Articles of Organization

Forming your new West Virginia LLC means that you have to file articles of organization. The articles of organization must be executed (signed) by one or more members and delivered, along with an exact copy and the $100 filing fee, to the Corporations Division of the Secretary of State’s office. The articles must include:

• The LLC’s name
• The LLC's duration (may be “perpetual” or for a certain period of time)
• The address of the initial designated (called “registered” in most states) office
• The name and address of the initial registered agent
• The name and address of each organizer authorized to execute instruments on the LLC’s behalf
• Whether the company will be managed by a "manager," and if so, the name and address of each initial manager
• Whether any member(s) are to be liable for the LLC's debts and obligations

Your LLC is considered officially “organized” once the original and a copy of the articles of organization are delivered with the fee to the Secretary of State’s Corporations Division. The articles can also list other items—even ones that are included in the operating agreement—if the members so desire, as long as they don’t conflict with state law.

Registered Agent and Office

A West Virginia LLC must have a registered agent in the state—someone to receive official state legal and administrative correspondence on behalf of the LLC. The registered office may be—but is not required to be—the LLC’s place of business.

The LLC’s registered agent may be an individual West Virginia resident or an in-state or out-of-state corporation or LLC authorized to conduct business in the state.

Operating Agreement

Another critical document is the LLC’s operating agreement, which can be changed by the members as set forth by the agreement itself or applicable state law. Having an operating agreement is not legally required by the state, but it’s a vitally important internal document that sets forth how the LLC will run.

The operating agreement needs to list the LLC’s members, how much each one has invested, how any profits will be distributed, and how much relative weight each member has when voting.

The operating agreement may also include requirements for meetings (notice, quorum, voting rules, etc.) and similar functions, but it doesn’t have to. Frequently, though, it does restate operating constraints and allowances already contained in state law and policy.

Membership in the LLC

A West Virginia LLC must have at least one member, and each member must be a natural person or a recognized business entity. A member can acquire an interest in proportion to their contribution, by the consent of all members, or in some other manner provided for in the articles of organization or operating agreement.

Becoming a member usually requires a contribution of cash, property, services rendered to the LLC, a promissory note or obligation to contribute one of these, or an assignment of a current member’s interest.

An LLC member can only resign as permitted in the LLC’s operating agreement. A member’s resignation is considered “wrongful” if he or she is expelled by a court order before the LLC’s expiration, or if he or she is dissociated due to bankruptcy (again, before the expiration of the LLC). If the member is a business entity and not an individual, willfully dissolving or terminating the member/entity’s existence is also considered a wrongful resignation. An LLC can pursue legal remedies against a former member who resigns wrongfully.

Unless the articles of organization or the operating agreement state otherwise, managers are to be elected by the members, and managers can be removed and vacancies filled by a majority vote of the members. Members’ votes are weighted proportionate to their contributions to the LLC.

Ongoing Requirements

A West Virginia LLC must deliver a report each calendar year between 1 January and 1 April to the state Secretary of State that lists the following:

• The LLC’s name and the state or country under whose law it is organized
• The address of its designated office, if any, and the name and address of its agent for service of process in this state
• The address of the LLC’s principal office
• The names and addresses of manager(s)
• The name and address of each member having authority to execute instruments for the LLC.

Additionally, each West Virginia LLC must keep the following records open for inspection at its office:

• Information about the company's business or affairs reasonably required for the proper exercise of the member's rights and performance of the member's duties under the operating agreement or law
• Information about the LLC's business or affairs, except to the extent the information demanded is unreasonable or otherwise improper under the circumstances
• A copy of the LLC’s operating agreement, if any

Dissolution

A West Virginia LLC is dissolved when any of the following events occurs

• Event(s) or a time specified in the articles of organization or operating agreement
• Written agreement by the number or percentage of members required by the operating agreement to dissolve
• Event or court order that makes it illegal for the LLC to continue
• When a member or manager dissociates, unless the business is continued within 90 days

Taxes

An LLC by its nature does offer some tax advantages over a corporation structure, including access to more deductions, since the LLC is not required to be a separate tax entity in the same way as a corporation. Instead, it is considered a “pass-through entity” for tax purposes, meaning LLC owners report business profits and losses on their individual tax returns.

West Virginia's personal income tax system is made up of five brackets with a top rate of 6.5 percent that kicks in at an income level of $60,000. Among states with personal income taxes, West Virginia's top rate ranks 18th highest nationally.

Articles of Incorporation

A new corporation’s articles of incorporation must be filed with the West Virginia Secretary of State before it can conduct business in the state. There must be at least one incorporator, who can be a natural person or a corporate entity, and does not have to be a corporate director, officer, or shareholder. The incorporator signs the articles of incorporation and then files them with the Secretary of State. The articles of incorporation must include:

• The general type of business the corporation will conduct (this provision can, however, end with a general statement such as "including the transaction of any or all lawful business for which corporations may be incorporated under West Virginia law."
• The number of shares the corporation is authorized to issue and the par value of each share, or a statement that all shares are without par value
• The street address of the corporation's initial registered office
• The name of its initial registered agent at that office

West Virginia also permits optional provisions to be included in the articles of incorporation (as long as they are consistent with state law), such as:

• The names and addresses of the initial directors
• Provisions for managing the business and regulating the affairs of the corporation
• Regulations regarding the powers of the corporation, board of directors, or shareholders
• A provision eliminating or limiting the personal liability of a director or officer to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director

The incorporation fee has three parts: first, a registration fee of $50; second, an “attorney-in-fact” fee (the amount of which depends on the month in which you file your articles); and third, a license fee.

The amount of the license fee depends on the value of the shares you authorize in your articles and the month when your articles are received for filing. To pay the smallest license fee, keep the authorized capital of your corporation at or below $5,000. For par value shares, authorized capital simply means the number of shares authorized in your articles multiplied by the par value amount of each share. Shares without par value are assumed to have a par value of $25 per share for purposes of this calculation.

Registered Agent and Office

West Virginia corporations must maintain a registered agent within the state—a person or office appointed to receive official state administrative and legal correspondence. The agent must have the same business office address as the registered office and be either an individual living in the state a business entity with authority to transact business in West Virginia.

The corporation’s registered office may be the same as any of the corporation’s places of business.

Bylaws

A corporation’s bylaws are very important because they lay out the corporation’s basic operating principles and processes. A West Virginia corporation must maintain a copy of its bylaws at its main executive office, but is not required to file them with the state.

The incorporators or board of directors should approve the corporation’s bylaws at their first meeting—insuring that they don’t conflict with either state law or the articles of incorporation—and keep them updated as time goes on. The bylaws should, at a minimum, include:

• What authority directors have, how many there are, and how long they serve
• Duties and responsibilities of officers and how long they serve
• How consensus on major decisions is reached with and without meetings
• How, when, and where shareholders and directors meetings are held
• How stock is issued
• Requirements for providing annual financial information to shareholders

Directors and Officers

The corporation’s board of directors has the responsibility for making major corporate decisions. The board must consist of one or more individuals, with the number specified in the articles of incorporation or bylaws. If the board of directors has the power to change the number of directors, the board may increase or decrease the number of directors by 30 percent, but only the shareholders may increase or decrease the number of directors last approved by the shareholders by more than 30 percent.

The articles of incorporation or the bylaws may specify a variable range for the size of the board of directors by establishing a minimum and maximum number of directors. If a variable range is established, the number of directors may be specified or changed within the minimum and maximum by the shareholders or the board of directors.

After shares have been issued, only the corporation’s shareholders are allowed to change the range of the board’s size, change from a fixed- to a variable-range size board or vice versa.

Officers of the company—who run the day-to-day affairs of the organization—must be natural persons and may be listed in the bylaws or elected by the board. An officer may appoint other officers in accordance with the bylaws and the volte of the board of directors. At least one officer must authenticate records for the corporation, as well as prepare minutes of directors’ and shareholders’ meetings. An officer may hold more than one office in the corporation unless otherwise prohibited by law.

Required Reports

An annual return must be filed with the West Virginia Tax Commissioner by July 1st of each year. The return must include:

• The address of the corporation's principal office
• The names and addresses of the officers and directors
• The name and address of the person on whom notice of process may be served
• The name and address of the corporation's parent corporation and of each subsidiary of the corporation licensed to do business in the state
• The county or county code in which the principal office address or mailing address of the company is located in;
• The corporation's business class code; and
• Any other information the tax commissioner considers appropriate.

Unless unanimously waived by the shareholders, a West Virginia corporation must mail financial statements to its shareholders within 120 days of the end of each fiscal year. The statement must include a balance sheet, an income statement, and a statement of changes in shareholders' equity for the year, unless that information appears elsewhere in the financial statements.

Additionally, certain types of businesses (such as health care and real estate) are required to obtain a license and pay a fee to operate in West Virginia.

Taxes

West Virginia's corporate tax structure consists of a flat 8.5 percent rate on all corporate income. Among states that tax corporate income, West Virginia's corporate rate ranks 11th highest nationally.

West Virginia recognizes “subchapter S” corporation or “S corporation” status, where a corporation chooses to be treated as a pass-through entity for tax purposes. This means that the tax-related information for the “S corp” is filed as part of the owner’s individual income tax and is taxed at the appropriate individual rate.