West Virginia may not be on the short list of prime entrepreneurial destinations, but the Mountain State is home to a small, yet dedicated startup and innovative technology community focused on boosting the state’s reputation nationwide.
The state’s affordability, ranked 8th in the nation by U.S. News & World Report, makes it easy for budding small business owners to find a foothold in the state, allowing them to focus on important aspects of their business, rather than on cash flow. West Virginia’s easygoing financial climate contributes to the state’s above average early startup survival rate and new entrepreneur opportunity share of entrepreneurs.
To aid you in your new venture, we’ve produced the definitive guide to starting a business in West Virginia, covering all the key steps of turning your business idea into a reality.
West Virginia small business statistics at-a-glance
- 113,410 small businesses are active in West Virginia, accounting for 98.9% of businesses in the state.
- 275,145 West Virginians are employed by small businesses, which is 49.2% of the city’s workforce.
- The number of small business proprietors in West Virginia increased by 1.7% in 2017.
- Healthcare and social assistance is West Virginia’s leading small business employer industry, followed by accommodation and food services, and retail trade.
- 80.15% of West Virginia startups survive beyond their first year of existence, which is above the national average.
- West Virginia startups create 3.06 new jobs in their first year, on average.
- 90.40% of West Virginia entrepreneurs create a business by choice, rather than necessity, which is the 6th highest rate in the nation.
- Tax Foundation ranked West Virginia 23rd in its 2020 Business Tax Climate Index.
Starting a business in West Virginia in 12 steps
1. Develop an idea
Every successful business starts with a good idea. Ask yourself these questions:
- Which product or service can your business provide that doesn’t already exist on the market?
- How does your business idea refine an existing product or service?
Determine your personal strengths and interests: developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary in addressing the myriad challenges you’ll face in getting your business off the ground.
Figure out how to market your expertise: if your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.
2. Do the research
Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:
- Is there a demand for your product/service in West Virginia?
- Who is your target market?
- Do existing businesses in West Virginia offer a similar product/service?
- What makes your business unique compared to the competition?
Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. Be patient: you’ll only want to proceed with the next steps after determining that a niche exists in the West Virginia market for your business idea.
3. Draft a business plan
Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.
Your business plan ought to include the following sections:
- Executive summary – An overview of your business and why it will be successful
- Description of business – Explain the advantages of your business and the problems it solves
- Market research – Provide research on your industry, target market, and potential competitors
- Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
- Product or service description – State what you are selling or offering
- Marketing plan – Explain your strategy for attracting customers
- Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
- Financial forecast – Data and balance sheets providing a financial forecast for your business
- Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.
4. Secure funding
Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.
If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in West Virginia.
An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.
Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors. West Virginia is home to a small, yet active investment community.
West Virginia Angel Investors and VCs
- Country Roads Angel Network – An accredited angel group that provides seed-stage funding and mentoring for West Virginia based startups.
- West Virginia Growth Investment, LLC – An investment fund focused on West Virginia startups that is currently accepting applications from entrepreneurs through the Gust application.
- Tri-State Angel Investment Group – A Kentucky-based angel investment group that provides funding for startups in the tri-state region of Kentucky, Ohio, and West Virginia.
Additional Investor Resources
- AngelList: West Virginia Angel Investors – A directory of over 4,900 investors seeking investment opportunities in West Virginia startups. Individual bios include an investor’s professional background, past investments, and fields of interest.
5. Decide on a legal business entity
The form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:
- Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business. A partnership is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
- LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.
Nowadays, LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.
You may want to consult with an attorney to help decide which entity works best for your business.
6. Register your business
Once you settle on a business structure, you can register your business with the state of West Virginia Secretary of State. Depending on whether you choose to form a sole proprietorship, an LLC, or a corporation, this process follows different steps.
For sole proprietorships
Sole proprietors operating under their own name in the state do not need to file with the state government, however, those operating under an assumed name are required to file a trade name registration with the Secretary of State.
First, contact the West Virginia State Tax Department at 304-558-3333 to ask if your assumed business name is available for use in the state.
Next, create an account with the WV One Stop Business Portal, and submit your trade name application online. Filing the application is free of cost.
For LLCs and corporations
The first step in forming either of these two business entities in West Virginia is appointing a registered agent to handle process notices and other government correspondence on your business’s behalf. The agent must be an individual or firm authorized to do business in West Virginia and have a physical address in the state.
Next, perform a search using the West Virginia business name database to verify that your business name is distinguishable from others in the state. If your name is free to use, you can file the appropriate documents to form your business.
To form an LLC in West Virginia, you must file Articles of Organization with the West Virginia Secretary of State. Filing can be done online, or through the mail. The filing fee is $100.
To form a corporation in West Virginia, you must file Articles of Incorporation with the West Virginia Secretary of State. You can file the articles online through the WV One Stop Business Portal, or by using postal mail. The filing fee is $100.
7. Acquire federal and state tax IDs
Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.
Each state has its own laws and taxes regarding businesses. Consult this guide produced by the West Virginia Tax Department for information on state taxes businesses must pay.
All West Virginia businesses must register with the State Tax Department and acquire a business registration certificate before operating. Visit the WV State Tax Department: Business Registration page for instructions on how to register, and a directory of the appropriate forms. After registering, you may report and pay state taxes online.
8. Open business banking and credit accounts
Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.
It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.
Banks and credit unions operating in West Virginia good for small businesses
9. Get the necessary licenses and permits
Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.
In West Virginia, most businesses require a local business license issued by the city or county in which the business is located, while many businesses require a specialty license if their occupational category is one of those regulated by the state.
Visit WV One Stop Business Portal: Occupational, Professional, and Special Licenses for information on the local and specialty licenses you’ll need to operate legally in the state, along with links to where to apply.
10. Choose a location
Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?
Our choice for the best place to start a business in West Virginia is Morgantown, a picturesque community located along the banks of the Monongahela River. The city of 30,000 (metropolitan area population: 140,000) offers an affordable cost of living and housing prices and is home to West Virginia University.
11. Get insured
No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged, or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.
Required forms of insurance:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business owned properties and possessions as a result of fire, theft, or storm.
- Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.
12. Develop an internet presence
Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:
- Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
- Create profiles on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile for your business
- Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor
West Virginia small business resources
- West Virginia One Stop Business Portal – Register your business with the West Virginia Secretary of State.
- West Virginia State Tax Department: Business Registration – Register your business to file and pay state taxes.
- West Virginia One Stop Business Portal: Licenses, Permits, and Renewals – Learn about and apply for local and specialty businesses issued in the state.
- West Virginia Small Business Development Center – A statewide organization dedicated to giving West Virginia entrepreneurs a leg up through free consultation, access to funding, and a number of other services.
- NFIB: West Virginia – The leading U.S. small business advocacy organization’s West Virginia page. Learn about pressing issues facing WV entrepreneurs.
- TechConnectWV – An organization focused on boosting the West Virginia startup and technology scene. The website features the latest business news, profiles notable WV companies, and highlights upcoming events of interest to members of the state’s innovation economy.
- SCORE WV – The West Virginia chapter of the nation’s leading business mentoring network, based in Charleston.
- HADCO – An accredited economic development organization dedicated to attracting new businesses to Cabell and Wayne Counties.
- WV Hive – A small business incubator and accelerator with offices in Beckley, Summersville, Montgomery, Lewisburg, and Hinton.
- West Virginia Wood Technology Center – A unique organization offering work area, training programs, and a business support center for woodworking businesses in the state.