West Virginia Kept the 1996 Buyout and Then Rewrote Its Veil-Piercing Rule
Chapter 31B of the West Virginia Code is still the 1996 uniform limited liability company act, which means it still contains the provision most states deleted when they moved to the revised act. Section 31B-7-701 requires the company to purchase the distributional interest of a member of an at-will company for its fair value as of the date of dissociation. Section 31B-6-602 supplies the other half: unless the operating agreement says otherwise, a member may dissociate at any time, rightfully or wrongfully, by express will.
West Virginia then added something no uniform act contains. Section 31B-3-303 was reenacted in 2022 with an express statement that the Legislature intended to modify the veil-piercing analysis adopted in Kubican v. The Tavern, LLC, and subsection (d) now applies that analysis only where the company is not adequately capitalised for the reasonable risks of the undertaking and does not carry liability insurance with minimum limits of $100,000.
None of this is filed. The Secretary of State takes articles of organization and a report and has no channel and no fee for an operating agreement. General patterns are set out in the operating agreement essentials guide; the transactional page for this state is West Virginia operating agreement.
What chapter 31B supplies when nobody wrote anything down
Money splits by head. Section 31B-4-405(a) requires distributions made before dissolution and winding up to be in equal shares. A member who funded the business and a member who funded none of it receive the same amount.
Votes split by head too. Section 31B-4-404(a) gives each member of a member-managed company equal rights in management, with any matter decided by a majority of the members.
Twelve decisions need every member. Section 31B-4-404(c) fixes the list, and three entries matter most: making an interim distribution, admitting a new member, and using company property to redeem an interest subject to a charging order.
The company is at will unless the documents say otherwise. A company is a term company only where the operating agreement or articles specify a definite term or a particular undertaking. Silence means at will, which switches on both the buyout and the dissolution rule.
Loyalty cannot be eliminated. Section 31B-1-103(b) prevents the agreement from eliminating the duty of loyalty, unreasonably reducing the duty of care, eliminating the obligation of good faith and fair dealing, or unreasonably restricting access to records, though it may identify categories of activity that do not violate loyalty if not manifestly unreasonable.
One member, a permissive agent rule, and a creditor section with no exclusivity clause
Two features of the West Virginia act surprise owners arriving from elsewhere. The first is section 31B-1-108, which provides that a limited liability company and a foreign limited liability company authorised to do business in the state may continuously maintain an office and an agent for service of process. The word is may. West Virginia does not compel a company to appoint a registered agent, and section 31D-5-501 uses the same permissive language on the corporate side, though most companies appoint one anyway because service and notice reach them faster.
The second is section 31B-5-504. It creates the charging order and makes it a lien, allows the court to order foreclosure of that lien at any time, and permits redemption with company property only where the operating agreement allows it. What it does not contain is any statement that the charging order is the exclusive remedy. Several neighbouring acts carry that sentence; chapter 31B does not, which puts a West Virginia member's interest at the weaker end of the national range. Federal and banking treatment is in the single-member LLC guide, with state detail on the West Virginia single-member LLC page.
Ten Clauses, Written Against Chapter 31B
Section 31B-1-103(a) lets all members regulate the affairs of the company and govern relations among themselves, and subsection (b) marks the boundary. In West Virginia the drafting has more to do than in most states, because three separate defaults can each end the company or empty its bank account.
West Virginia at a glance
| Question | What W. Va. Code chapter 31B says |
|---|---|
| Governing act | West Virginia Uniform Limited Liability Company Act, W. Va. Code chapter 31B |
| Required by statute? | No. Section 31B-1-103 is permissive |
| Form accepted | Written or otherwise. The statute says it need not be in writing |
| Filed with the state? | Never. No form, no submission, no fee |
| Default voting | Equal rights per member, majority of the members, section 31B-4-404 |
| Default distributions | Equal shares, whatever the contributions were, section 31B-4-405 |
| Quitting | A member may dissociate at any time by express will, section 31B-6-602 |
| What that costs | The company shall purchase the interest at fair value if at will, section 31B-7-701 |
| Charging order | Foreclosure available at any time, and no exclusivity clause in the act |
| State fees you do pay | $100 to form, $25 for the annual report. Nothing for the agreement |
1. Members, percentages, and the distributional interest
List each member with a stated percentage and use the statute's term. A distributional interest is the interest in distributions alone, and it is what a transferee or a foreclosure purchaser ends up holding. West Virginia publishes no member detail, so this schedule is the only record a bank or a buyer can rely on.
2. Contributions, and the enforceable promise
Record the form, date and agreed value of every contribution, and note that section 31B-4-405 ignores the record when it splits the money. Section 31B-4-402(b) also makes a contribution obligation enforceable notwithstanding death or disability, so document promised contributions as carefully as delivered ones.
3. Management, and the agency rule behind it
A company is member-managed unless the operating agreement provides otherwise, and section 31B-3-301 then governs when a member's or manager's signature binds the company. Define who may sign, for what categories, up to what amount and with what approval, and set the manager's term, compensation and removal procedure.
4. Weighting the vote, and pruning the twelve-item list
Tie votes to ownership if that is the intention, since section 31B-4-404(a) counts heads. Then work through subsection (c). Interim distributions sit on the unanimity list, so in a four-member company one holdout stops everyone being paid, and so does the redemption of an interest under a charging order.
5. Allocations, distributions and a tax draw
Separate the allocation of taxable income from the distribution of cash, displace the equal-shares rule, and add a mandatory tax distribution. Section 31B-4-405(c) gives a member entitled to a distribution the standing of a creditor of the company for that amount, which is worth knowing before a distribution is declared and then deferred.
6. Transfers, and the redemption the statute conditions
Sections 31B-5-501 through 31B-5-503 make a distributional interest transferable and limit what the transferee receives. Add consent requirements, a right of first refusal, permitted estate transfers, and a mandatory purchase on death, divorce or bankruptcy. Then address section 31B-5-504(c)(3) expressly, since company property may redeem a charged interest only if the operating agreement permits it.
7. The buyout clause, and whether to become a term company
This is the West Virginia clause. Section 31B-6-602 gives a power to dissociate at any time unless the agreement says otherwise, and section 31B-7-701 then obliges an at-will company to purchase the interest at fair value. Three routes exist: restrict the power to dissociate, specify a definite term or particular undertaking so the company is a term company, or keep the buyout and define the valuation method, discounts, instalments and interest rate.
8. Dissolution, and the ninety-day continuation vote
Section 31B-8-801(b)(3) is the provision most often missed. Dissociation of a member of an at-will company dissolves the company unless, within ninety days, the remaining members entitled to a majority of distributions and a majority of future distributions agree to continue, or the operating agreement states a right to continue. One sentence in the agreement removes the risk entirely. The filing sits on the West Virginia dissolution page, and an administratively dissolved company works through reinstatement.
9. Tax classification, and the reporting cycle
Record the federal classification and test the allocations against it, since an S corporation election cannot carry preferred returns or special allocations. Section 31B-1-108 carries the report fee and, as amended in 2026, allows an entity to elect biennial reporting instead of annual reporting. The West Virginia annual report page covers the deadline and the consequence of missing it.
10. Amendments, insurance, and the record that answers section 31B-3-303
Set the amendment vote, since section 31B-4-404(c)(1) otherwise requires every member. Then record the two things subsection 31B-3-303(d) now measures: capitalisation adequate for the reasonable risks of the business, and liability insurance with minimum limits of at least $100,000. Keep the certificates with the agreement, the articles and any West Virginia articles of amendment.
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How the Buyout and the Dissolution Rule Interact
Read sections 31B-6-602, 31B-7-701 and 31B-8-801 together, because in an at-will company one notice sets all three running. A member gives notice of withdrawal. Section 31B-8-801(b)(3) starts a ninety-day clock: unless the remaining members holding a majority of current distributions and a majority of future distributions agree to continue the business, or the operating agreement already states a right to continue, the company is dissolved and must be wound up.
If the business is continued, section 31B-7-701 takes over. The company must deliver a purchase offer within thirty days of the dissociation date, accompanied by a statement of assets and liabilities as of that date, the latest available balance sheet and income statement, and an explanation of how the estimated payment was calculated. If price and terms are fixed by the operating agreement, those govern unless the purchaser defaults.
If no agreement is reached within one hundred twenty days, the dissociated member has a further one hundred twenty days to bring a proceeding to enforce the purchase, and the court's jurisdiction is plenary and exclusive. Section 31B-7-702 then tells the court what to weigh, including any agreement among members fixing the price or specifying a formula, and allows instalments, security, subordination and a covenant not to compete.
The drafting lesson is that a formula written today is not merely convenient. Section 31B-7-702 directs the court to consider it, so a clause drafted at formation shapes the outcome even in contested litigation years later.
The 2022 Rewrite of West Virginia Veil Piercing
Section 31B-3-303 now begins with a policy statement. Subsection (a) records the intent of the Legislature to modify the applicability of the veil-piercing analysis adopted in Kubican v. The Tavern, LLC for claims arising after the 2022 reenactment. That is an unusual thing for a statute to say, and it changes how a West Virginia claim is argued.
Subsection (b) removes formalities from the analysis outright: failure to observe the usual company formalities is not a ground for imposing personal liability. Subsection (c) then lists the routes that remain open, including a provision in the articles with the member's written consent, a personal guarantee, tax liabilities imposed on members by law, and actual or constructive fraud causing injury.
Subsection (d) is the operative restriction. The Kubican analysis applies only if the company is not adequately capitalised for the reasonable risks of the undertaking and does not carry liability insurance for the primary risks of the business with minimum limits of $100,000, or a higher amount where the law requires one. Both conditions have to be satisfied before the analysis is even reached.
Two further subsections keep the door open elsewhere. Subsection (e) preserves joint enterprise liability where entity members operate a joint enterprise and a tort claim arises from it, and subsection (f) confirms that a member remains primarily liable for the member's own tortious conduct. The practical consequence is a compliance point with a number attached: an insurance certificate, a capitalisation record and a current certificate of existence are worth keeping in the same file as the agreement.
Five Mistakes West Virginia Owners Keep Making
Three of these come from the 1996 act nobody expects to still be in force. Two come from provisions that were rewritten recently.
Mistake 1: Using a template written for the revised uniform act
The revised act deleted the mandatory buyout and abolished the dissolution-on-dissociation default. West Virginia kept both. A template drafted against the revised act will be silent about dissociation because its drafter assumed the default was harmless, and that silence leaves sections 31B-7-701 and 31B-8-801(b)(3) fully operative.
Mistake 2: Assuming an agent is required and the agreement is not
It is the other way round. Section 31B-1-108 says a company may maintain an agent for service of process, and section 31B-3-303 makes the governance and insurance record decisive on personal liability. Appointing an agent is sensible practice; the document is where the legal consequences actually sit.
Mistake 3: Missing the ninety-day continuation window
Section 31B-8-801(b)(3) dissolves an at-will company on a member's dissociation unless the remaining members holding a majority of current and future distributions agree to continue within ninety days. Companies discover this months later, when a bank or a buyer asks for evidence that the business was properly continued and nobody documented the vote.
Mistake 4: Looking for the filing or the fee
There is neither. The operating agreement is never delivered to the Secretary of State, appears in no fee schedule and is not part of the formation packet. What West Virginia charges is $100 to form the company and $25 for the annual report, with a biennial reporting option added by the 2026 amendments.
Mistake 5: Treating liability insurance as purely commercial
Since 2022 it is also a statutory shield. Section 31B-3-303(d) applies the veil-piercing analysis only where the company is both inadequately capitalised and uninsured for the primary risks of the business below the $100,000 minimum limit. A company carrying proper cover has taken one of the two conditions off the table entirely.
Three West Virginia Companies and the Clause That Decided It
Composite cases built from the patterns that recur under chapter 31B.
Example 1: A Morgantown restaurant group and a thirty percent put
Four members ran two restaurants and a catering operation with a going concern value near $1.9 million. One member holding thirty percent gave notice of withdrawal. There was no operating agreement, so the company was at will, section 31B-8-801(b)(3) put the business ninety days from dissolution, and section 31B-7-701 then required a purchase at fair value. The claim was roughly $570,000 in cash from a business whose assets were leasehold improvements and goodwill.
Example 2: A Huntington haulage company that let the ninety days run
Three members operated a regional haulage business. One dissociated in March. Nobody documented a continuation vote, and the operating agreement did not state a right to continue. The company traded on for two years until a refinancing lawyer read section 31B-8-801(b)(3) and asked when the business had been continued. The answer required a retrospective reconstruction and delayed the closing by five weeks.
Example 3: A Charleston property services company and a $100,000 policy
A tenant injury claim of $650,000 arrived against a small property maintenance company whose owner also held two related entities. Counsel pleaded alter ego. Section 31B-3-303(d) required both inadequate capitalisation and the absence of liability cover at minimum limits of $100,000 before the Kubican analysis applied, and the company held a policy well above that threshold, so the personal claim failed at the statutory gate rather than on the facts.
The Financial Consequence of Relying on Chapter 31B
West Virginia imposes no penalty for having no operating agreement. There is no fine and no compliance event attached to it. These are the amounts the defaults move.
The fair value put. This is the largest exposure in the act. A thirty percent member of a company worth $1.9 million can require the business to pay roughly $570,000 in cash, with an offer due within thirty days and interest running from the dissociation date. There is no statutory discount for lack of control or marketability, so anything of that kind has to come from an agreed formula.
The dissolution nobody voted on. A company that traded for two years after a dissociation without documenting a continuation is a company whose existence a buyer's lawyer will question. On a refinancing or a sale, that is weeks of delay and a five-figure legal reconstruction before anything closes.
The $100,000 insurance line. Section 31B-3-303(d) makes carrying liability cover at minimum limits of $100,000 one of the two conditions that keeps the veil-piercing analysis out of the case entirely. Against a $650,000 tenant claim, that premium is the cheapest legal argument the owner will ever buy.
The costs the state does charge. Formation is $100 and the annual report is $25, so almost nothing in the calendar prompts a review of the governance file. A certificate of existence pulled for a closing is often the first look in years, and trading in another state adds foreign qualification and a second calendar.
How File.Business Drafts a West Virginia Operating Agreement
The intake starts with the buyout, because it carries the largest number. The members decide whether to restrict the power to dissociate under section 31B-6-602, whether to become a term company by specifying a definite term or particular undertaking, or whether to keep the put and price it with a formula the court will read under section 31B-7-702.
The second pass is the continuation right, so that section 31B-8-801(b)(3) can never dissolve the company by inattention. From there the work covers the equal-shares displacement, the twelve-item unanimity list, the redemption permission section 31B-5-504(c)(3) requires, and the capitalisation and insurance record that section 31B-3-303(d) now measures. Delivery includes a member and contribution schedule formatted for a bank's beneficial ownership file, signature pages and an adopting consent. Adjacent work runs alongside: registered agent coverage, agent changes and trade name filings. The flat fee is $99 and no state fee attaches, because there is no filing.
Template or drafted document
A single-member company has no dissociation counterparty and can run on a careful template written to chapter 31B, provided it contains the redemption permission and a discretionary distribution clause. Every multi-member company earns a drafted document.
The test takes one search. Open the template and look for the word dissociate. If the document neither restricts the power nor specifies a definite term, the company is at will, every member holds a fair value put against the business, and a single notice starts a ninety-day dissolution clock.
West Virginia Operating Agreement FAQ
Does West Virginia require an LLC operating agreement?
No. Section 31B-1-103(a) provides that all members of a limited liability company may enter into an operating agreement, which need not be in writing, to regulate the affairs of the company and the conduct of its business. The Secretary of State never asks to see it.
Do I file the operating agreement with the West Virginia Secretary of State?
No. There is no form for it, no filing channel and no fee, because it is a private contract among the members. The state fees you do pay are $100 to form the company and $25 for the annual report.
Does a West Virginia LLC have to appoint a registered agent?
The statute says may, not must. Section 31B-1-108 provides that a limited liability company and a foreign limited liability company authorised to do business in this state may continuously maintain an office and an agent for service of process. Most companies appoint one anyway so that service and notices reach them promptly.
Can a member of a West Virginia LLC quit and be paid?
Yes, by default. Section 31B-6-602 gives a member the power to dissociate at any time by express will unless the operating agreement provides otherwise, and section 31B-7-701 then requires an at-will company to purchase that member's distributional interest for its fair value as of the dissociation date.
Does a member leaving dissolve a West Virginia LLC?
It can. Section 31B-8-801(b)(3) dissolves an at-will company on the dissociation of a member unless, within ninety days, the remaining members entitled to a majority of current and future distributions agree to continue the business, or the operating agreement states a right to continue.
Can a creditor foreclose on a West Virginia membership interest?
Yes. Section 31B-5-504(b) provides that a charging order constitutes a lien on the judgment debtor's distributional interest and that the court may order a foreclosure of that lien at any time, with the purchaser taking the rights of a transferee. The section contains no exclusive-remedy clause.
How did the 2022 amendment change West Virginia veil piercing?
It narrowed it. Section 31B-3-303 now records the Legislature's intent to modify the analysis adopted in Kubican v. The Tavern, LLC, removes failure to observe formalities as a ground, and applies the analysis only where the company is not adequately capitalised and does not carry liability insurance with minimum limits of $100,000.
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Doing this in West Virginia specifically: West Virginia operating agreement covers the state detail. There is no state form and no fee, because the document is never filed.
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