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As a business owner, you want to limit the risk of your personal liability for business debts, and forming an LLC is a great way of achieving that. Contrary to popular belief, forming an LLC is straightforward and can be done by yourself.
This article will provide a comprehensive step-by-step guide on how to form an LLC in Washington, the costs involved, the recommended tax structures, and other helpful information.
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Step 1: Choose a Name For Your LLC
Before you can proceed with forming an LLC, you need to first decide on a name for your business. When choosing a name, you need to be aware of a couple of state requirements.
Here are the Washington state naming guidelines:
- The chosen name must be available for use. It cannot be already registered with the Secretary of State. To avoid having your application rejected, you can conduct an online search on the Secretary of State’s naming database.
- The chosen name must include the following words or abbreviations: Limited Liability Company, Limited Liability Co, L.L.C, or LLC.
- The chosen name cannot contain words that are used in the naming of military or government institutions.
- Additional documentation and permits will be required if the LLC offers professional services like law or medicine.
To read through the complete list of naming rules, click here.
If you have already chosen a name, but you are not ready to immediately file for your Certificate of Formation, there is the option to reserve it for up to 180 days. This can only be filed by mail for a fee of $30. You will need to complete the form in dark ink and mail it to the following address:
Secretary of State
Corporation Division
801 Capitol Way S
PO Box 40234
Olympia WA 98504-0234
If you wish to operate your business under a different name than what you registered, also known as an assumed name, you will need to complete an application online. This will need to be done through the Washington Department of Revenue or by mail.
Step 2: Appoint a Registered Agent
In Washington state, every LLC will need to appoint a registered agent. A registered agent is either an individual or entity authorized to do business in the state. The registered agent is the LLCs first point of contact with the government. The registered agent will receive and handle all legal mail on behalf of the business.
Your registered agent needs to meet the following criteria:
- They need to have a physical street address in Washington state.
- They must be present on-site and daily during regular business hours to accept any mail.
Step 3: File the Certificate of Formation
Once you have chosen a name and hired a registered agent, you must create the LLC by filing the Certificate of Formation. This document lays out the basic information about the LLC, which will be sent to the Secretary of State. There are three options for filing this document: online, in-person, or by mail.
To complete the application online, you must create an account on the Secretary of State’s online portal. The form will be completed online, and the non-refundable fee of $200 will need to be paid. If you choose to use the mail option, you must complete the form, pay the non-refundable fee of $180 via check, and mail the form to the Secretary of State, Corporations Division.
The Certificate of Formation will include the following information:
- The name of the LLC
- The name and address of the registered agent
- A general statement about why you want to form an LLC
- The date of formation
- The LLC’s duration, if applicable
- The management structure of the LLC
- The signature of the person forming the LLC
Once the application has been submitted, you will have to wait for them to accept or reject it.
Step 4: Apply For a Washington Business License
All LLCs need to obtain a business license in the state of Washington. This is done through the Department of Revenue after you have filed the Certificate of Formation. This will need to be done online, and pay the $90 fee. In approximately ten days, you should receive a UBI, Unified Business Identifier. This UBI is a nine-digit number used when filing the annual report and other business documentation.
You should also check requirements to see if you need to obtain any other types of licenses or permits to run your business. Use the Washington State Department of Revenue Business Licensing Wizard for more information.
Step 5: Receive the Certificate from the State
If your application has been successful, you will be issued three documents with a duplicate sent to your registered agent.
Documents you will receive from the state include:
- A congratulation letter
- A Certificate of Formation
- A Certificate of Formation with the initial report – this report confirms that the LLC does exist and is legally able to operate.
Step 6: File Your Annual Report
Every Washington LLC is required to complete and file an annual report, also called an annual renewal. The initial annual report is due within 120 days of officially forming the LLC. In subsequent years, the due date will be the end of the month the LLC was formed. The Secretary of State will also send a renewal notice to the registered agent ahead of time so that you can file your annual report in time.
The initial report and the annual report can be filed either online or by mail. The fee is $10 unless you choose expedited services which are extra. If you fail to submit in time, you may be charged a penalty fee and can even face the dissolution of your LLC.
Cost to Start an LLC in Washington
There are several expenses to consider when forming an LLC. Firstly, if you decide to reserve your name, this will cost $30. The business license fee is $90. And finally, you will also need to file the Certificate of Formation, which will cost $200 or $180, depending on whether you file online or by mail.
On top of these starting costs, you will need to consider registered agent fees and additional fees if you decide to hire an LLC formation service.
What To Do After Forming Your LLC in Washington
After forming your LLC in Washington, you still need to do several important things to ensure it remains compliant and operates efficiently.
Create an Operating Agreement
Creating an operating agreement in Washington is not legally required but is highly advisable. A good operating agreement is a document that outlines the business’s scope of practice. This can be drawn up by a lawyer or yourself.
Having an operating agreement can significantly help during disputes as all decisions can be decided by what was provided in the operating agreement.
While there are no rules on what needs to be included, here are some things to include:
- Basic information of the LLC, such as physical address and the name of the business.
- The name and contact details of the members of the LLC.
- The name and contact details of the registered agent.
- A brief statement of the purpose of the business.
- The management structure of the LLC.
- The way profits and losses are divided.
- The procedure for hiring new employees and letting employees go.
- Any indemnification and liability clauses.
Get Your EIN
An Employer Identification Number (EIN) is a number issued free of charge by the Internal Revenue Service that identifies your business as a taxable entity. This nine-digit number can be used for several things:
- Managing and paying both state and federal taxes
- Opening a bank account for the business
- Hiring employees
An EIN can be applied online or by mail, and there is no fee to apply for one.
Separate Your Assets
To protect your personal assets from liability, open a bank account for your business. This is an excellent way of tracking expenses and simplifying the process of tax filings. You can even take it a step further by getting a business credit card.
Get Business Insurance
Having business insurance is something most businesses invest in first. General Liability Insurance is the most commonly used as it is a broad policy. Speak to a professional insurance broker to explore your options.
Hire an Accountant
Hiring an accountant can make all money matters so much easier. You can either use an accounting service or hire one on your payroll. They can look after your spending and take care of all paperwork needed come tax season.
How to Keep Your LLC Compliant in Washington
Forming an LLC is just the beginning. You want to ensure that your LLC remains compliant with the state so that you may legally continue to operate.
Here are a few ways to keep your LLC compliant in Washington:
- File and submit the annual report by the due date.
- Maintain your registered agent.
- Submit and pay all taxes on time.
- Ensure that all permits and licenses are up to date.
- Remain informed about state regulations and any changes.
- Maintain your business as described in the Certificate of Formation.
Tax Filing Requirements for LLCs in Washington
For any business, it is important to ensure you understand all tax requirements to remain compliant. For LLCs in Washington, you will need to look at state and federal taxes.
State Taxes
LLCs are required by law to pay Business and Occupation Tax (B&O). This tax is calculated from the gross income of the business and varies. You can view the different rates here.
You will also need to pay Unemployment Insurance taxes if you have employees. You can find more information about this in Washington’s Employment Security Department.
Federal Taxes
LLCs are automatically considered pass-through entities, meaning the LLC does not pay taxes. Instead, the individual members of the LLC pay taxes on their personal income taxes.
Single-member LLCs must submit Form 1040 Schedule C. Multimember LLCs must submit Form 1065 Partnership Return.
Frequently Asked Questions
How long does it take to register an LLC in Washington?
If you wish to register by mail, it can take around 7-10 business days. This timeframe does not include any mailing time, so you will also need to factor that in.
Online registration is a lot quicker. Registration takes around 2-3 days, and the documents can be downloaded instantly after approval.
There is also the option to pay extra for expedited service for mail filings. For an additional $50, your application will be processed in 3 business days.
What tax structure should I choose for an LLC in Washington?
Whether you’re a disregarded entity (single member) or a partnership (multi-member), you will be taxed as a pass-through entity. This means that the LLC will not pay any federal taxes or face double taxation. Instead, only the members drawing an income from the LLC will be taxed. This will be through their own personal income tax return.
In some cases, being taxed as a corporation can be an advantage. Especially if your LLC is bigger or earns more money, you may want to consider switching to be taxed as a corporation instead.
To understand the tax structure best for you, seek professional advice.
Should you hire an LLC formation service in Washington?
This all depends on your needs. Forming an LLC on your own is simple to do so. There can be a bit of paperwork, but nothing overly complicated. However, if this is your first time completing the process or you’re still unsure what to do, then yes, hiring a formation service would be helpful. You can check out the best LLC formation services in our research.
Filed under: Washington Business Guides