The West Virginia Secretary of State handles entity formation. The IRS handles federal tax classification via Form 8832 and Form 2553. The West Virginia Tax Division administers state income tax. A West Virginia LLC can elect to be taxed as an S corporation for federal purposes.
West Virginia LLC basics.
- Articles of Organization filed with the WV Secretary of State. Filing fee is $100.
- Annual report filed each year with the Secretary of State between January 1 and June 30. Filing fee is $25. Failure to file by June 30 may result in monetary penalties and possible administrative dissolution.
- The annual report fee is waived for veteran-owned registered entities for the first 4 years after initial business formation; the annual report must still be filed.
- Single-member LLCs default to disregarded entity for federal tax. Multi-member LLCs default to partnership tax. Either can elect S corp treatment with Form 2553.
- West Virginia does not impose a franchise tax. The $25 annual report fee is the only recurring state fee for an LLC.
West Virginia income tax.
- West Virginia has a graduated individual income tax; top rate adjusted by recent legislative schedule. Confirm current rate with the WV Tax Division.
- Pass-through income from an LLC flows to the owner's WV individual return.
- Federal S corp status is recognized by WV. The S corp files WV Form WV/SPF-100. Shareholders report pass-through income on individual returns.
West Virginia S corp basics.
- Federal S corp election flows through to WV for income tax purposes.
- The S corp files the annual report and pays the $25 annual fee.
- Payroll. An S corp owner-employee must take a reasonable W-2 salary. WV state withholding and state unemployment tax through WorkForce West Virginia apply once thresholds are met.
Why a West Virginia trades shop might still elect S corp. The main reason is federal self-employment tax savings. A disregarded-entity LLC owner pays self-employment tax on the full net profit. An S corp owner-employee pays payroll tax on wages only; the distribution portion avoids self-employment tax. West Virginia's lack of a franchise tax and modest $25 annual report fee make the S corp election essentially a federal decision for most new trades shops.
Rule of thumb. Start as a West Virginia LLC. When annual profit after a reasonable owner wage is high enough that payroll tax savings clear the payroll, retirement plan, and accounting costs, elect S corp. A CPA with West Virginia construction clients can run the breakeven for your numbers and confirm current state income tax rates.