A corporation is owned by shareholders who hold a certain amount of capital stock, and this business structure is considered a separate legal entity by West Virginia and United States authorities. The purpose of a corporation is to distribute its profits to the shareholders after considering net income, losses, and taxes. The fact that authorities tax corporate income before shareholders receive their share of the profits creates a situation known as “double taxation.” In other words, the corporation pays tax once on its income before the shareholders pay additional tax on any profits they receive in the form of dividends. 

Despite this double-taxation, corporations offer numerous tax advantages – and they may benefit from special deductions and privileges not available to individuals or other business structures. Aside from these tax advantages, corporations offer their shareholders excellent protection from personal liability. As a general rule, in most circumstances, shareholders cannot be personally sued by plaintiffs for any alleged wrongdoing by the corporation. This allows shareholders to shield their assets in a way that would be impossible with many other types of businesses. That being said, corporations are relatively complex compared to other structures – requiring extensive record-keeping and reporting on an annual basis. 

The “default” corporate structure is a “C” corporation, or “C Corp.” This type of corporation is consistent with the description above. An “S” corporation, or “S Corp,” is slightly different, and its primary purpose is to avoid the double-taxation issue associated with a C Corp. Technically speaking, an S Corp is a tax designation rather than a business structure in its own right. Business owners can identify profits and certain losses as personal income or expenses by designating a company as an S Corp. This helps them avoid corporate tax rates. 

Since the West Virginia Tax Division identifies a corporate income tax rate of 6.5% and the federal government enforces a corporate tax rate of 11%, an S corporation designation could be advantageous in many situations. This is especially true when considering West Virginia’s personal tax rate may be as low as 3%. An S Corp provides many of the same general liability protections as a C Corp.