How to Start a Business in Washington

Picking a legal structure for your business is the first big decision to make, as well as one of the most important. If you simply start selling stuff without filing paperwork with the state, then you’re a sole proprietor. That means, legally speaking, there’s no legal separation between you and your business. If you get sued, personal assets like your car and home can be taken in a lawsuit.

For liability protection, you’ll want to form an LLC or corporation.

Washington Limited Liability Company (LLC)

From an organizational standpoint, LLCs (limited liability companies) are more flexible than corporations. For example, LLCs are not required to form a board of directors, unlike corporations. To start a Washington LLC, you’ll need to file paperwork with the Washington Secretary of State. There’s a $200 filing fee if you file online or $180 if you send a paper form.

Washington Corporation

Forming a Washington corporation requires a more structured approach. A Washington corporation has a board of directors who are appointed by shareholders. The board then appoints officers to run the corporation. To form a corporation, you’ll need to file paperwork with the Washington Secretary of State. You can pay $200 to file online or $180 to file by mail.

If you’re a sole proprietor, then your human name is also your business name. If you want a different name, you must file for a DBA.

But if you’re an LLC or corporation, you can be a lot more creative with your business name. Of course, there are still rules you have to follow. In Washington, your business name must do the following:

• Use a proper identifier, like “Incorporated” for a corporation and “Limited Liability” for an LLC.
• Not be identical or similar to an entity that already exists in the state
• Not use words that imply a false business purpose—i.e.: using “nonprofit” when your business is a bakery.

Find out if your preferred name is available in Washington by checking the Corporations Registration Database or the Department of Revenue.

Sole proprietors don’t have to file formation paperwork. But there’s a chance you’ll still need a local business license.

If you’re starting an LLC or corporation, you will have to file paperwork with the Secretary of State:

• To form a Washington LLC, file a Certificate of Formation
• To form a Washington corporation, file Articles of Incorporation

As part of the formation process, you must also designate a registered agent. Once the form is done, submit it to the Washington Secretary of State, Corporations and Charities Division. It can be submitted online or by mail.

In Washington, your business must file an initial report within 120 days of formation or incorporation. This report includes information like your business’s physical address and mailing address. If your registered agent has changed, you should include that on your initial report as well. The initial report filing fee is $10, and it can be completed online or by mail.

After your initial report, you’ll need to file an annual report ($60) every year. The annual report should be filed by the last day of your anniversary month. It can be submitted online or by mail.

Learn more about how to file a Washington annual report.

So far in this guide, we’ve dealt with public forms that you’ve had to file with the Washington Secretary of State. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.

Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.

Here are the major internal documents you need to organize for LLCs and corporations:

Washington LLC Operating Agreement

This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.

Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a Washington LLC Operating Agreement template that you can use as a solid foundation.

Washington Corporate Bylaws

Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in Washington (see Washington Rev Code § 23B.02.060 (2019).

As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a Washington Corporate Bylaws template you can use to get started.

Starting a nonprofit? We also have Washington nonprofit bylaws.

The state of Washington requires most businesses (specifically LLCs and corporations) to get a Washington Business License. Your Washington Business License will allow your business to collect sales taxes from customers and remit those taxes to the state. It’s also likely you’ll need other types of licenses, depending on what type of business you’re running and where your business is located.

Washington State Business License

Washington requires all LLCs and corporations to obtain a Washington Business License. In addition, your city or county will likely require you to obtain an extra business license in order to conduct business within city limits. For example, Bellingham, Spokane, and Wenatchee all require local business licenses.

Professional Business Licenses

Washington requires professional business licenses if your trade requires specialized training and education. Court reporters, geologists, and private investigators are some of the people who need a professional business license in Washington. For a more complete list, see the Washington State Department of Licensing. Some licenses must be renewed annually, while others are good for several years.

Local Business Licenses

There are many cities and towns in Washington that also require a local business license. For example, Aberdeen, Bothell, Cheney, Deer Park, Ellensberg, Federal Way, and Granite Falls require local business licenses. The state recommends applying for local licenses at the same time you apply for state licenses.

Learn more about How to Get a Business License.

The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.

Open a Business Bank Account

To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.

Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.

Set up Payroll

If you’re planning to hire employees or independent contractors, you need to set up payroll. To do so, you’ll need to:

• get an EIN for your business
• get a Washington State Unified Business Identifier (UBI)
• register with the Washington Employment Security Department to file quarterly wage reports and pay unemployment taxes
• figure out your income tax withholdings
• determine whether you’re hiring employees or independent contractors
• prepare the forms your employees will fill out
• choose a payroll service or software
• decide on a payroll schedule

Setting up payroll in Washington can be a taxing process. But a solid payroll service or software will automatically withhold payroll taxes, file state and federal returns on your behalf, and pay your employees either by check or direct deposit—whichever you choose.

Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.

That said, it can be hard to tell what kind of insurance your business truly needs. In Washington, workers compensation coverage is required for most employers, while other types of insurance are optional.

Workers Compensation Insurance

Being an employer comes with certain responsibilities. It’s up to you to provide workers compensation coverage in case one of your employees gets injured on the job.

In Washington, you can’t purchase workers compensation insurance from a private company. You have to either get it from the Washington State Department of Labor and Industries or qualify to be self-insured.

Some employees don’t require workers compensation insurance. A single domestic worker in a private home doesn’t have to be covered, for instance.

Liability Insurance

This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.

Good news: Washington has neither a personal or corporate income tax. However, the state does have a business and occupation tax that almost every business must pay. That rate varies based on how a business is classified by the state, but most businesses will see a tax rate of 1.5% on their gross receipts.

Washington also has a retail sales and use tax (6.5%). In addition, if you use personal property in your business, you must pay a property tax. The property tax applies to things like equipment, furniture, and supplies. However, Washington alone doesn’t decide which taxes you pay. Here’s quick breakdown:

Federal Taxes

• LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. You’ll have to pay the 15.3% federal self-employment tax rate. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
• Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable Washington business and occupation tax.

To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.

Local Washington Business Taxes

Statewide, Washington’s sales tax is a base rate of 6.5%. But local municipalities can and do add a little on top of that. For example, the city of Spokane adds 2.5%, meaning you will pay an overall sales tax of 9%. The state’s largest city, Seattle, goes even higher. It adds 3.75% to the state base, giving it an effective sales tax rate of 10.25%.

If you want the good people of Washington to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:

• Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
• Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
• SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
• Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.

A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.

You can apply to register your trademark with the State of Washington or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Washington is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Washington.

You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.

Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.