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If you’re considering starting a business in the state of Washington, there are a few things you should know. First, the type of business entity you choose is important. The most common is an LLC. You may be asking what an LLC is and why is this beneficial? A Limited Liability Company or LLC is formed to own and operate a business. This is the most popular option in most cases because it provides the same limited liability as a bigger corporation but is easier to form and more flexible. LLCs may also help protect your personal assets while establishing credibility and providing better tax benefits.
In Washington State, one of the main benefits of choosing an LLC as your business structure is the Flow-Through Taxation. This helps individual members avoid paying corporate and individual tax every year. There are over 50 tax incentives offered by the Washington State Department of Revenue that could benefit your business in addition to deductions, credits, and sales and use tax deferrals. Make sure to review the Washington State’s Department of Revenue website for additional information on incentives and loans.
The forms required to register an LLC will ask for detailed information on the members. Have their names, addresses, email addresses, and telephone numbers ready.
Here are the steps you’ll take to file and obtain your LLC in Washington State:
Below, you’ll find a detailed explanation to walk you through each step.
Washington has very specific guidelines to follow when naming a business to avoid rejection of the application or additional issues with the state.
When naming your business in Washington, there are a few things to know:
Now that you’ve decided on a name for your business, the next step is reserving the name. In Washington State, a business name may be reserved for 180 days by filing a name reservation with the Washington Secretary of State by mail. This form must be downloaded and completed. All questions and feedback should be directed to the website at http://www.sos.wa.gov/corps or by calling 360-725-0377. A $30 fee is required to file. If expedited service is requested, an additional $50 is charged.
This form must indicate the name of choice, alternate names in order of preference, the entity type, name and address of the applicant, and filing fee. “EXPEDITE” must be on the outside of the envelope for rush orders. Completed forms should be mailed to the Secretary of State Corporation Division, 801 Capitol Way S, PO Box 40234, Olympia, WA 98504-0234.
When doing business, some companies choose to use a trade name. This is also called an assumed name, trade name, or DBA (doing business as). To do this, the DBA must be registered with the Washington State Department of Revenue. This can be done at the same time as obtaining a business license. Registration can be done online, or via a business license application by mail.
Various fees associated with filing a business license application are determined after using the business licensing wizard. A $90 nonrefundable processing fee is required in addition to a $5 per trade name fee. All physical forms should be completed and mailed to Business Licensing Service, PO box 9034, Olympia, WA 98507-9034.
A DBA is not required to operate an LLC in the state of Washington. This choice is strictly based on the discretion of the company.
Businesses in Washington State have the option of registering for a trademark used exclusively within the state or region or with the U.S. Trademark and Patent Office (USPTO) for the broadest protection. Some businesses do both, but the federal trademark is recommended.
Before registering your trademark, it is important to verify that the name, symbol, or device being registered is unique. A search in the trademark database (Trademark Electronic System, or TESS) is required. Once the availability of the trademark is identified, you can file online.
The fees to file an in-state trademark is $55 per classification number, $50 if expedited, $10 for assignment, $5 for a new certificate, $30 for reservation of name, and $10 for certified copies. The fees to file a federal trademark online vary based on class. When filing electronically, the Teas Plus is $250 per class of goods/services, and the TEAS Standard is $350 per class of goods/services. Additional fees may apply based on intent-to-use applications. When filing, an acceptable image of the intended trademark is required.
In Washington State, this is called a “Certificate of Formation”, which must be filed with the Secretary of State. In many states, this is called the “Articles of Organization”. This includes:
Unified Business Identifier (UBI): If the entity has previously filed with another state agency, a 9-digit UBI number may already be issued. If there is no UBI number, select “No.”
Name: The chosen name of the LLC in accordance with the rules of Washington State.
Duration: The intended use and duration of the LLC, whether perpetual or limited.
Effective Date: The effective date of the filing.
Registered Agent: Every business entity must have a Registered Agent in Washington State. Entities are required to select only one type of agent, with the signature of the agent for consent. The name and title of the person must also be printed with the date.
There are two types of Registered Agents. The Commercial Registered Agent is registered with the Office of the Secretary of State whose business is designed to receive legal documents, notice, or demand required or permitted by law to be served on behalf of the entity. Their address is verified and on record with the Office of the Secretary of State.
A Noncommercial Registered Agent has agreed to receive legal documents, notice, or demand or permitted by law to be served on behalf of the entity. The LLC must choose one of these options.
Principal Office: This is the place where the records of the entity are kept. It must be a physical address. Post office boxes are not allowed, but a home address may be listed. The address is not required to be in Washington State.
Return Address for the Filing: This is an optional section used when documents are to be sent in addition to the Registered Agent’s address.
Executor Information: This is the person(s) forming the LLC. Full names and addresses of each Executor are required, along with their signature.
There are no age requirements to file an LLC, and additional member/managers names are not required to be listed in the Certificate of Formation.
The filing fees for the required documents for an LLC in Washington State include:
All requirements are listed in the various documents needed to successfully file. In all cases, you need:
LLC filing documents may be completed online with the Secretary of State. Forms may also be printed, written, or typewritten and mailed to the Washington Secretary of State at P.O. Box 40234, Olympia, WA 98504-0234. Documents sent overnight should be mailed to 801 Capitol Way S, Olympia, WA 98501-1226. Please make sure to follow all instructions and fully complete all documents to avoid delays.
Washington State requires each business entity have a registered agent. This is to make sure important documents, legal correspondence, or packages are always able to be delivered during normal business hours. Some states call this a “Resident Agent” or some other term.
There are two types of registered agents in Washington State: Commercial and Non-commercial. The Washington State statutes governing registered agents RCW Title 25, Chapter 25.15, Section 25.15.021 should be carefully read and understood. Generally, registered agent costs vary between $100 and $300 per year. Individuals over the age of 18 can be registered agents.
To be a registered agent:
While Washington State does not require LLCs to have an operating agreement, it is advised to prepare one.
Operating agreements establish how the LLC will be run, setting out the rights and responsibilities of each member and manager. Although an internal document, it helps avoid disputes and discrepancies within the LLC. It helps ensure everyone is on the same page and working in sync toward the same goal.
This is a legally binding document outlining ownership, operating procedures, and parameters for the LLC. It is not required but highly advised to offer protection for each member against conflicts that may occur in the future.
The operating agreement does not have to be filed with the Secretary of State but should be filed internally with all important formation documents.
Washington State requires LLCs to file an initial report filing within 120 days of incorporation. Additionally, all LLCs must file an annual report on or before the last day of the anniversary month of incorporation. The associated fee is $69. A renewal notice is sent to the registered agent 45 days before the annual report is due. An EIN is required for LLCs that have employees. Banks also require this to open a bank account. Washington State also requires a state tax identification number.
All businesses must obtain a state business license. The state license and most city and county licenses can be registered on the Department of Revenue website. If the city or town is not listed, they will have to be contacted separately. This information is further detailed on the Washington State Department of Licensing website. Depending on the nature of your business, you may have to obtain additional permits and licenses. Your local government office will be able to guide you on the requirements to ensure you are compliant with the law.
Sales tax permits may also be required from the Department of Revenue. Businesses with $12,000 or more in revenue or required to collect sales tax must register with the Washington Department of Revenue. There is no income tax on businesses or individuals, but a business and occupation tax is assessed on gross business income.
An Employer Identification Number or EIN is required for every registered business entity in the U.S. by the Internal Revenue Service (IRS). This is like a Social Security number for your business and keeps your personal and business information separate. There are many benefits to having an EIN:
It is very simple to obtain an EIN. Go to the IRS website and fill out form SS-4 for an LLC EIN. There are specific questions you must answer, in addition to the Social Security number of the principal(s). A physical address for the LLC is also needed, which can be a principal’s address or the address of the Registered Agent.
All business and tax-related matters will need your EIN, as this is how the IRS identifies you. Tailor Brands can assist in getting your EIN set up for business.
As a new business, it can be difficult to know whether you follow all state tax requirements. As a rule of thumb, these are a few general guidelines on how your LLC should handle taxes.
Your LLC is expected to pay state and federal taxes on the income you receive.
When payments are made to the principals, that income is distributed and accounted for by your accountant or bookkeeper. Each disbursement made to a member of the LLC is considered income and subject to income tax at the state and federal levels.
It is strongly recommended that you start your LLC with a tax professional as part of the team to assist with tax preparation. This will help avoid tax-related problems with the state or federal agency tax filings. It is always important to maintain good financials and tax records. Tax records must be kept for a minimum of 7 years.
In addition to filing business taxes, your personal taxes are also filed on an annual basis. Your tax professional should be able to keep you informed on the latest tax guidelines and deductions you may be entitled to as a member of the LLC. Keeping up with everything can be tricky, which is why working with a tax professional is advised.
All Washington State businesses are taxed at 6.5% on taxable income, but the average local tax is 2.28%. That makes the tax total 8.78%. There is no personal or business income tax, but the tax structure includes the Business & Occupation tax, sales, and use taxes, property taxes, and a variety of industry-specific taxes. The Washington Department of Revenue administers over 60 different taxes. More information can be found on the Washington Small Business Guidance website.
Certain businesses are required to pay sales taxes based on their goods. Most small businesses will need to file an excise tax return in addition to their sales tax. Taxes are paid electronically using the online filing system.
The self-employment tax in Washington state is 15.3%, where 12.4% covers Social Security and 2.9% covers Medicare. Owners of an LLC pay self-employment tax on business profits. These taxes must also be paid to the IRS for federal taxes. If you take a withdrawal from the earnings of the LLC, a quarterly tax return should be filed. Washington does not collect income tax on individuals, so a state income tax return is not required.
The tax year is divided into 4 payment periods by the IRS. Estimated tax payments may be sent with Form 1040-ES online, by mail, by phone, or on a mobile device with the IRS2Go app.
If you have employees, you will be required to withhold payroll taxes on a state and federal level. A withholding account should be set up for the LLC that is not transferable to any other business. Compliance is needed to avoid paying fines.
Most businesses in Washington State also must pay a Business and Occupation (B&O) tax, a use tax, real and personal property taxes, and industry-specific taxes. You can learn more about additional taxes for businesses by reviewing these documents:
New business tax workshops are offered throughout the state all year. Find out more information about New Business Tax Basics.
It is very important to keep your personal and business finances separate. This will help to keep no co-mingling of funds that could alter the accurate accounting of your business income. To solidify and establish credibility as a business entity, opening a bank account should be one of the first items on the to-do list.
All income from the business should be deposited into the business bank account for accountability. Any payments made for debts owed by the LLC (including supplies, taxes, filing fees) and operational fees (legal consultations, registered agent payments) should be paid from this account.
Any disbursements made to members of the LLC should also be made from this account. If any monies are disbursed, each member should receive a 1099, so they can file their federal taxes.
Once the LLC has been properly set up, an annual report is required by the Washington Secretary of State. The report is due by the end of the LLC’s anniversary month. A notice is sent 45 days before the due date.
There are a few financial requirements needed to keep your LLC in compliance with state and federal regulations. A legal firm specializing in business matters or an accountant who works with businesses can assist.
When you work with a professional, you can feel more confident in knowing you are compliant with all tax obligations and will not have to worry about missing any changes in the tax code.
In some cases, registered agents in Washington State are qualified to handle financial matters related to your business. In all business transactions, a good rule of thumb is to hire someone well-versed in that area of expertise. They should be familiar with the tax guidelines of Washington State, all federal tax guidelines, and in-depth knowledge of the financial aspects of an LLC.
Every business must verify all the requirements needed for business permits and licenses. Washington State provides a business licensing wizard that can assist in determining these requirements.
There may be some municipalities and towns that are not located in the wizard. Make sure you check with the town you are doing business in to ensure you follow local rules and regulations and the type of business you may run from your home.
Some towns may have permits specific to their locality. It is important to do the legwork to find out what is needed before you are fined for non-compliance. There is a business licensing and local licensing portal that may assist in obtaining the information you need.
As a business, most states require some form of business insurance. Washington State does not require businesses to have general liability or professional liability insurance, but some clients do. Businesses that operate vehicles are required to have commercial auto insurance policies. While businesses are not required to have a business policy, workers’ compensation coverage for their employees is required.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.