How to Start a Sole Proprietorship in West Virginia

Entrepreneurs with a business plan and who want to start a company in West Virginia have several business options. One is a sole proprietorship which is easy to start but does require a little bit of knowledge to do so properly. Let’s discuss sole proprietorships and how to get them off the ground in West Virginia.

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What is a sole proprietorship?

A sole prop is someone in charge of an unincorporated business by themself. They are the sole proprietor and can run the business the way they’d like.

There’s no formal paperwork to register a sole proprietorship with the state, but there may be business licenses that you’ll need to file for.

Examples of a sole proprietorship

  • Freelancer who is on a website like Fiverr or Upwork
  • Local clothing store owner
  • Freelance writers or editor working on their own or on a platform
  • Freelance artists selling their works at a local craft market or on Etsy

What qualifies your business as a sole proprietorship?

Whether you want to start an s corp or a sole proprietorship as a new business, it’s helpful to be aware of legal requirements in the state. In West Virginia, there is no formal setup process for owners, nor any fees required. To own a sole prop, all you need to do is begin the work process.

Sole proprietorship vs LLC

A sole proprietorship is an unincorporated business owned by a sole proprietor. There is no legal distinction between the owner and the business entity.

An LLC is a Limited Liability Company, a business structure permitted and protected by state statute. It defends owners from personal responsibility and liability while running their businesses.

Who is it best for?

A sole prop is best for small business owners with minimal personal assets. Those who don’t need to rely on an extensive network of liability protection will fare well with a sole proprietorship. In West Virginia, it’s ideal for a small business as it can be set up and dismantled easily if your business idea doesn’t work out. 

An LLC is better for larger companies with more to lose. It offers more defenses against the outside world and will serve better in the long run. LLCs are also not as easy to dismantle as a sole proprietorship, so they’re best for more established companies because of their increased asset protection, but note that they will cost more to start up and operate.

How to set up a sole proprietorship in West Virginia

If you want to set up a sole prop business structure and have complete control over your company in West Virginia, all you need to do is start working. From that point on, you have a sole prop. You don’t need to establish a separate bank account or employment identification number.

However, there are benefits to taking further action to name and establish your sole prop in the legal system of West Virginia. Let’s discuss setting up your sole proprietorship in West Virginia to help you bring your business endeavor to life.

Is there any formal paperwork filed to establish this type of business?

The incorporation of formal paperwork is necessary for many businesses but not for a sole prop. There is no legal paperwork necessary unless you want to file your business under a DBA. All taxes through the company are filed under your personal income tax.

Name your business

First, it’s helpful to come up with a business name. When you start a sole prop, it is automatically under your legal first and last name. However, you can also set up a DBA if you want something more personalized.

Let’s go over each naming technique. Different owners may prefer varying options for their sole proprietorship. 

Using your own name

First, you can name your own business with your first and last name. There are no further steps needed here; it is the automatic name of your sole prop and should be labeled as such on your taxes.

Some individuals, like artists, may prefer using your own name. It provides distinction right away. However, others may prefer using a DBA to prove their value to the client right from the start and avoid having to use their legal name for business dealings. 

Setting up a DBA

For maximum business profits, it sometimes helps to register your company under a DBA, or “Doing Business As” name. This trade name can be whatever you want and helps personalize your business. 

Many prefer trade names because they sound better to clients and help businesses seem more professional. You must register with the West Virginia Secretary of State, but the additional steps are worth it if you have a specific sole prop name in mind.

State licenses 

Once you have your name, it’s ideal to check for business forms. West Virginia does not require any paperwork, but your specific industry might. Check your job to determine if you need to complete any paperwork for your sole prop before settling in.

Usually, businesses selling food or alcohol require specific permits. Additionally, any business which involves healthcare will require your practice and employees to be licensed. Find the full list of businesses that need licenses on the West Virginia Business Portal

Pros

  • Simple setup process and minimal cost
  • No need to do complicated annual filings and paperwork
  • No formal business structure for restraint
  • No corporate business taxes
  • You can still hire employees if you need to.
  • You can open a business bank account, but it isn’t required

Cons

  • No ability to apply for government grants or benefits
  • Lack of ongoing business life in a sole prop startup
  • No legal protections for your business assets if something goes wrong
  • Unlimited liability for business debts, business taxes, and personal liability
  • Oftentimes it’s a struggle to get loans or other established means of financing.

FAQs

Do you need a business license to sell crafts in West Virginia?

If you own a separate business and want to sell crafts in West Virginia, tax.wv.gov states that you need a West Virginia business registration certificate. The rules may differ based on the type of entity you decide to own, but most small craft businesses should follow this request from the state.

How much does it cost to set up a sole proprietorship in the state?

There is no fee and no cost to set up a sole prop in the United States of America. All you need to consider are the tax rate, cost of supplies, startup fees for your business, and other personal items. You also will pay a fee if you register your company under a DBA name instead of your legal first and last name.

Does a sole proprietorship have to have a DBA?

For tax purposes, a sole prop does not have to be a DBA. If a sole proprietor does not register a DBA, the business remains under its legal first and last name. Those who want to use a DBA must register with the West Virginia Secretary of State and inform them of the establishing title.

What do you need as a sole proprietor?

As a sole prop legal entity, you don’t need anything to start a sole prop in West Virginia. All you need is to do business and provide no legal distinction between you and the company on your tax records. It doesn’t take anything more than your effort to bring a sole prop to life in West Virginia.

Do sole proprietorships need to be registered in West Virginia?

Sole props do not need to be registered in West Virginia, but they need to get a West Virginia business registration certificate from the West Virginia State Tax Department. It doesn’t take much effort to make a sole prop legal in West Virginia.

What is the owner of a sole proprietorship called?

A business owner, the owner of a sole proprietorship, is known as a sole proprietor. They are the only owner of the company, and they do not have a partner who began the business with them. This name specifically refers to the person who is in charge and the legal owner of the company.

How much can you write off as a sole proprietor?

As a sole proprietor, you can write off 20% on your taxes. This taxation rate only applies to specific proprietors, and this number includes adjustments. Ensure you do your research to decide what applies to you.

Can a sole proprietor write off a vehicle?

A sole prop can write off a vehicle if it legally qualifies as a business car. However, not all cars fall under this distinction. As a sole proprietor, it’s critical to determine if your car applies before writing anything off.

How does a sole proprietorship pay taxes? 

A sole proprietor is subject to pass-through tax methods, meaning they use individual tax forms and a Schedule C to report income or loss in one go to the IRS. Tax payments, tax returns, income tax, self-employment tax, and more are all filed under one system. There is no separation between the sole proprietor’s personal taxes and their business.

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