West Virginia Corporation Advantages and Disadvantages

West Virginia Corporation
Advantages and Disadvantages

West Virginia Corporation

West Virginia Corporation Advantages and Disadvantages

A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.

Advantages and Disadvantages of a West Virginia Corporation

Advantages of a Corporation

Shareholders have limited liability for the corporation's debts or judgments against the corporations.
Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
Corporations can raise additional funds through the sale of stock.
A corporation may deduct the cost of benefits it provides to officers and employees.
Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 - $75,000; 34% tax on income from $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.

Disadvantages of a Corporation

The process of incorporation requires more time and money than other forms of organization.
Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.

Federal Tax Forms for Regular or "C" Corporations

Form 1120 or 1120-A: Corporation Income Tax Return
Form 1120-W Estimated Tax for Corporation
Form 8109-B Deposit Coupon
Form 4625 Depreciation

West Virginia's 2008 Business Tax Climate Ranks 37th

West Virginia ranks 37th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Pennsylvania (27th), Ohio (46th), Virginia (14th) and Kentucky (36th).

West Virginia's Individual Income Tax System

West Virginia's income tax system is composed of five brackets with a top rate of 6.5%, kicking in at an income level of $60,000. Among states with personal income taxes, West Virginia's top rate ranks 20th highest nationally. West Virginia's 2005 individual income tax collections were $646 per person, which ranked 33rd highest nationally.

West Virginia's Corporate Income System

West Virginia's corporate tax structure consists of a flat 8.75% rate on all corporate income. Among states that tax corporate income, West Virginia's corporate rate ranks 11th highest nationally. In 2006, state-level corporate tax collections (excluding local taxes) were $293.12 per capita, which ranked 4th highest nationally.

West Virginia's Sales Tax Rate above National Median

West Virginia's state and local sales tax rate stands at 6%, which exceeds the national median of 5.4%. In 2005, state and local governments combined collected $1,225 per capita in general sales taxes, which ranks 25th highest nationally. West Virginia's gasoline tax stands at 31.5 cents per gallon, which ranks 13th highest nationally. West Virginia's cigarette tax stands at 55 cents per pack of twenty and ranks 39th highest nationally. The sales tax was adopted in 1933, gasoline tax in 1923, and the cigarette tax in 1947.

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