How to Start an LLC in Washington
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If you’d like to set up a limited liability company, or LLC, in Washington, you’ll need some help with LLC formation. To establish a business entity in the state, entrepreneurs need to follow this step-by-step guide. To begin a new business, you need a name. From there, you’ll file the necessary business formation documents with the state.
Washington has long had a strong economy. It grew at two and a half times the national rate in 2016 with a 3.7% growth. Industries that grew in 2022 in jobs and profits include health care, food and beverage businesses, temporary job companies, and manufacturing. Washington is known for being the top apple-producing state. Apples generate around 20% of the state’s total agricultural receipts. The state produces approximately 64% of all apples sold in the country. It is also a solid wheat producer and ranks fifth in wheat production nationally. It ranks second in potatoes. Beyond apples, the state has a huge aerospace industry, and manufacturing is also a key economic element. Clean technology is ever growing and the state has always been known for its forestry. Information technology is a growing sector.
Name your LLC
Do you have a name in mind for your business? Find out if it’s available by researching the state’s business directory. Names that show up are unavailable. If your chosen name doesn’t appear, it’s yours to claim.
A state will require a business name on all documents so picking one is the first thing you do.
Check name availability
Washington requires that all businesses have a distinguishable name. That means you can’t use a name that is already registered with the state. You can check that for free by looking up the name on one of three business trackers in Washington.
You should use the free business name search to see if another business is already using the name. This shows businesses registered under a general license. Then, you should research the name through the Secretary of State Corporations Registration Data Search. This shows all businesses registered with the state.
Consider what makes a name memorable
It takes some thought to find a good business name that suits your LLC and all your needs. A good business name describes your business fully, is easy to spell, simple to say, and convenient to remember.
Those who have trouble finding a great business name use a business name generator to help. This is a paid online tool that will ask a few questions and then spill out possible names for your business. It’s affordable and a good way to find a suitable, available name.
You can reserve your business name if you aren’t ready to do the formal paperwork for your business. Name reservations prevent others from using it. In Washington State, you can reserve a business name for up to 180 days. It cost $30. You can get expedited service for an additional $50.
Don’t forget to check for a matching domain name.
Select a registered agent
The State of Washington requires businesses to have a registered agent. A registered agent is someone responsible for signing and accepting legal documents, including service of process, on behalf of the business. They are an important responsibility because they will be the ones served if you are ever involved in a legal matter.
According to state law, all LLCs, Limited Partnerships, and corporations doing business in the state must have a registered agency. The agent can be either an individual or a business.
Washington has general rules about who can be a registered agent. For this business structure, the rules are:
- The registered agent must have a physical street address in the state, not a P.O. box.
- The individual must be available to accept the service of documents during business hours.
- Be more than 18 years old.
LLC owners can be their own registered agents or can ask a friend or family member to do it as long as they live in the state and have a mailing address. However, those choices may not be practical. You don’t want to be served at your place of business in the view of customers. Your friend or family member may not always be available to accept papers or could forget to tell you they received them.
Many sole proprietors find it less stressful and more convenient to hire a professional service for this role. Some individuals provide this service in Washington and there are also national business service companies that provide registered agent services, along with many other formation services such as registering your business with the state and filing for your employer identification number (EIN).
File Articles of Organization
The next thing to do to start your LLC in Washington is to file Articles of Organization. These can be filed online or by mail and includes basic information like the business name, its primary address, the name and address of the registered agent, and the LLC members’ names and addresses.
Business owners can find out more about filing formation documents in Washington here.
The state fee for filing an Articles of Organization in Washington for an LLC filing is $200.
Washington processing time
Washington usually processes business registrations within two days. You can order expedited service for an additional $50.
Create an LLC operating agreement
The State of Washington doesn’t mandate that LLCs have an operating agreement. State law addresses operating agreements saying they can be written, verbal, or implied. It is best to have a written agreement to avoid miscommunication.
Even though an operating agreement isn’t required, most experts agree it’s best to have one. An operating agreement sets the standards and foundation for running your LLC and addresses unique parts of your business like transferring interest, and the process after an LLC member leaves or dies.
Creating an operating agreement is a good way to get LLC members to talk about their views on running the business and can help resolve conflicting issues in the beginning.
An operating agreement should include things like:
- Identifying LLC activities
- Listing decision-makers
- Establishing voter rights
- Member interest transfers
- Listing initial contributions
- Profit and loss management
- Management structure (like member-managed, manager-managed)
- LLC member compensation
- Bookkeeping methods
- Dissolution procedures
Managing a business takes a lot of time and effort. The first thing you should do is get all of your tax information squared away.
Get your EIN
An employer identification number (EIN) is required of most businesses in Washington State, except for sole proprietorships. An EIN identifies your business with the Internal Revenue Service (IRS). It’s like a social security number for your business.
You will need it to do most anything including filing federal taxes, hiring employees, getting loans, and opening checking accounts.
It’s simple to get an EIN because you can apply for it online. All you need to do is answer a few simple questions and the IRS will generate an EIN for your business.
A Washington business will also need a state tax number. That is obtained by registering your business with the Washington Department of Revenue. You will need this number to pay state corporate taxes and sales taxes.
You can get your EIN by visiting the IRS website.
Get Washington business licenses
Most businesses in Washington are required to obtain a state business license. You must fill out a Washington state business license application online or by mail. There is a $19 fee.
Some specialized services, such as massage therapists, nail technicians, engineers, and real estate agents, require professional licensing. This is a certification beyond a basic business license. This requires some paperwork and an additional fee.
You can find out more about your specific industry licensing requirements in Washington State here.
Open business bank accounts
One of the first things you will do after you register your business is to open a business bank account. You will need your state certificate of formation, your EIN, your state tax number, and your driver’s license or state identification.
A business checking account is needed to keep your LLC money separate from your personal finances. That is a best business practice. You should also consider opening a savings account and a business credit card to help manage cash flow while you pay for inventory or equipment.
Look for banks that are connected to the Small Business Administration (SBA) and have incentives for small businesses. Many credit cards offer things like cash-back bonuses for small businesses, along with other incentives for this type of business.
Review LLC tax rules in Washington
One benefit of starting a business in Washington state is it doesn’t have a corporate or personal income tax. Washington uses other taxes like a sales tax, a business and occupation (B&O) tax, and property tax to finance the state.
Sales tax in Washington
Washington State has a sales tax of 6.5%. It also allows local municipalities to charge a sales tax and that can make your combined sales tax rate 10.4%, depending on where you live.
Washington has more than 50 tax incentives and credit programs for businesses that can be filed via your tax returns. These come in three broad categories of tax deductions, credits, sales, and use tax deferral programs. There are more than 100 different deductions for businesses and around 40 credit programs. You can find a list of deductions here, on the state website.
Some of the credit programs include the bad debt tax credit, credit for clean energy, the Main Street Credit, the Small Business B&O Tax Credit, and the Veterans Employer PUT Credit. You can find out more about tax credits for businesses here.
The state also offers economic incentives for those locating businesses in what is named an opportunity zone. These are lower-income areas where the state would like to see economic investment. You can find out more about where the state’s opportunity zones are and how to obtain this benefit here.
File an annual report
All businesses and nonprofits are required to file an annual report in Washington to update any business information like a change in the registered agent or the business address. You can file an annual report online or in the mail. The deadline is the last day of the anniversary month of the business.
The filing fee is $60.
Every LLC, including new LLCs, must file this report yearly to stay in good standing.
These reports are a matter of public record.
In some states, an annual report is called a Statement of Information.
The form for filing an annual report for an LLC can be found here.
Get insurance for your LLC
Insurance is important to obtain before you open your LLC as it protects your business, you, and your LLC members. Three basic types of insurance should be a priority and those are liability insurance, workers’ compensation, and property insurance.
Washington doesn’t require a business to have general liability insurance but it is well worth it. Liability insurance covers you if your product or service does something to harm someone else or their property. It can save your business if you are sued. Plus, many clients and other businesses you work with require it.
Washington State is different from other states regarding workers’ compensation insurance. It requires it for both workers and even some independent contractors. Also, it doesn’t allow businesses to purchase workers’ compensation insurance privately but mandates you purchase it through the Washington State Department of Labor and Industries or to become a self-insured employer.
Property insurance is important whether you own your commercial property or rent it. It pays the cost of rebuilding and replacing your equipment or inventory should there be a fire, flood, natural disaster, theft, or vandalism. Some landlords require tenants to take out additional property insurance as a security measure.
Another type of insurance you should consider if you have company vehicles is automobile insurance. Washington requires vehicles to be covered and your fleets should meet the minimum standards to remain in compliance.
Additional resources to help you set up a business in Washington
Many resources are there to help you set up your LLC in Washington including:
What qualifies as a small business in Washington?
The state defines a small business as any that is owned and operated independently from all other businesses and has fewer than 50 employees. This includes corporations, partnerships, sole proprietorships, and any other legal entity.
Is Washington State a good place for business?
The good news is it is number two on the 2022 list of top states for business ranked by CNBC. The better news is the state moved up seven notches in the ranking from 2021.
What are some of the best businesses to start in Washington?
Washington is still a heavily agricultural state so any business that deals with agricultural products has a niche. Other innovative business ideas for starting in Washington State are electric car charging stations, app development, and transportation services like ridesharing programs.
What’s the benefit of an LLC over a sole proprietorship?
One of the biggest perks of an LLC is its liability protection. With this personal liability protection in place, your personal assets, like your home and car, can’t be used to cover any debts brought on by your startup.
What is the most profitable business in Washington?
Figures from 2021 show that technology giant Amazon showed the most profit of any business in the state. The company made $386.06 billion.
What are some of the largest industries in Washington?
Again, Amazon tops the list with 647,500 employees. That’s followed by Starbucks with 291,000 employees, Costco Wholesale with 172,000 employees, and Providence Health Services with 120,000 employees.
What is the most common job in Washington State?
Believe it or not, there are more internships offered in Washington than anything else. The latest figures show 26,939 interns were working in the state. Other common jobs in Washington are administrative assistant, cashier, and office assistant.
What jobs are set for growth in Washington?
The top five jobs expected to be in demand in years to come are massage therapists, EMTs, ambulance drivers, physical therapists, and computer hardware engineers. Generally, specialty jobs that require special training are going to have growth in the state.
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