You’ve got this amazing idea for a business and are eager to see it come to life. But, if you’re like many people, you might not know where to begin to make it a reality.
That’s where we come in. Our guide to starting a business in West Virginia is here to help by breaking down the important steps you need to take to get your business off the ground. We’ll walk you through everything, step-by-step, so that you can turn your great idea into a successful business..
Steps To Start A Business In West Virginia
Step 1: Choose a Business Idea
This may be an overly obvious statement, but choosing the right business idea is really important. Optimally, it should be something you’re interested in, but before you move ahead, it’s often a good idea to see what others think first. You can do this by making a simple version of your product or service to show to potential customers, asking people what they think, or doing a survey. This helps you test whether your idea is good and that people will like it before spending a lot of time and money.
You might already have a great idea, or you might still be thinking about it, but either way, you can find a lot of helpful information in our library of business ideas, which is full of details about different types of businesses, how much money you might need to start, helpful tips, and more.
Step 2: Write a Business Plan
Once a solid business idea is in place, it’s time to start working on the business plan. A business plan serves as a roadmap to guide you through the various stages of development, enabling you to make informed decisions and stick to your goals along the way.
The business plan is not only a necessary tool when approaching lenders and investors, but writing a business plan is also a great way to test on paper whether an idea for starting your business is feasible. In this sense, the business plan is your safety net. If working through a business plan reveals that your business idea is not feasible, it will save you a great deal of time and money.
Related: How to write a business plan
Step 3: Find the Money
While funding is at the top of the list of struggles business owners have when starting a business, there are various funding options available to entrepreneurs in the state, each with its own advantages and limitations.
One of the most common sources of funding is personal funds. This includes savings, investments, or any other money that you have access to. It’s important not to use up all of your personal funds in case it takes longer to get your business off the ground than expected.
Another option is conventional bank loans. These loans can be used for a variety of purposes, including start-up costs and expansion. However, they often require a personal investment, collateral, and good credit scores in order to qualify.
In conjunction with borrowing from lenders, the Small Business Administration (SBA) offers loan guarantees that can help businesses obtain financing. These guarantees reduce the risk for lenders and make it easier for small businesses to qualify for loans.
Microloan programs are another option available to small businesses in West Virginia. These programs provide small amounts of capital with fewer requirements than a traditional lender. They are often used by startups and entrepreneurs who need access to capital quickly but don’t have the resources or credit history required by traditional lenders.
The West Virginia Capital Access Program (WVCAP) is one of several microloan programs offered to businesses in the state.
Finally, investors can also be a great source of funding for businesses. Investors provide capital in exchange for equity in the company or some form of return on their investment, such as dividends or profits from sales of products or services offered by the company. Country Roads Angel Network and the West Virginia Jobs Investment Trust are two investment funds targeted at small businesses.
No matter what type of funding you choose, it’s important to do your research so that you can make an informed decision about which option is best for your business needs.
Step 4: Select a Business Structure
Our next step begins the process of formally forming the company, and to begin, a business structure (also called a legal structure or business entity) needs to be selected. A business structure is how a business is set up to conduct business. Choosing the right business entity is important because it can affect your taxes, legal liability, and ability to raise capital. There are four common types of business entities in West Virginia: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).
A sole proprietorship is the most basic form of business entity. It is owned and operated by one person, and there is no legal distinction between the owner and the business. The owner is personally responsible for all debts and liabilities of the business.
- Easiest to establish and maintain, with minimal paperwork and legal requirements.
- Complete control over the business and decision-making.
- Pass-through taxation, which means that profits are taxed as personal income.
- Unlimited personal liability, putting the owner’s personal assets at risk.
- Limited fundraising options, as selling ownership in the business isn’t possible.
- Business continuity is dependent on the owner.
A general partnership is similar to a sole proprietorship but has two or more owners. Each partner contributes to the business and shares in the profits and losses. Partners are personally responsible for all debts and liabilities of the partnership.
- Relatively easy to establish and maintain.
- Shared decision-making and responsibilities can lead to better business outcomes.
- Pass-through taxation, which means that profits are taxed as personal income for each partner.
- Unlimited personal liability for each partner.
- Potential for disagreements and conflicts among partners.
- Business continuity may be jeopardized if a partner leaves or dies.
A corporation is a separate legal entity from its owners. It can be owned by one person or many people. The owners are called shareholders, and they elect a board of directors to manage the corporation (who may just be the owner(s). The corporation is responsible for its own debts and liabilities, though a bank will likely require a personal guarantee from the shareholders to secure a small business loan.
- Liability protection for shareholders.
- Easier to raise capital through the sale of stocks.
- Business continuity is not affected by the death or departure of shareholders.
- More complex and expensive to establish and maintain, with specific legal and regulatory requirements to follow.
- Potential for double taxation, as both corporate profits and shareholder dividends may be taxed.
A Limited Liability Company (LLC) is a hybrid between a corporation and a sole proprietorship/partnership. It provides limited liability protection to its owners (called members) while allowing them to be managed like a sole proprietorship or a partnership.
- Limited liability protection for members (owners).
- Greatest flexibility in how the business is taxed.
- Flexibility in management structure.
- More paperwork and legal requirements than a sole proprietorship or general partnership.
- Potentially higher costs to establish and maintain compared to simpler business structures.
Related: How to form an LLC in West Virginia
Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular formation services include:
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Step 5: Register the Business
If you are planning to open a West Virginia business, there could be several licenses and permits that you will need to obtain. Some of the more common registrations include:
Business licenses: The state of West Virginia doesn’t have a general business license; however, many cities require a business license to operate.
Business Registration Certificate: The West Virginia State Tax Department requires all businesses to register for a Business Registration Certificate.
Obtain an Employer Identification Number (EIN): An EIN, also known as a Federal Tax ID Number, is required for most businesses that have employees, operate as a partnership or corporation, or file certain tax returns. The EIN is issued by the Internal Revenue Service (IRS).
Sales tax permit: Depending on your business type and activities, you may need to register for various state taxes, such as sales and use tax, employer withholding tax, and unemployment insurance tax. The sales tax permit registration is through the West Virginia State Tax Department.
Business name registration: Before a sole proprietorship or partnership can legally operate under a fictitious business name or DBA (Doing Business As), they will need to file a Certification of Trade Name Registration with the County Clerk’s Office in the county where the business is located.
Professional licensing: Some occupations, such as accountants, cosmetologists, landscapers, and massage therapists, require licensing in West Virginia. Various state agencies manage the licensing for specific professions.
Zoning: Before starting to operate a business (even if it’s home-based), be sure to check local zoning regulations before starting to operate out of a location.
Step 6: Open a Business Bank Account
After getting the business structure sorted and licensing in place, the next step is to open a business bank account. While the sole proprietorship or partnership can be operated with the owner’s personal bank account, it is important to separate business and personal finances for a number of reasons. First of all, by keeping business finances separate, they will be more organized and accurate, which will be appreciated at tax time.
Also, if you operate as a Limited Liability Company (LLC) or corporation, maintaining a clear distinction between your business and personal finances is required to preserve the limited liability protection these business structures provide. Commingling funds can lead to a situation called “piercing the corporate veil,” where a court might hold you personally liable for your business’s debts and liabilities.
Step 7: Hire Employees
Before hiring your first employee, it’s important to ensure that you have taken the necessary steps to comply with all applicable state and federal laws. This includes obtaining the proper licenses and permits, understanding applicable tax requirements, and familiarizing yourself with labor laws.
It’s important to note that there may be additional requirements depending on the size of your business and the industry you’re in, but in general, employers are responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.
Learn more about the steps to hiring your first employee in West Virginia
Step 8: Obtain Business Insurance
While most types of insurance aren’t required, proper insurance coverage is a good idea for safeguarding your business’s financial health and longevity. A few types of insurance many small businesses use include:
General liability insurance is perhaps one of the most common and important types of coverage for small businesses, as it helps protect against claims related to bodily injury or property damage caused by your business operations.
Workers’ compensation insurance is a type of insurance that is required by law for businesses with employees in West Virginia. This type of coverage helps protect employers from financial losses due to employee injuries or illnesses that occur while on the job.
Professional liability/E&O insurance can also be beneficial for businesses offering professional services, as it helps cover legal costs associated with errors or omissions made by your company.
These are a handful of important policies, but it’s important to remember that each business has unique needs when it comes to insurance.
Step 9: Set up an Accounting System
Setting up an accounting system and maintaining accurate financial records are important steps (though often overlooked) to ensure the long-term success of your business. A few reasons include:
Accurate tax reporting: Businesses in West Virginia must comply with federal, state, and local tax laws, which require tracking your income, expenses, and deductions. Poor financial management increases the risk of errors on your tax returns, resulting in potential audits from tax authorities.
Financial visibility and planning: Proper accounting and bookkeeping provide you with a clear understanding of your business’s financial health, allowing you to make informed decisions about budgeting, investments, and growth strategies. Regularly reviewing your financial records can help you identify trends, opportunities, and potential issues, enabling you to address them and optimize your business’s performance proactively.
Cash flow management: Accurate bookkeeping helps you monitor your business’s cash inflows and outflows, ensuring you have sufficient funds to meet your financial obligations, such as payroll, rent, and supplier payments. Effective cash flow management can help prevent financial crises and support the smooth operation of your business.
Related: Setting up accounting for a business
This material is property of StartingYourBusiness.com
Common questions when starting a business in West Virginia
What are the steps to starting an LLC in West Virginia?
There are three main steps to starting a Limited Liability Company in West Virginia. These include:
There are a few more details to learn about, so be sure to check out how to start an LLC in West Virginia.
How much does it cost to start an LLC in West Virginia?
The Secretary of State filing fee to form a West Virginia LLC is $100.
What licenses do I need to start a business in West Virginia?
The state doesn’t require a general business license, however, there are potentially several different licenses and permits a business will need to obtain before starting.
How do I buy goods for resale without paying West Virginia sales tax?
To buy goods at wholesale to resell in West Virginia, you first need to get a Sales and Use Tax Permit from the West Virginia State Tax Department. People often call this a seller’s permit or sales tax license. It lets your business sell products or services and collect sales tax on them.
There’s also something called a Certificate of Exemption. This is different from the Sales Tax Permit. It allows your business to buy products without paying sales tax on them, but only if you are going to sell these products to others.
So, in simple steps: first, get your Sales and Use Tax Permit so you can sell items. Then, get a Certificate of Exemption to buy products without paying tax, as long as you plan to resell those products.
West Virginia Small Business Resources
There are 109,300 small businesses in West Virginia, which is 98.8% of all businesses in the state,1 and 48.5% of West Virginia employees work for small businesses.2 Because of the economic impact of small businesses on the state, the state has invested a lot in various business support programs to help West Virginia businesses start, grow, and succeed. Some of these resources include:
- Small Business Administration (SBA): The U.S. Small Business Administration provides resources for starting, building, and growing their businesses.
- West Virginia Business Link: The WV Business Link connects entrepreneurs and small business owners with the necessary assistance, resources, and information for starting and growing their businesses in West Virginia.
- West Virginia Department of Economic Development: Provides resources and assistance for businesses in the state.
- West Virginia One Stop Business Portal: This state site facilitates the registration of your business with the West Virginia Secretary of State.
- West Virginia Small Business Development Center: The SBDC is a statewide organization aiding West Virginia entrepreneurs.
- West Virginia State Tax Department: This department is a key resource for registering your business to file and pay state taxes, ensuring that your business remains compliant with state tax regulations.