After countless weeks and months of research and considering whether your product or service is unique enough to stand out from the competition, you’ve decided to take the plunge. It’s time to turn that dream into reality by starting your own business. But to do that, it takes more than just creating a product or service. You also need to make your business legal.
Luckily, ZenBusiness is here to help! Here is a comprehensive guide to limited liability companies (LLCs) in Washington, and how our products and services can help you start and grow your business from the ground up.
Starting a Washington LLC isn’t terribly complicated, but it does demand careful attention to detail. Before you can file your Certificate of Formation (the official paperwork that establishes your LLC), there are preliminary matters to consider. These include choosing a unique name that meets Washington state’s criteria, appointing a registered agent to accept legal correspondence for your business, and formulating a comprehensive Operating Agreement.
It might sound like a lot, but our many tools and support services can make the process easier. This leaves you to focus on what you really want to do: build and grow your business.
Step 1: Name Your Washington LLC
Before you register your LLC in Washington, you need to decide on a name. You must be sure that your LLC name isn’t taken by another company in the state and is unusual enough to be distinguished. The state has a business name search, but with ZenBusiness’s WA business search tool, we’ll walk you through it step by step.
Washington state law requires you to include some variation of “Limited Liability Company” as the name’s suffix. You have a few possibilities: You can end your company’s name with the full “Limited Liability Company,” shorten it to “Limited Liability Co.,” or use the abbreviations “LLC” or “L.L.C.”
The state additionally prohibits certain words and combinations of words from appearing in LLC business names. You cannot use words that would suggest your LLC is a financial institution, like “banker,” “banking,” “trust,” or “cooperative.” You also can’t combine the words “trust” and “loan.” Finally, you may not use any combination of two or more of the following words: “savings,” “association,” “society,” “home,” “loan,” or “building.”
Once you’ve found a name, you might not be ready to take the next step and file your Certificate of Formation right away. Washington gives you the option to reserve your intended name for 180 days, so if you need some time, use our name reservation service to make sure your name is ready when you are.
As you search for available business names, check if relevant domain names are available for those business names. A website is an affordable marketing tool that can drive customers to your business. You want a domain that aligns with your LLC name, making the website easy for search engines to find. Check out our domain registration and search services for more information.
If you plan to use an alternate name for your LLC, you’ll need to complete this process twice. Known as a trade name or “Doing Business As” (DBA) name, you’ll first need to check that your trade name is available and compliant with Washington’s requirements. Unlike your LLC’s official name, your trade name should not have any business entity suffix, including “Limited Liability Company,” “LLC,” or “L.L.C.” The trade name should also not include any words relating to financial institutions, such as “bank,” “trust company,” “credit union,” or other similar words or phrases.
Once you’ve found an acceptable DBA name, you will need to register it. This guide to Washington DBAs can give you the specifics.
Step 2: Appoint a Registered Agent in Washington
Every registered Washington business entity needs to have a registered agent. This is a person or entity acting as the point of contact for service of process and other legal documents on behalf of the buisness. The registered agent must have a Washington residency in the form of a permanent address in the state and be authorized to do business in the state.
As an LLC member, you can list yourself as your company’s registered agent; however, this option is not always in your best interest. If you are served with a lawsuit, for example, you don’t want to receive this paperwork at your place of business, with customers and clients around.
Instead, consider ZenBusiness’s registered agent service. We can help you fill this legal requirement and make sure all important documents get to you in a discreet and time-efficient manner.
Step 3: File a Washington Certificate of Formation
Once you’ve decided on a business name and appointed a registered agent, the next step is making your Washington LLC official! To do so, you’ll need to complete a Certificate of Formation and file it with the Washington Secretary of State. This is the official document that formally establishes your LLC as a recognized legal entity in Washington. To complete your certificate, you’ll need:
- Registered agent name and address. As noted above, this is the person or business who will receive legal documents on behalf of your business, be available during regular business hours, etc.
- Principal office address and contact information. You will need to provide a phone and email contact for your business. Your business street and mailing address (if they are different) are also required. Please note: Unless you are acting as your own registered agent, this address is not the same as your registered agent’s address.
- Duration. You will pick if your company has a perpetual duration, if it expires after a certain number of years, or if it expires on a specific date.
- Effective date. This is the date your business begins to exist. You can select the date of filing or a different date, but the date is not allowed to be more than 90 days from your filing date. It also cannot be prior to the filing date.
- Executor. Washington requires each business to have at least one executor. An executor is a person forming the LLC and signing the Certificate of Formation. An entity is not allowed to be its own executor.
- Governor. Washington also requires each business to have at least one governor. A governor is a person or entity listed on the business’s annual report, and in an LLC is usually a member or a manager.
- Nature of the business. You can be specific, but a more general statement will suffice.
- A return address for filing. This is the email and address where you want follow-up correspondence on your application to go.
The Washington Secretary of State prefers online filing but does accept paper forms with an extra fee. Once accepted, your LLC will receive a Washington State Unified Business Identifier (UBI). Be sure to keep a record of that number, as you will use it when dealing with other state agencies. Within 120 days of your LLC’s formation, you are required to file an Initial Report, which is really the first annual report your LLC will file every year.
If this sounds overwhelming, don’t worry. Take a look at our comprehensive business formation packages and let our team do the work for you. Once the state approves your LLC, your state paperwork will be available on your ZenBusiness dashboard, where you can keep it and other important business paperwork digitally organized.
In addition, we offer customized business kits to help you keep these important documents organized and looking professional. Whether it’s an operating agreement, member certificate, business contracts, compliance checklists, transfer ledgers, or anything else, you can be sure it’s all in one safe place.
Finally, consider a business address. You’re going to need to give out an address for your LLC more often than you realize, and that can be unsettling for those running their business from home. In instances where you’re not required to give the registered agent address or official principal address for your business, a virtual business address can come in handy. With our virtual business address service, we can supply you with a physical street address where you can have your mail sent without divulging your real address to more people than necessary.
Step 4: Create an Operating Agreement
An operating agreement is where you put in writing how the business will be run, the breakdown of responsibilities, how profits will be shared, and more. All partners in the LLC will approve and sign it, making it a binding contractual relationship between the members. Washington does not require a business to have one, but most experts strongly encourage all LLCs to have one.
This is because an operating agreement can be tailored to your business’s needs. If a conflict arises, the default state LLC laws will control the outcome. You can make sure to avoid unpleasant situations like this by using our Washington operating agreement template, available in many of our formation plans.
What does an operating agreement look like? What’s contained inside will depend on the specifics of your business, but there are a few things you will want to include:
- Percentage of ownership and distribution of profits and losses
- Voting rights and responsibilities
- Division of roles and responsibilities with members and any managers
- Required meetings
- Buyout and buy-sell rules
Once it is completed and signed, it should be kept with important business formation information in your ZenBusiness dashboard.
Step 5: Apply for an EIN
A federal Employer Identification Number (EIN) is a nine-digit code the IRS uses to identify businesses for tax purposes. Most Washington LLCs need this Tax ID number, even if you are a single-member LLC with no employees. Getting an EIN should be a priority anyway, as it can help with practical things like opening a business bank account. You can use our EIN registration service to make it easy.
Once you’ve secured your EIN, you’ll be able to open a business bank account. It’s important to keep separate accounts for your business and your personal banking, as failing to do so might land you in legal trouble and open your personal assets up to creditors or those looking to file a lawsuit against your business.
To help you avoid this, we offer a discounted bank account for new businesses. This allows for unlimited transactions, online banking, a debit card, and more. When you want to authorize others in your business to use the account, we offer a banking resolution template to simplify the process.
If you don’t feel confident in your financial skills quite yet, try the ZenBusiness Money App. It can help you create invoices, receive payments, transfer money, and manage clients all in one place.
How much does it cost to start an LLC in Washington?
The cost to starting an LLC in Washington State depends on your situation. Filing a Certificate of Formation requires a fee, and you must also provide your Initial Report within 120 days, which will cost an extra fee. The cost varies based on filing method, and you will pay more if you need expedited service.
In addition to this cost, you may have licenses, permits, and insurance to pay for when starting your Washington LLC. This will depend largely on the type of business you run. For example, if you work in the foodservice industry, you need a business license, health permit, and possibly a liquor permit — to name just a few. LLCs with employees will need workers’ compensation insurance as well.
You’ll need to make sure your LLC has all the licenses and permits it’s required to have by law. Unfortunately, because licensing varies by industry and location and can occur on the federal, state, and local levels, there’s no central place to check to see if you have all the licenses and permits you need. If you feel lost, our business license report service can do the work for you.
What are the benefits of an LLC in Washington?
LLCs aren’t the only type of business you can form in Washington. However, 90% of ZenBusiness customers, along with the majority of entrepreneurs, choose to form an LLC over all other types. Compared to corporations and other forms of entities, LLCs come with enticing benefits. The reporting requirements for LLCs are less extensive than those of a corporation, for instance, and they allow for flexible management structures.
Forming your LLC in Washington state means you’ll reap the following added benefits:
- Skilled labor. Washington highlights its expert workforce as a major boon for business owners. One-third of workers have a postsecondary degree. The state’s many colleges and universities frequently work with businesses in public-private partnerships, feeding the workforce.
- Excellent supply chain. Geographically, Washington is ideally situated for doing business. It’s on the coast, well-connected via ports and on-land transport. It’s also equidistant between Europe and Asia, allowing for promising international business opportunities.
- Favorable tax situation. Washington is one of the few states to have neither personal nor corporate income tax. The state also offers incentives to spur growth, for example, tax deferrals and credits.
How is a Washington LLC taxed?
Your Washington LLC will likely need to pay taxes on the federal, state, and local levels.
At the federal level:
- If you choose pass-through taxation, your taxes are paid on members’ personal tax returns most LLCs.
- Owners typically make quarterly estimated tax payments during the year using form 1040-ES.
- You can elect to have your LLC treated as a C corporation or S Corporation for tax purposes using the IRS Form 8832 for a C corporation and Form 1120-S for an S corporation. In doing this, you will need to file a business tax return and report your earnings on your personal taxes.
At the state level:
- While Washington does not have a personal or business income tax, there is a Business & Occupation (B&O) tax, sales and use tax, property tax, and some industry taxes. You can find out more details by visiting the Washington Department of Revenue’s website.
- Small businesses often will file an excise tax return. How often you need to file is assigned to you after you submit your business license application and is based on the estimated amount of tax you owe.
At the local level:
- Most of Washington’s cities and towns have a local sales tax rate, which will be collected by the Washington Department of Revenue.
- Most also have a business and occupation tax that the cities collect on their own — for more information on these taxes, you will want to contact the city or town where you do business.
- Sales tax is based on location, and businesses are required to charge the rate of the location where the product or service was delivered.
- To determine the correct rate, the state has provided an online lookup tool.
State employment tax:
- Unemployment tax (also called unemployment insurance tax) is paid quarterly to the Employment Security Department (ESD).
- Tax calculations are based on a rate supplied to your business by ESD and multiplied by each employee’s wages.
Workers’ compensation premiums:
- Workers’ compensation premiums are also paid quarterly to the Department of Labor and Industries.
- Rates are calculated on the risk classification your business will receive from the department and multiplied by hours worked by employees in that classification.
- Employers can deduct a portion of the rate from an employee’s pay — the amount of which will be included in your rate notice.
Washington LLC FAQs
What is the processing time to form my Washington LLC?
It depends. Your Certificate of Formation will be processed with the Washington Secretary of State in the order in which it is received. Online filing is the quickest way, your LLC paperwork is usually processed within two business days.
Do I need to file my operating agreement with the state of Washington?
No. The Operating Agreement is kept internally by the members. While some states legally require LLCs to have an Operating Agreement, Washington is not one.
What tax structure should I choose for my Washington LLC?
As an LLC, you have different tax classification options to choose from. The majority of LLC owners opt for the default status. Under this set up, profits are passed through the LLC to the members. You pay taxes only on your individual income tax return. Since Washington doesn’t have personal income taxes, this is favorable. Note that the LLC will likely be subject to other state taxes, however. Washington requires LLCs to pay business and occupation taxes, for instance. These are calculated based on your business’s gross receipts. The tax rate varies depending on the type of business. At the federal level, if your LLC has multiple members, the IRS will designate it as a partnership. This means each partner pays taxes on their share of the business. Alternatively, you can have your LLC taxed as a corporation federally, but this is usually advisable only for much larger and more profitable businesses. A tax professional can advise whether this makes sense for you.
Does Washington allow a Series LLC?
A Series LLC is a special business structure that allows multiple limited liability companies to operate under one “parent” organization. The LLCs operate independently, with their own members, Operating Agreements, assets, and liabilities. Washington does not allow Series LLCs (only a minority of states do).
What is a Washington State LLC Initial Report?
All LLCs in the state of Washington need to file an Initial Report within 120 days of being formed and should be submitted to the Washington Secretary of State. The Initial Report is the first version of the annual report required each year.
How do I add members to my LLC in Washington?
You’ll first need to review your Certificate of Formation and Operating Agreement, as these documents should outline how your business handles the addition of new LLC members. If your LLC is member-managed, you may need consent from specific members before adding a member. Similarly, if your LLC is manager-managed, you may need approval from the manager. Once the addition of the member has been agreed upon, you will need to amend your Operating Agreement or draft a new agreement entirely to document the changes. Considering Operating Agreements are internal documents, you will not need to refile any paperwork with the state or immediately notify the IRS.