This week we'll take a look at an interesting bill out of West Virginia, the Small Business and Entrepreneurship Act. West Virginia has passed a decent amount of legislation in the last few years working to invigorate the startup scene in the state. Let's dive in!
A Brief Look at Entrepreneurship in the United States
Entrepreneurship has been on a rise in the United States as more people are turning their passions and ideas into businesses. According to the Global Entrepreneurship Monitor 2021/2022 Report by Babson College, the total entrepreneurial activity rate (measurement of the rate of new and existing business ownership) was at 16.5% in 2021, up from 15.4% in 2020. The US Census Bureau data found that 4.3 million new business applications were filed last year, and 3.8 million have been filed so far this year. It also found the youth are a huge driving factor to increased rates of entrepreneurship, with 19% of 18-to-24-year-olds involved in entrepreneurship and 20% reporting entrepreneurial intentions.
When looking at the purpose behind many of their businesses, the report found that 68% of entrepreneurs prioritize the social and environmental impact of their businesses. Forty nine percent said they have attempted to minimize the impact of their business on the environment and 50% said they’ve taken action to maximize their social results.
A Brief Look at Entrepreneurship in West Virginia
According to the Entrepreneurship page on the state website, West Virginia boasts 111,000+ small businesses. These small businesses represent over 98% of West Virginian business and employ nearly half of all employees within the state. The site says "entrepreneurs and small business owners are the backbone and driving force behind West Virginia’s growing economy." The state aims to cultivate a "robust entrepreneurial ecosystem" to help entrepreneurs be successful, ensuring they can access the resources needed, when they are needed.
West Virginia also has the Young Entrepreneurs in Action video series, aimed to provide interested K-12 students with entrepreneurship education materials. The series contains age-appropriate lesson plans to help guide students. Also, there is the Governor's School of Entrepreneurship (GSE). The purpose of the school is:
"Using technology and creative minds, we intend to run a School of Entrepreneurship with teams working physically apart but mentally together.This summer, the Governor's School of Entrepreneurship (GSE) is looking for 50 young students who are excited about the possibilities of making the future better for themselves, our state, and the world we live in. Those students will work with some exciting professors and entrepreneurs as they explore the creative and business sides of running a business."
The GSE "exemplifies our strategy to create small businesses that will energize the economy of West Virginia, and we are attempting to foster that growth through fashioning an atmosphere of imagination, innovation, and creativity for our young potential entrepreneurs".
With all of this hype around entrepreneurs and small business in West Virginia, it is no surprise they have proposed and passed some key legislation to make it more accessible to all.
The Small Business and Entrepreneurship Act
West Virginia HB3305, or the Small Business Entrepreneurship Act, was introduced the beginning of this year. The bill aims to create the "Office of Entrepreneurship" within the Department of Economic Development. The office would employ an individual to promote policies and initiatives to support the growth of entrepreneurship in West Virginia. The office will also work with communities and stakeholders to provide information and technical support to entrepreneurs engaged in a new business within the state.
The bill puts forth different tax rates on new business income. The term "new business income" is defined as "any business income from a taxpayer that begins business operations in this state on or after January 1, 2023." It does not include any business income from a taxpayer that began business operations in West Virginia prior to January 1, 2023 or where the business was dissolved or otherwise terminated and reincorporated. The first $100,000 of new business income included in a taxpayer's West Virginia adjusted gross income after any subtraction provided would be reduced for the first through third tax years in which the taxpayer's business is in operation by 20%
Another focus of the office is to support and advise the Secretary of Administration with preparing a report with the Joint Committee on Government and Finance making recommendations on improving access and resources for new West Virginia businesses that have been in operation for less than three years on or before January 1, 2024. The report would include:
- The number of contracts awarded to businesses that have been in operation for less than three years
- The percentage of the number of contracts awarded to businesses that have been in operation for less than three years compared to the total number of contracts awarded
- The total dollar amount of all contracts awarded to businesses that have been in operation for less than three years
- The percentage of the total dollar amount of contracts awarded to businesses that have been in operation for less than three years compared to the total dollar amount of contracts awarded
The bill would also require the state to award five percent of the total number of state contracts to new businesses beginning July 1, 2023. "New business" is defined as "a business entity or organization validly licensed in the applicable laws of this state, whose headquarters or principal place of business is located and maintained in this state, and that begins operations in this state on or after January 1, 2023." The bill states further that the term "New Business" does not include any business entity or organization that dissolves or otherwise terminates business operations and reincorporates or otherwise reinitiates operations in this state on or after January 1, 2023. There is an exemption stating that the state may vary from this requirement if a determination is made that compliance is not feasible, but does not state what that process would be.
Also, beginning July 1, 2023, the fees charged by the Secretary of State would be waived for any new business or person establishing a new business, including home based businesses, for the first three years of business operations. Starting the fourth year of operation and for all years thereafter, businesses would be required to pay all fees to the Secretary of State in accordance with law.
Another Interesting Bill
The Young Entrepreneur Reinvestment Act, passed in May of 2016, waives filing fees for anyone under the age of 30 when establishing their business. It also eliminated sunset dates for expiration of fee waivers. The fees waived apply to articles of incorporation for limited liability companies, for-profit corporations, and non-profit corporations.
In West Virginia, business registrations of this type range between $25 to incorporate a domestic nonprofit and $100 to incorporate each other type of business entity exempted by this Act.
Cover Photo by Photo by Marvin Meyer on Unsplash
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