File a West Virginia S Corp

If you’re thinking about starting an S corporation in West Virginia, you’re looking at a tax status that might bring some significant tax benefits your way. This choice is particularly interesting for those running a limited liability company (LLC) in the state. Usually, the whole income from an LLC is subject to self-employment taxes, but when you opt for S corp status, you get to shake things up a bit. This setup allows you to draw a salary from the business, and here’s the kicker: only this salary portion will face self-employment taxes. Any extra income you take home won’t be taxed the same way, potentially offering a nice boost to your take-home earnings.

This introduction aims to guide you through initiating an S corp in West Virginia, exploring how this tax status can help ensure your business makes the most of its tax situation while staying aligned with all the legal requirements.

S Corporation Requirements and Limitations 

Without filing Form 2553 your business entity will default to C Corp status. That said, if you properly file the form with the IRS, your West Virginia S Corp will be formed. Bear in mind that S Corps have certain limitations imposed by the IRS when they are created from a C Corp. The following are the IRS restrictions on S Corps when the foundational entity is a C Corp:

• S Corps can only have one class of stock
• S Corps can have a maximum of 100 shareholders
• Be a domestic business
• Generally only natural persons who are U.S. citizens, or certain trusts or estates, can be S Corp shareholders
• Not be an ineligible corporation, including insurance companies, domestic international sales corporations, or certain financial institutions

The benefit of properly creating your S Corp with the Internal Revenue Service is that it retains the limited liability protection of a C Corp but has the pass-through tax treatment of a partnership.

What to know before creating an S Corporation in West Virginia

When you create a business corporation in West Virginia, it’s a C Corporation by default until you make it an S Corporation.  C Corporations and LLCs might miss out on certain tax benefits if they don’t elect S Corporation status. However, your business has to follow certain rules before it can become a Florida S Corp. 

Form 2553

If an S Corporation is the right choice for you, you need to choose when to file the form. You normally have only two times you can file it, and they are: 

• Within two months and 15 days after the start of the tax year when you want your S Corp status to apply
• Any time before the start of the tax year when you want your S Corporation status to apply

Sometimes you can file it late, but that often requires additional paperwork and proof that your late filing was due to a reasonable cause. 

What’s the difference between an S Corporation and a C Corporation?

When you file an S Corp tax election with the IRS it is treated as a partnership rather than a C Corp for federal tax purposes. That said, your S Corp still retains all the benefits of a traditional C Corp, but also gets the benefits of a general partnership (e.g., pass-through taxation). But the differences between an S Corp and a C Corp don’t stop there. Following are other important differences between S Corps and C Corps:

• S Corps can have only one class of shares.
• S Corps can have a maximum of 100 shareholders. 
• Generally, only natural persons who are U.S. citizens can be S Corp shareholders.

Further, all S Corps start as C Corps. To change over to an S Corp, you need to file Form 2553 with the IRS. This form will elect partnership tax treatment rather than traditional corporate tax treatment for your S Corp.

What are the requirements to create an S Corporation? 

To form an S Corporation, you have to operate within the limitations we listed above and file the proper paperwork. In addition to the basic state filings for all corporations and LLCs, the main part of your West Virginia S Corporation filing requirements is submitting Form 2553 to the IRS.

To properly submit this form, your business needs to have an Employer Identification Number (EIN). We can help you get your EIN in next to no time with our Employer ID Number Service. 

How to Create an S Corporation in West Virginia

A West Virginia S Corporation is itself not an entity but rather springs from an established C Corp or LLC. As a tax election under Subchapter S of the Internal Revenue Code, an S Corp must attach to a foundational entity (i.e., your C Corp or LLC). As such, you first need to create a standard corporation or an LLC on which your S Corp can stand. Follow these West Virginia S corporation requirements to create your C Corp or LLC foundational entity:

S-Corp Election Steps for LLCs

For detailed formation steps, see our West Virginia LLC formation guide.

• Step 1 – Choose a name
• Step 2 – Appoint an Agent of Process
• Step 3 – Elect Directors or Managers
• Step 4 – File Articles of Incorporation or Articles of Organization
• Step 5 – Apply for S Corp status with IRS Form 2553

S-Corp Election Steps for Corporations

For detailed formation steps, see our West Virginia Corporation formation guide.

• Step 1 – Name Your West Virginia Corporation
• Step 2 – Appoint Directors
• Step 3 – Choose a West Virginia Registered Agent
• Step 4 – File the West Virginia Articles of Incorporation
• Step 5 – Create Corporate Bylaws
• Step 6 – Draft a Shareholder Agreement
• Step 7 – Issue Shares of Stock
• Step 8 – Apply for Necessary Business Permits or Licenses
• Step 9 – File for an EIN and Review Tax Requirements
• Step 10 – Submit Your Corporation’s First Report
• Step 11 – Apply for S Corp status with IRS Form 2553

File Form 2553 to turn business into an S Corporation

Form 2553 is what makes your foundational entity (corporation or LLC) into West Virginia S Corp. Before doing any filing with the Internal Revenue Service be sure to review the instructions for the form to make sure you meet the S corporation filing requirements. Lastly, check that you satisfy the tax filing and registration requirements for West Virginia.

Pros and cons of creating an S Corporation

Once you commit to a foundational entity, that decision will last for the life of your business. As such, we have created a list of pros and cons to help you weigh your decision about creating an S Corp. 

Pros

• Limited liability protects your personal assets
• Pass-through taxation
• Favorable tax characterization of income
• Permits the cash method of accounting

Cons

• Increased reporting and maintenance requirements
• Tight IRS tax qualification requirements
• Restrictions on shareholders
• Restrictions on shares
• Increased IRS scrutiny
• Less flexibility in allocating income and loss

We offer additional information in our different business structures guide. In that guide, we get further into the nitty-gritty and flesh out some other considerations that might help you.

S Corp Tax Calculator

The S Corporation tax calculator below lets you choose how much to withdraw from your business each year, and how much of it you will take as salary (with the rest being taken as a distribution.) It will then show you how much money you can save in taxes.

Disclaimer: The savings estimate provided by this tool is for informational purposes only and should not be considered financial, tax, or legal advice. Actual savings may vary depending on individual circumstances and other factors. We recommend consulting with a qualified tax or legal professional before making any decisions regarding your business entity. ZenBusiness, Inc. is not responsible for any actions taken based on the information provided by this tool. Use of this tool does not establish any client relationship with ZenBusiness, Inc.

Check out how to form and Scorp in these states:

• File a Virginia S Corp
• File a Wyoming S Corp

Get help establishing a West Virginia LLC with S corp tax election

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