West Virginia Corporation Advantages and Disadvantages

West Virginia Corporation
Advantages and Disadvantages

West Virginia Corporation

West Virginia Corporation and Taxes

West Virginia Corporation - Articles of Incorporation must be drafted and submitted to the West Virginia Secretary of State, Corporations Division. Once articles of incorporation have been successfully filed, your West Virginia Corporation has been formed and this begins its existence as a West Virginia corporate entity.

Should I form a West Virginia Corporation?

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 Business Tax Climate Ranks 47th

West Virginia ranks 47th in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Neighboring states ranked as follows: Pennsylvania (22nd), Ohio (29th), Virginia (12th) and Kentucky (44th).

West Virginia�s State/Local Tax Burden is Higher than the National Average

In 1990 West Virginia had a slightly below-average tax burden (10.0% compared to a national average of 10.3%). Since then, tax collections have risen substantially, faster than income in most of the past 14 years. Estimated now at 10.6% of income (the 8th highest in the nation), West Virginia�s state/local taxes are higher than the national average of 10.0%.

West Virginia Top Individual Income Tax Rate Fairly High

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. West Virginia's 2002 individual income tax collections were $573 per person (31st highest nationally).

Since most small businesses are either S Corporations or partnerships or sole proprietorships, they pay their business taxes at the rates for individuals. This makes West Virginia's taxes on small businesses fairly high compared to most other states.

West Virginia�s Corporate Income Tax Rate is Among the Highest in the Nation

West Virginia�s corporate tax structure consists simply of a flat 9% rate on all corporate income. West Virginia also imposes a "Business Franchise Tax" of $0.70 per $100 of taxable capital, or a minimum of $50. This tax ranks the state in a tie for 9th in terms of highest corporate tax rate. Despite the high rates, West Virginia�s corporate income tax collections are among the lower 50% of states. In 2000, corporate tax collections in West Virginia totaled $120.44 per capita.

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