West Virginia LLC Taxes
For tax purposes, a West Virginia LLC looks much like a sole proprietorship or partnership. However, depending on the type of business, an LLC may be required to pay state excise taxes such as those imposed on beer and wine sales or health care services.
When an LLC is registered in West Virginia, it must file and pay state, federal, and local taxes. If an LLC fails to fulfill its tax obligations, the state may place a lien on the business’s assets or even dissolve it. Fortunately, there are steps an LLC can take to stay compliant with its tax obligations.
Most new businesses form an LLC as a pass-through entity for income tax purposes. This means the company doesn’t pay income taxes on its profits. Instead, the profit passes through to the owners/members and is reported on their tax returns. Members must pay self-employment taxes, which include Social Security and Medicare contributions. This is different from a corporation, which pays its own Social Security and Medicare taxes on its corporate profits.
How to Form a West Virginia LLC?
The first step in forming your LLC in West Virginia is to draft an operating agreement that details how your business will be run. This is a critical document that’s necessary to preserve the limited liability your LLC provides its members.
All Virginia LLCs must acquire an Employer Identification Number, or EIN—a nine-digit number that acts as a business’s Social Security Number. This is a requirement for all businesses that want to use the IRS’s electronic tax filing services, open bank accounts, and perform other functions. In addition, all multi-member LLCs must provide their EIN on their tax return. LLCs that elect to be taxed like C-corporations must also obtain an EIN.
For all other LLCs, the state treats them as pass-through entities, meaning they don’t pay state income tax but rather pass profits and losses to individual members who report them on personal tax returns. It’s also essential to carry sufficient liability insurance for the company and its owners, and that you obtain any other business permits required by the state or local authorities.
Most West Virginia LLCs are taxed as pass-through entities, meaning the business’s income is reported on the owner’s personal state-level return (Form IT-140). However, you can elect to be taxed as a corporation by filing Form 2553 with the IRS. This will change the way your LLC is treated for federal taxes and allow it to make distributions to its members without being subject to self-employment tax.
