How to Start a Business in Washington
There’s no shortage of reasons to start a business in Washington. For one, Washington is one of a few states without a corporate income tax or a personal income tax. To start a business here, all you really need to do is begin selling some type of product. But if you want to build a Washington business that protects your personal assets, you need to go beyond the basics. In this guide, we’ll tell you exactly how to start a business in Washington.
Ready to Start a Business in WashingtonLet's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
File a Washington Initial Report
Draft Internal Records
Get Washington Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
Apply for Trademarks
1. Pick a Business Structure
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.
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.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about a Washington nonprofit?
2. Name Your Business
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.
Can I reserve a business name in Washington?
Yes, you can. Submit a Name Reservation Form to the Secretary of State’s office. For LLCs and corporations, the cost is $30 by mail and $50 to file online.
What is a DBA?
DBA stands for “doing business as.” A DBA is a name your business uses besides its legal name. If you’re a sole proprietor, your human name will also be the legal name of your business unless you get a DBA. For an LLC or corporation, your business’ legal name will be what you list on your formation paperwork.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
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.
How can I keep my information off the public record?
The best way to keep your private information off the public record is simple: don’t put it on public documents in the first place. That’s where a registered agent service (like NW) can be especially helpful. A registered agent service can list their business address instead of your personal address.
What is a registered agent?
A registered agent is the person or entity who is responsible for receiving state and legal mail on behalf of your business. A Washington registered agent must have a physical address in the state. The registered agent must also be available to accept legal and state documents on your behalf during regular business hours. In Washington, a registered agent can be either an individual (like your cousin) or a business (like us). If you don’t like to be tethered to your desk all day, it makes sense to hire someone else to act as your registered agent and ensure you don’t miss any important documents.
4. File a Washington Initial Report
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.
What if I don't file an annual report in Washington?
If you don’t file your annual report on time, the state charges LLCs and corporations a $25 delinquency fee. In addition, your business could be administratively dissolved.
5. Draft Internal Records
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.
6. Get Washington Business Licenses
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.
How do I get a Washington business license?
Washington’s main business license costs $50. You’ll need to include information like your business name and address. Filing fees will vary depending on what kind of business you are operating.
How much does it cost to get a Washington state business license?
In most cases it costs $50 to file a Business License Application (Form 700-028). However, if your business requires a local license and/or a professional license, you will have additional fees. For example, if you’re a scrap metal worker in Snohomish, you’ll pay $50 for your state license, $1250 for your Scrap Metal Processor License, $5 for your first Scrap Metal Processor License Plate, and a minimum of $25 for your local business license. That’s a grand total of $1330.
How do I get a professional license in Washington?
The application process changes depending on what type of license you’re seeking. You’ll need to apply to the specific board or agency that oversees your profession. For instance, funeral directors must apply to the Funeral and Cemetery Board. Hairstylists will apply to the Cosmetology Program Department of Licensing.
How do I get a local business license?
Each city has different requirements and fees. You can start by referring to your city government’s website. For example, a general business license in Walla Walla costs $50. In Vancouver, the price of a business license varies based on annual income and the number of full-time employees working within city limits.
7. Organize Your Money
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.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
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.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What's the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
How do I get a Washington State Unified Business Identifier?
If you filed paperwork to form your business online, your UBI should be listed in your confirmation email. If you filed by mail, you’ll find it on the formation document sent to you by the Secretary of State’s office.
8. Get Business Insurance
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.
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.
Do business owners need workers compensation insurance in Washington?
Business owners are typically excluded, although the state has special provisions for some family-run businesses. Even if you don’t have to get workers compensation insurance, it’s still not a bad idea to cover yourself. If you do get hurt, having workers compensation insurance can save you money on medical bills—especially since your personal health insurance likely won’t cover any work-related injuries.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
9. Understand Your Tax Burden
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:
- 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.
Do I need an EIN if I'm self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in Washington, there’s no corporate tax rate). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
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%.
10. Build Your Business Website
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.
11. Apply for Trademarks
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.
How do I register for a trademark in Washington?
In Washington, trademark requests must be submitted via postal mail to the Washington Secretary of State. You’ll need to send a Trademark Registration Form with information about both your business and the trademark, including three examples of how the trademark is already being used. You must also include the date your business first started using the trademark.
The fee is $55 per classification. Regular processing typically takes 5 to 7 business days after receipt. Expedited processing takes 1 to 2 business days and requires an additional $50 fee. If approved, your trademark is only registered in Washington, not at the federal level.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.