for your business. This name should comply with West Virginia’s naming regulations and should not be already in use by another corporation or LLC. You can check the availability of your chosen name through the West Virginia Secretary of State’s office and reserve it if it’s available.

Step 2: Appoint a registered agent

West Virginia requires that every business entity have a registered agent. This agent is the official recipient of legal and official documents for your business. The agent must be authorized to operate in West Virginia and have a physical address in the state.

Step 3: Elect a management structure

Decide on your business’s management structure. If you’re forming a standard corporation, you must elect a Board of Directors. If you’re opting for an LLC, you will appoint managers. These individuals will be responsible for overseeing and managing your S corp.

Step 4: File foundational documents

Next, file the foundational documents with the West Virginia Secretary of State. For a corporation, these are known as Articles of Incorporation; for an LLC, they are Articles of Organization. These documents outline the basic details of your business. A filing fee is typically required at this stage.

Step 5: File IRS form 2553

To officially elect S corp status, file IRS Form 2553. This step is crucial in converting your foundational entity (C Corp or LLC) into an S Corp in West Virginia. Ensure you meet all the S corp requirements laid out by the IRS. You must familiarize yourself with and adhere to any specific tax filing and registration prerequisites West Virginia sets.