Launching a professional business? If your team of licensed practitioners is ready to turn an idea into a legal business entity, you’ve come to the right place. Our step-by-step guide will connect you with the tools and information you need to open the doors to your Washington professional corporation. Let’s get started.
Is a Washington professional corporation the right structure for you?
All businesses should consider a formal entity structure, but there are some that would do better as a corporation than other types. See the ZenBusiness entity guide to see what’s right for you.
PC or PLLC?
There are two types of professional entities to choose from in Washington state. A professional limited liability company (PLLC) is easier to form and provides some tax benefits. However, if the services you provide require a higher level of liability protection, a professional corporation (PC) might be the best choice.
In a PC, owners are referred to as shareholders because they own stock in the company. When forming your business, you will decide on the total number of shares and your percentage of ownership, which is often based on your initial investment. As the company grows and members come and go, you can redistribute these shares and change the ownership composition.
There are three main roles to fill in your Washington professional corporation, and some team members can be assigned more than one.
- Director: A member of the management team in charge of organization and operations
- Shareholder: The owner(s) who control stock in the company
- Incorporator: The individual(s) who files Articles of Incorporation, officially creating the PC upon acceptance
Choose a name for your corporation
Washington name restrictions
Choosing the perfect name for your new business can be exciting and stressful. We recommend choosing something easy to read, memorable, and relevant to your company’s mission. In Washington state, your name must include the words “Professional Service” or “Professional Corporation.” Consider an approved abbreviation, such as “P.S.,” for sleeker signage.
Conduct a quick search on the Washington Secretary of State’s business name database before settling on a name idea because your business name is required to be unique in the state of Washington. It’s best to select a name with an available web domain to help your online presence remain consistent and easy for clients to identify.
What should you do if you’ve decided on the perfect name but can’t file immediately? Take advantage of ZenBusiness’s name reservation service to secure your choice in advance and prevent it from being scooped by competitors for 180 days.
Find a Washington registered agent
Selecting and maintaining a registered agent is mandatory as long as your professional corporation is active. In Washington, an agent must:
- Be a business entity or individual with an in-state physical address (not a P.O. box)
- Accept responsibility for handling legal notices and documents on an ongoing basis
It’s fine for a shareholder to serve as the corporation’s agent. However, this requires them to be available continuously during business hours. ZenBusiness’s registered agent service connects you with a Washington professional who manages everything on your behalf. Outsourcing ensures ongoing compliance and helps keep things from getting lost in the shuffle.
File Articles of Incorporation
To become a legally recognized professional corporation, your chosen incorporator must fill out and sign the Articles of Incorporation. This document informs the state of your PC’s name, address, directors, number of shares, and company mission. You must also submit a consent form signed by your registered agent. In Washington, you can file online for $200 or by mail for $180, payable by check or money order. Unlike many other states, Washington requires the incorporator to be licensed to provide the same professional services as other members of your team.
Establish a corporate record
Washington law instructs corporations to keep an official record of important legal documents and transactions. Many businesses choose to use a secure binder or file cabinet in addition to a cloud-based storage system. Countless files will pass through your hands before you know it, so the sooner you start organizing, the better. Corporate records are also required for business compliance.
Designate a board of directors
The initial board of directors has an extremely important role to play in your new business. The board holds meetings regularly, provides insight and oversight as the company scales, and manages organizational tasks. The board must be composed of state-licensed professionals in the same field and may include the incorporator.
Draft corporate bylaws
Once you have named your initial directors, it’s time to draft bylaws. External legal counsel may be helpful, but it isn’t required. The rules and regulations you agree on will provide a strong foundation for the success and longevity of your business. Consider voting procedures, share distribution, conflict resolution, and officer appointments. Be as specific as possible but know that you can always revisit these later.
Hold your first board meeting
Your first official board meeting will be long; ask a team member to record the entire session so you can revisit the meeting minutes and include them in the corporate record. You should use this time to:
- Appoint officers (president, secretary, and treasurer)
- Ratify bylaws
- Discuss tax status
- Outline the shareholder agreement
- Issue stock shares
Understand Washington tax obligations
Before you familiarize yourself with the particulars of Washington corporate tax law, register for an Employer Identification Number (EIN) from the IRS. This legally required unique business identification number is needed to file taxes, open a bank account, and hire employees. ZenBusiness has a streamlined tool to make this process easier.
In the U.S., every PC must pay federal taxes as a C corporation (standard) or S corporation (requires a special application). C corporation shareholders are taxed twice, once on the corporate level and again on the personal level. S corporation status alleviates some of the tax burden, but you must submit a formal application proving you have fewer than 100 shareholders, no foreign shareholders, and only one class of stock.
The good news is that Washington doesn’t have a state income tax. However, you’re required to pay a business and occupation (B&O) tax that will be calculated based on your gross receipts and business classification.
Several major cities in Washington impose a local version of the B&O tax. To read more about city, sales, and industry taxes relevant to your corporation, visit your municipal government website, or consult a tax professional.
Obtain Washington licenses and permits
Often, license and permit requirements are dictated by your location and business functions. Understanding exactly what you need can be daunting because there’s no central location to gather information. ZenBusiness’s license report tool eliminates the need for tireless research by doing the hard work for you.
Regardless of your services or location, you’ll need to register with the Washington Department of Revenue to get a general business license. This should be done after filing your Articles of Incorporation.
Your business may need to apply with Washington’s Department of Licensing to obtain industry-specific permits. For example, health care facilities, accounting firms, and construction agencies must hold a valid Washington license before accepting clients.
Acquire insurance for your Washington PC
Commercial liability insurance is the first line of defense for any corporation. It protects you from losses due to property damage or injuries that occur on the premises.
This optional coverage is important for licensed practitioners, especially health care providers, who need protection in case a client claims they were harmed due to a professional error.
The Department of Labor and Industries requires any corporation that hires employees to secure workers’ compensation insurance through the state fund. Alternatively, you may be able to qualify as a self-insurer.
Open a business bank account
Using your corporate EIN, open a new bank account for your corporation. It’s likely that the bank will ask for a copy of your Articles of Incorporation, bylaws, and signatories for verification, so be sure to bring these along.
Ready to kickstart your business?
Forming a Washington PC by yourself isn’t impossible, but it helps to have support. At ZenBusiness, we’re dedicated to providing you with helpful tools and an expert team to run and grow your business. Follow our guide, contact us with any questions, and allow us to share in your success as you launch an amazing business!
Washington Professional Corporation FAQs
What are the filing fees for a Washington professional corporation?
For Articles of Incorporation for a professional service corporation, expect to pay $200 online (including a $20 expediting fee) or $180 by mail. You can choose to expedite a paper filing for $50. Mail-in submissions must include a check or money order payable to the Secretary of State.
Do I need a lawyer to form a Washington professional corporation?
Hiring a lawyer is not required, but it is recommended. A professional can help you write state-compliant bylaws and prevent you from making common beginner’s mistakes as you form your new corporation.
Does Washington have other professional entity types?
Yes, licensed professionals may form a PLLC in Washington state. This entity offers different tax benefits and certain liability protections for state-licensed practitioners like doctors, lawyers, and architects.
Can professionals from different fields form a Washington professional corporation together?
Practitioners at your company must all render the same state-licensed services. Professionals from different fields are not permitted.
Will I be taxed as an S corporation or C corporation in Washington?
A C corporation is the default business type; you will be taxed as such unless you apply for S corporation status. To qualify for this election, you must meet specific eligibility requirements regarding the number of shareholders and type of shares. These requirements are set by the IRS.