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West Virginia may bring to mind scenic mountains and outdoor recreation like skiing and whitewater rafting, but it’s also a place of opportunity for the right entrepreneur. The state government has demonstrated over the years that it’s serious about encouraging new businesses within its borders.
Read on if you’re interested in forming a successful business in the Mountain State.
In an effort to be more friendly to business, West Virginia has removed approximately $800 million of business tax burden over the past eight years, including reducing the corporate net income tax and eliminating the business franchise tax altogether. No new business taxes have been introduced in the state in the past 20 years, and the Tax Foundation recently rated West Virginia 19th in the country for state business tax climate.
The cost of doing business is also significantly lower in West Virginia than most states, ranking at number 11 in CNBC’s “America’s Top States for Business 2018.” In addition, the state is located within one day’s drive of 50% of the U.S. population. Major metropolitan areas like New York City, Baltimore, Pittsburgh, and Washington, D.C., are relatively close by.
Read the steps below to get an overview of forming a business in West Virginia.
Your new venture should begin with a business plan. Planning can sometimes seem intimidating for future small business owners, but it doesn’t have to be. Writing a business plan lays out on paper or on screen your overall sense of:
Without a firm business plan, many creditors and potential business partners are unlikely to take your idea seriously. But apart from that, having a business plan helps you sit down and really consider what you’ll need to do to make your business idea a reality.
Another critical early step is deciding how you will structure your business entity. You have several different types of businesses to choose from, and each has its pros and cons. The most common entity types are sole proprietorships, general partnerships (GPs), corporations, and limited liability companies (LLCs).
Sole proprietorships and GPs are unincorporated businesses that are free and simple to set up. Taxation is straightforward, but sole proprietors and GPs leave themselves open to personal liability if something goes wrong with the business. For example, someone suing the business can go after the owner’s personal finances and assets.
The corporation structure offers liability protection to the business owner (called a “shareholder” in a corporation), so if the business ends up in trouble, the shareholders’ home, bank accounts, and other assets are protected. C corporations (the default form of corporation) come with a less-than-ideal tax setup that taxes income once at the corporate level and again on the personal tax returns of the shareholders.
Forming an LLC in West Virginia can be a best-of-both-worlds option. LLCs require more paperwork and setup costs than a sole proprietorship, but there are significant benefits as well.
One of the biggest advantages of an LLC is that it is a separate legal business entity from the owners, thus separating their personal assets from the company’s. By doing so, it provides personal liability protection if the business files for bankruptcy or gets sued. Yet you’ll still only get taxed once for income, on your personal tax return, just like with a sole proprietorship.
Business entities like LLCs and corporations do require registration with the state of West Virginia. We can file the paperwork to form an LLC or corporation for you with our business formation plans.
Estimating your startup costs is an important step to take before spending money on the business. It can be helpful to think of costs in three categories: one-time, fixed, and ongoing.
If your business grows and requires additional employees, plan to include estimates for payroll, healthcare costs, unemployment insurance, and workers’ compensation.
Marketing is another cost to consider. Think about how you’ll market the business, such as your company website, advertising (such as online, print, and broadcast), industry events, and/or hiring a marketing firm. Investigate what the costs of each marketing method will be.
Estimating your costs may take some time, it’s an essential step in the startup process. Be sure to include it in your detailed business plan.
Have you thought about your business name? Like most states, West Virginia has rules that every entrepreneur must follow when picking a company name.
For starters, no two businesses can have the same name within the state. The state says every company name must be distinguishable from one another and doesn’t allow duplicate titles.
To see if a name is available, conduct a business entity search on the West Virginia Secretary of State website. We walk you through the search process on our West Virginia business entity search page. This will help prevent legal issues, confusion among customers, and ultimately wasted time and money.
The state lets you reserve a name for a fee. If you don’t plan to register your LLC or corporation for a few months, this is an excellent way to hold the title so it won’t vanish. If you’d rather not do the paperwork for this process yourself, we have a business name reservation service that can handle it for you.
As you settle on a business name, you may also consider getting the matching domain name. If this feels outside of your wheelhouse, we can help you register a domain name.
If you’ve chosen a business structure such as an LLC or corporation, you’ll need to register your small business with the West Virginia Secretary of State. Many businesses are also required to get a federal employer identification number (EIN), which identifies your business to the Internal Revenue Service (IRS) and is used for filing taxes, hiring employees, etc. Note: Sole proprietors and some single-member LLCs with no employees may be allowed to use the owner’s Social Security number as their tax ID, though many experts recommend obtaining an EIN to help avoid identity theft.
Open a business bank account to avoid mixing business finances with personal. It creates a mess at tax time and makes it hard for you to see the true income and expenses of the business. It can also sometimes make your personal assets vulnerable by eroding the liability protections you would otherwise have from an LLC or corporation.
At this time, you can also consider applying for a business credit card to cover small purchases and start building your company’s credit.
Next, apply for any permits or licenses required for your business to legally operate. Permits and business licenses vary by industry, and they can be needed at the federal, state, and local levels. There’s no central authority to tell you every license and permit your business requires, so you’ll have to do some research or have someone like us do the research for you with a business license report.
Talk with a qualified insurance agent in West Virginia to learn what coverage your specific business may need or otherwise benefit from, such as workers’ compensation, general liability, and others.
Before officially opening your West Virginia business, it’s essential to think about how you’ll attract customers. By marketing your business, you make customers aware of your services and products. It’s your way to make the case for why someone should choose you over the competition.
Making a marketing plan is an important first step. It establishes a strategic roadmap to coordinate, deliver, measure, and analyze your marketing activities so you know where your marketing budget will best be spent.
A business website is necessary for most businesses, with pages that showcase your offerings, tell customers your business’s story, and have a way for them to get in touch.
Many do-it-yourself marketing tactics exist for getting the word out about your new company. For starters, open social media accounts on the channels where you believe your future customers are.
You can also add your business to free online directories, including Google My Business and Yelp. Both also include options for customer reviews, which can help as digital word-of-mouth marketing for your company.
Consider holding a grand opening and other events and inviting local media to attend. If your budget allows, seek out a marketing firm to get other ideas for increasing your visibility.
Finally, customize your marketing approach. While it makes sense for a home-based web design company in Huntington to market globally, an electrician in Point Pleasant will want to limit marketing efforts to a smaller area.
You’ll need to weigh many variables in deciding the kind of business you want to start in West Virginia. What are your own talents and skills? What businesses in your area seem to be thriving? Is there a customer need you can fill?
Timing also plays a major role. As of this writing, the COVID-19 pandemic is still very active, so perhaps a home-based business would be a better play than a brick-and-mortar store.
Here are some ideas to consider:
West Virginia has a business-friendly environment with a pro-business tax structure and an affordable cost of living. If you want to create a business, West Virginia could be a good setting.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.