How to Start an LLC in Washington? (5 Steps Needed)
Entrepreneurs and small business owners may want to establish a business entity in Washington State for several reasons
Forming an LLC in the state is relatively simple if you follow the necessary steps and comply with the requirements set forth by the state.
With years of practice as a business consultant specializing in limited liability companies, I’ll share my insights on how to establish an LLC in Washington State.
We will cover all aspects of forming a limited liability company, such as how much it costs, the process of filing a certificate of formation with the Secretary of State and paying taxes.
Quick Summary:
- To start an LLC in Washington, choose a business name, appoint a registered agent, file certificate of formation, create an operating agreement and obtain an EIN.
- After the registration of an LLC, it is advisable that you open a separate bank account and obtain the required licenses and permits.
- A limited liability company is not subject to corporate tax, instead, the members pay taxes in their individual returns.
How to Start a Washington LLC
To start a Washington LLC, all you need to do is file the documents required by the Washington Secretary of State, file them with the Secretary of State, and pay its corresponding filing fee.
You can do all of that in just a couple of days, and once you're done, proceed with the steps you need to accomplish after forming an LLC.
Once your LLC is formed, you can take advantage of the many benefits that come with owning an LLC, such as preventing business liability and providing you with personal liability protection.
There are also LLC tax savings you can enjoy when you choose to start a Washington LLC over other types of businesses.
Step 1: Name Your Washington LLC
First of all, you need to choose a LLC name.
This is the official title of your business, and it can't be used by any other company operating in Washington.
If you want to make sure no one else has chosen this exact same business name for their LLC, you should check if the name is available online.
Your preferred business name can only be approved if you follow Washington’s state naming guidelines:
- The terms “Limited Liability Company,” “LLC’ or “L.L.C” should be included in the name.
- The business name must be unique and distinguishable from other companies registered in the state.
- The state does not allow the words “Incorporated,” “Cooperative,” “Partnership” or “Corporation” and their corresponding abbreviations in the LLC name [1].
If you want to reserve your business name with the Washington Secretary of State, you can do so by filing a reservation fee of $30 ($50 for an expedited process).
The name will be reserved for 180 business days.
Keep in mind that all business names must be registered with the Washington Secretary of State, so if your business name has already been taken by another business, you won't be able to use it.
It's also possible to get a DBA, which is a business name that you might use when conducting business.
Read More: Washington LLC Business Search
Step 2: Look for a Registered Agent
A registered agent is someone who agrees to accept legal documents on behalf of your LLC.
These can include lawsuits, tax notices, and other official notifications from the state.
It can be an individual or a business entity. All that matters is that it's registered in the state.
In Washington, a registered agent must be located in the same county where your company's principal office address is listed.
A Washington registered agent is easy to find. You can look for an agent by asking your personal attorney or using a registered agent service.
Step 3: File Washington Certificate of Formation
Washington LLC's certificate of formation should be filed with the Washington Secretary of State.
In order to file the certificate, you must have a business name that is distinguishable from other names on record in Washington.
The certificate needs to contain all necessary information, such as:
- LLC name and physical street address
- Registered agent's name and address
- LLC purpose - it could be simply "to engage in any lawful act or activity for which LLCs may be organized under the laws of Washington."
- Termination date if applicable
You need a certificate of formation to establish an LLC in Washington.
You can either send it by mail or file it online. The online filing fee for a Washington LLC is $200 while filing by mail is $180. There's a $60 annual renewal fee.
Step 4: Create an Operating Agreement
A Washington LLC operating agreement will outline how the business operates and define the management structure, and share distribution of each member in case of dissolution or sale.
You should consult with an attorney to help form one if necessary.
Although Washington state does not mandate business owners to file the document, it is highly advisable to draft one to clearly define how the LLC will operate.
In the absence of an operating agreement, state laws apply.
The operating agreement should include information such as:
- What the LLC will do
- How much money each member is putting into their initial contribution
- Roles and responsibilities of all members
- Restrictions on the transfer of interest
- Dissolution or buyout provisions in case a member wants to leave the business.
Step 5: Get an Employer Identification Number
Finally, you can get your employer identification number (EIN), so you can start doing business.
You can get your EIN by completing the SS-4 form and sending it to the Internal Revenue Service (IRS).
A federal employer identification number is a nine-digit number that identifies your business for tax purposes.
However, it will also be needed when you open bank accounts and apply for loans.
Also, employer identification numbers are not required by law if the LLC has no employees, i.e., it's registered as a sole proprietorship.
However, it's still beneficial to have EIN if you don't plan to hire employees, so visit the IRS website for more information.
Related Articles:
- How To Close an LLC in Washington
- Best LLC Formation Services in Washington
- How Long It Takes to Get Your LLC Approved in Washington
Open a Separate Business Bank Account
It's always a good idea to have a business bank account that's separate from your one. You can open business bank accounts at banks or credit unions, and you'll need the following documents:
- Certificate of formation of your LLC
- Operating Agreement (optional)
- The tax ID number for your LLC (EIN).
Separating personal assets from business ones is important to reduce the risk of liabilities and losses in case your LLC gets sued.
It's also beneficial for tax purposes, since you will have different filing requirements depending on whether you are operating as a sole proprietor or an LLC with employees.
Having two bank accounts makes it easier to keep track of business funds, helps separate business expenses, and maintains the personal asset protection of the members.
LLC Business Licenses in Washington
After the LLC formation process, you'll need to check if you need a business license to operate your LLC in Washington.
Business licenses are required for any business that sells, leases, or provides its products and services to the public.
Depending on what your business does, the license may be called something else (for example, a food service establishment permit).
A professional LLC is one where at least one member has a profession like lawyers, doctors, contractors, etc., who are providing their service to the public. They always need a business license.
How are LLCs Taxed in Washington State?
LLCs in Washington State are taxed depending on which classification status the members opted for – as a sole proprietor, partnership, S-Corp or C-Corp.
A Washington LLC is a pass-through entity. That means the LLC is not taxed for its income, and all profits or losses are passed through to the members, who then report it on their personal tax returns.
If your Washington LLC sells goods and services to the public, then it must collect sales tax from its customers.
The LLC is responsible for paying this money to the state.
The amount of income taxes your Washington LLC needs to pay depends on how many members are in the company and their shares or ownership percentages.
You'll have to register for a seller's permit through the Washington Department of Revenue website to pay the sales tax.
Federal and state taxes are not required for LLCs that don't sell to the public. However, they do need a federal tax ID number anyways.
In Washington, you also need to pay the occupation and business tax.
This is a business tax that LLCs have to pay through the Washington Department of Revenue in addition to state and federal income taxes.
FAQs
How Does an LLC Work in Washington?
In Washington, an LLC work similarly to other limited liability companies outside the state.
How Do I Form a Single Member LLC in Washington?
You can form a single-member LLC in Washington by filing the certificate of formation with the Secretary of State and following the steps to start a limited liability company.
Can I Start a Washington LLC on My Own?
You can start a Washington LLC on your own. However, it would be best to consider hiring a business attorney to ensure that the formation documents comply with all state and federal laws.
Can I Have a Foreign LLC in Washington?
You can have a foreign LLC in Washington. However, the LLC must file a certificate of authority with the Secretary of State before transacting business.
Start an LLC in Washington
With a little bit of research and information, you should be able to set up a Washington state LLC in no time.
You can find all the necessary forms online on the Secretary of State's website for free.
Setting up a Washington limited liability company is not always easy.
It's essential to know the basics of how an LLC works and what you need to set one up.
You have the option to consult with an online service provider like ZenBusiness to help you stay compliant with the law during the formation process.
References:
- https://app.leg.wa.gov/RCW/default.aspx?cite=23.95.305
