Starting a Limited Liability Company (LLC) in the state of Washington can be a daunting but rewarding experience for any small business owner. With this in mind our article will guide you through the process of forming an LLC, from choosing a business name to understanding the costs involved. Whether you're a seasoned business owner or new to this world, understanding how to navigate the formation of an LLC is a good place to start a business.
How to start an LLC in Washington in 7 steps
01. Pick your business name
When starting a business in Washington, the first step is to choose a name for your LLC. This is both a creative and legal step. Your business name should be unique and should not be the same as or too similar to other names on record with the Washington Secretary of State. Ending your chosen name with "LLC," "L.L.C.," or "Limited Liability Company" is necessary to fulfill state requirements.
Follow these steps to make sure your business name is distinctive and complies with all necessary regulations:
Check for availability: Use the Washington State Secretary of State's online database to search for business names already in use.
Follow naming guidelines: Avoid restricted words that could confuse your LLC with a government agency (e.g., FBI, Treasury).
Build a website and choose a domain name: Look up domain availability if you plan to also focus on creating a website, which can be easily done through platforms like Wix.
Tip: If you're having trouble coming up with a unique name for your business, consider using a business name generator for more inspiration.
02. Choose your registered agent
Every LLC in Washington State must have a registered agent. This is an individual or company that agrees to accept legal papers on behalf of your LLC. Your registered agent must be available during regular business hours and have a physical address in Washington State.
To choose the right registered agent, consider the following factors:
Reliability: They must be trustworthy and able to handle confidential information related. to your business.
Availability: They should be consistently available at the listed address during business hours.
Compliance: They should meet all legal requirements set by the state of Washington State.
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03. Obtain state business permits
Depending on the nature of your business, you may need specific permits or licenses to operate legally in Washington State. These could range from general business licenses to industry-specific permits.
For example if you plan to start a plumbing business in the state you need to be a Licensed Plumbing contractor under the relevant law, SB 6170. Changes made in 2021 meant that. a general contractor license is not enough to work as a plumber in the state. Here's what you must do to register:
Make sure that your business is first registered with the Department of Revenue.
Get a Continuous Plumbing Contractor Surety Bond or an Assignment of Savings.
Purchase a general liability insurance policy to protect yourself
Fill in the Application for Plumbing Contractor application.
Pay the required application fee of $139.10.
Complete the Designated Plumber Assignment.
Finally pay the required application fee of $50.
To obtain the necessary permits in order to register your business, follow these steps:
Identify specific requirements: Check with local and state agencies to determine what permits you need.
Complete all applications: Fill out all required paperwork accurately and submit them to the appropriate authorities.
Pay any fees: Be prepared to pay any associated fees for obtaining your permits.
Learn more: How to get a business license
04. File a Certificate of Formation
The Certificate of Formation is a critical document that officially creates your LLC in Washington State. You'll file this with the Washington State Secretary of State, either online or by mail, along with the required filing fee.
Filing requires the following key actions:
Gather your business information: You'll need your LLC's name, registered agent information and details about the structure of your business and its management.
Fill out the form: This is the specific form used for filing an LLC's Certificate of Formation in Washington State.
Submit your application and pay relevant fees: Complete the process by paying the necessary fee. This is $200 to file an LLC online or $180 by mail.
05. Draft your LLC operating agreement
Although not legally required in Washington State, creating an operating agreement is highly recommended for any LLC. This internal document outlines ownership structures, member roles and operational procedures for this type of business.
Here’s why an operating agreement is important:
It clarifies business rules and guidelines: It sets clear expectations for members regarding operations and conflict resolution. This is necessary for the long term success of your business.
Protects LLC status: Helps maintain limited liability status by proving that your LLC is a separate business entity.
Prevents misunderstandings: Reduces potential disputes among members by detailing policies and procedures for how the business should be run.
06. Apply for an EIN and pay relevant taxes
An Employer Identification Number (EIN) is like a social security number for your LLC. It’s necessary for hiring employees, opening bank accounts and filing taxes.
Securing an EIN involves:
Applying online or via mail: The IRS provides free EIN registration through their website or via mail submission.
Understanding your business tax obligations: Research state-specific taxes that apply to your LLC, such as franchise tax or sales tax. In Washington State for an LLC owner this means a 15.3% self-employed tax (12.4% social security, 2.9% Medicare). For more information, visit the Washington State Department of Revenue website.
07. Organize your annual reports
If you start and run an LLC in Texas you'll need to submit annual reports to the Washington Secretary of State. These reports keep your business information up-to-date and are required even if there are no changes from the previous year. Failure to file can result in penalties or even dissolution of your LLC.
To ensure you’re compliant with this make sure to:
Know due dates: Mark your calendar for when the annual report is due, this is always the last day of the month in which the business was first formed.
Fill out the online form: This is the specific form used for filing an LLC's Annual Report in Washington State.
Submit and pay fees: Complete the submission process by paying the $70 filing fee.
How much does it cost to start an LLC in Washington State
When you're planning to start an LLC in Washington State, it's important to budget for the various costs involved. These expenses can vary depending on the complexity of your business and any additional services you may need.
The main costs for starting an LLC in Washington State
Filing Fee for Certificate of Formation: The state of Washington requires a fee when you file your Certificate of Formation. This is one of the primary costs you'll incur. For an LLC it costs $180.
Registered agent fee: If you choose to use a professional registered agent service, they will charge an annual fee for their services.
Business license application fee: To operate your LLC, you'll need to apply for a Washington State business license, which comes with its own fee.
Specialized permits and licenses: Depending on your industry, additional permits may be necessary, each with varying costs and application processes.
Annual report filing fee: Each year, your LLC will need to file an annual report with the state, which includes a filing fee.
Employer Identification Number (EIN): While obtaining an EIN from the IRS is free, if you require assistance or choose to use a third-party service, there may be additional costs.
Additional costs may include:
Legal or financial consulting fees: If you seek professional advice during the formation process, these services will add to your startup costs.
Domain registration and website creation: Establishing an online presence via a website is crucial in today's market. Costs here include domain registration and potentially hiring a web designer or using a website builder like Wix.
Business insurance: Depending on your industry, you might need various types of insurance to protect your LLC.
Who can start an LLC in Washington State
In Washington State, starting an LLC is open to various individuals and groups, but there are specific eligibility criteria that need to be met. It's important to understand who can form an LLC in the state before you begin the process.
Residency
You don't have to be a Washington State resident or a U.S. citizen to form an LLC in the state. However, your LLC must have a registered agent with a physical address within Washington State.
Legal status
Both individuals and entities can form an LLC. This includes sole proprietors or business owners looking to change their business structure and existing businesses by creating a new LLC.
Industry restrictions
Most types of businesses can form an LLC in Washington State but certain professions with specific regulatory requirements might need to form professional limited liability companies (PLLCs). Examples include dentists, chiropractors, osteopaths and architects.
Benefits of starting an LLC in Washington State
Forming an LLC in Washington State offers a range of appealing advantages for business owners including legal and tax advantages.
Limited liability protection
As the name suggests, an LLC provides its owners with limited liability. This means your personal assets are typically protected if your business faces lawsuits or debts. This allows you to take the risk of becoming a business owner without worrying about sacrificing your own home, for example.
In short, LLCs have flexible tax options and protect owners from personal liability. Shylene D’Addario, VP and associate general counsel at LegalZoom
Pass-through taxation
LLCs often benefit from pass-through taxation where the business income passes through to the owners' personal tax returns, avoiding the double taxation that corporations can face.
Flexibility in management
Unlike corporations, LLCs have a flexible management structure. You're not required to have a board of directors or hold annual meetings.
Ease of formation and maintenance
Compared to other business entities, forming and maintaining an LLC is relatively straightforward with fewer formalities and paperwork.
Credibility with customers and partners
Having 'LLC' after your business name can add professional credibility, which may help when dealing with customers and partners and with building a trusted brand,
Potential disadvantages of starting an LLC in Washington State
While there are many benefits to forming an LLC in Washington State, it's important to consider the potential disadvantages as well. By being aware of these, you can make a well-informed decision about whether an LLC is the right structure for your business.
Limited growth potential
An LLC may not be suitable for businesses that plan to go public or seek investments from venture capitalists as it doesn't allow for the issuance of shares.
Self-employment taxes
Members of an LLC may be subject to self-employment taxes on their share of the profits since they're considered self-employed.
Annual fees and reports
Washington State requires LLCs to file annual reports and pay a fee, which is an ongoing commitment that sole proprietorships do not have.
Transferability of ownership
Transferring ownership interests in an LLC can be more complex than with a corporation. It often requires approval from other members.
Why start an LLC over another business entity in Washington State?
Choosing the right business structure is a critical decision when it comes to starting a business. In Washington State, forming an LLC is often chosen because of its unique advantages. Let's compare it with other business structures to understand why an LLC might be the best choice for your situation.
Here's how an LLC compares to other business structures:
Sole proprietorship: Unlike a sole proprietorship, an LLC provides personal asset protection, separating your personal liabilities from those of your business.
Partnership: An LLC offers more protection for each member compared to a partnership, where each partner can be personally liable for the debts of the business.
Corporation: While corporations also provide limited liability protection, they’re also subject to double taxation (taxes on both corporate profits and shareholder dividends). An LLC avoids this with pass-through taxation.
LLCs also offer these unique advantages:
Operational flexibility: Corporations are required to have a formal structure with directors and officers, while an LLC can be managed by its members or managers.
Fewer record-keeping requirements: An LLC has less stringent requirements for record-keeping and reporting compared to a corporation.
Profit distribution flexibility: Profits in an LLC can be distributed in any manner agreed upon by the members, unlike corporations that distribute profits according to the number and type of shares held.
You've formed your LLC in Washington State, now what?
After successfully forming your LLC in Washington State, the journey to building and growing your business is just beginning. There are several important steps you should take to ensure that your LLC operates smoothly and is compliant with state laws.
Open a business bank account
Keep your personal and business finances separate by opening a bank account specifically for your LLC. This will simplify accounting and tax filing.
Obtain business insurance
Protect your LLC with the appropriate insurance policies. Consider general liability insurance, professional liability insurance or product liability insurance depending on your business needs.
For example, if you’re looking to start a contractor business in the state you’ll need to consider general liability insurance, professional liability insurance, workers’ compensation insurance, tools and equipment insurance and potentially commercial property insurance too.
Comply with employment laws
If you plan to hire employees, ensure you comply with all employment laws including wage requirements, labor standards, and workplace safety regulations.
Additionally, focus on these areas to manage and grow your LLC:
Understand ongoing compliance requirements: Familiarize yourself with any annual filings or fees required by the state of Texas to keep your LLC in good standing.
Develop a strong brand identity: Create a logo with a logo maker, establish a brand voice and build a professional website to present a cohesive image to customers. we
Implement a good accounting system: Good financial management is essential for any business. Set up an accounting system that allows you to track expenses, profits, and financial growth accurately.
Looking to start an LLC in another state?
How to start an LLC in Washington State FAQ
What's the processing time for forming an LLC in Washington State?
The processing time can vary depending on the filing method. Online filings are typically processed within 2-3 business days, while mailed applications may take several weeks.