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2022 Guide to Starting an LLC in Washington

Washington LLC Quick Facts

Washington LLC Costs

Initial Cost:
– State LLC Filing Fee: $200

 

Recurring Cost:
– Annual Report Filing Fee: $60

Washington LLC Processing Time

– Filing Online: 2-3 business days
– Filing by Mail: 2 weeks

Not sure about filing an LLC yourself?

Want an LLC, but not sure about filing the paperwork yourself? Let Zenbusiness, IncFile, or IncAuthority help guide you through the LLC formation process, so you know everything was done right.

IncFile and IncAuthority are both currently running a special where you only pay state fees for your LLC formation!

Overview

Guide to Starting an LLC in Washington

Are you thinking of starting a business in Washington? If so, you’ll need to decide what legal structure to use. One popular option is an LLC, and we will explain how to start an LLC in Washington.

What is an LLC?

The Limited Liability Company (LLC), is a type of business entity that provides limited liability to its owners. This means that the personal assets of the LLC’s owners are protected in the event that the business is sued. and it can be operated like any other type of business.  

Unlike a sole proprietorship or partnership where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

Related: Guide to starting a business in Washington

Steps to Form a Washington LLC

An LLC can be set up with just a few simple steps in Washington, so let’s break these down.

Total Time: 10 minutes

Step 1: Choose a Name for the LLC

The first step in forming a Washington State LLC is to make sure the name you want is available.  

It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of Washington. The Washington Secretary of State makes it easy to search and verify if your LLC name is available.  Here is more information on how to do a Washington LLC name search. 

In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
– Limited Liability Company
– Limited Liability
– L.L.C.
– LLC

A comma may be used after the business name and before the designator.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

If there is an LLC name you want to use, but you are not ready to register the LLC, the Name Reservation Form will hold a name for up to 180 days. The state fee for filing the Name Reservation Form is $30.

If you plan to use a different name from the one that you register (perhaps you want to run multiple businesses under the LLC), you can use a trade name (sometimes referred to as a fictitious business name, assumed name, DBA, or Doing Business As name).  Registration of the Trade Name will cost $5 for each name and can be applied at the same time as the Business License Application.

Before settling on a name, you may want to do a domain name search to match your business name and website address.

Step 2: Appoint a Washington Registered Agent

Every LLC in Washington is required to have a Registered Agent. A Registered Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.

The basic requirements to be a Registered Agent in Washington include:
– The agent must be a Washington resident at least 18 years of age (Non-Commercial Registered Agent) or a Commercial Registered Agent service with a registered office in the state.
– The agent must have a physical address in the state (PO Boxes aren’t allowed).
– The agent must generally be available during normal business hours at the address provided to receive service of process.

Learn more about the requirements for a Registered Agent in Washington

Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed.  Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being listed on the state’s website.

Step 3: File the Washington Certificate of Formation

The paperwork to officially create an LLC in Washington is called the Certificate of Formation (called the Articles of Organization in many states). To submit the paperwork, either file online through the  Washington Secretary of State’s website. If you prefer to fill out and mail the application, download the Certificate of Formation Form.

Related: How to fill out the Washington Certificate of Formation

When filling out the Certificate of Formation, a few sections and terms can be confusing. Let’s go over a few of these sections to help get your LLC started right.

Defer Initial Report – Every LLC is required to file an Annual Report, and the first one is named the Initial Report.  The Initial Report is due within 120 days of the LLC being approved.

It’s recommended to file the Initial Report along with the Certificate of Formation as the option to defer will cost an additional $30.

UBI Number – UBI stands for “Unified Business Identifier” and is a unique identification number for entities in the state of Washington.  Most filers wouldn’t have filed for this number already and would choose “No.”

Principal Office Street Address – In this section, enter the phone number and an email for the principal office.  This does not have to be an official business email. 
Next, enter the initial principal office’s street address, city, state, and zip code.  This address can be the LLC’s physical address, or the address where the business records are stored.  You may not use a PO Box for the designated office.

Address Confidentiality Program – If you are a part of the Washington Address Confidentiality Program, you can check this box.

Duration – In this section, you can indicate how long the LLC will remain in existence.  Most LLCs will choose a Perpetual duration; however, some businesses (usually investment-related) will have a specific closure date.

Effective Date – If you want the LLC to start as soon as possible, “Date of Filing.”  If you want the LLC to start later, enter a date less than 90 days in the future.  The main reason to consider delaying the LLC start date is when the filing is made close to the end of a calendar year, and the business isn’t going to have any activity until the start of the year.  You can eliminate the need to file a partial-year business tax return by delaying the start date until the following year.

Executor – An LLC Executor (known as an Organizer in most states) is someone involved with the formation of the Certificate of Formation.  The Executor may or may not become an LLC member, such as a mentor, attorney, or accountant, but any LLC initial member can be listed as an executor.  At least one person must be listed as an Executor.

Governors – Governors refer to how the LLC is managed.  Governors are LLC Members or Managers and are typically going to be individuals.

At least one governor needs to be listed.  Some filers will want to leave out the governors to protect their privacy.  The downside is that it may be difficult to obtain signing authority from the bank for any governors that are not listed.

Nature of the Business – Here, you are asked to provide some basic information about what the business does.  Open the drop-down menu to look at the basic categories.  If your business isn’t listed in any category, you can type in detailed information in the box.

If you want to keep the business purpose more open-ended or not disclose what your business does, you can select  “Any Lawful Purpose” from the drop-down menu.

Consider using an LLC formation service like Zenbusiness, IncAuthority, Northwest, or IncFile to guide you through the LLC formation process, so you know everything was done right.

IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!

You have a Washington LLC! Now what??

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

File the Initial Report

Within 120 days of forming your LLC in Washington, an Initial Report will be due. The Initial Report is similar to the Annual Report that will be filed every year.

LLCs filed online through the Secretary of State’s website have the price of the initial report included in the formation cost. LLCs filed by mail will have to pay an additional $30.

Prepare a Washington LLC Operating Agreement

The LLC operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: Washington operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Federal Tax Identification Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number (SSN) for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership is that the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.

Apply for Business Licenses and Permits

In addition to forming the LLC, there will likely be various business licenses and permits needed before starting the business. Some common registrations include:

  • Business License Application – All LLCs in Washington will need to apply for a state business license. This registration will quickly get a business set up with the Department of Revenue, Department of Labor & Industries, and the Employment Security Department, and any Specialty Endorsements and/or City Endorsements.  The fee for the Business License Application is $19.
  • Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
  • Sales Tax Registration – In order to sell products and certain services and collect sales tax, registration with the Washington Department of Revenue will be necessary.
  • Business and Occupation Tax (B&O Tax) – Even though Washington has no income tax, it does assess a tax on business income. All businesses generating over $12,000 in sales annually will pay this tax.

Related: What Business Licenses are Needed in Washington?

File state of Washington LLC Annual Reports

LLCs are required to file an annual report with the Washington Secretary of State.  The annual report updates ownership information and other details.

Related: How to File a Washington LLC Annual Report

Common Questions To Starting An LLC In Washington

How much does it cost to start an LLC in Washington?

The state filing fee to start an LLC in Washington is $200.

How long does it take to start an LLC in Washington?

It normally takes 2-3 business days to form an LLC in Washington when filing online or up to two weeks when filing by mail.

Is there a yearly fee for an LLC in Washington?

Each year, an annual report and $60 filing fee must be sent to the Washington Secretary of State.

What should I put for purpose of LLC?

When filling out the Washington LLC Certification of Formation, a section asks about the nature of the business.

The nature of the business or purpose of the LLC is requesting some basic information about what the business does.  Open the drop-down menu to look at the basic categories.  If your business isn’t listed in any category, you can type in detailed information in the box.

If you want to keep the business purpose more open-ended or not disclose what your business does, you can select  “Any Lawful Purpose” from the drop-down menu.

Can you be your own Registered Agent?

Yes! Anyone can act as a registered agent, provided they are at least 18 years old, reside in the state of Washington, and are generally available to receive documents during normal business hours.

Do you need a business license if you have an LLC in Washington state?

It’s sometimes thought that the LLC and business license are the same in Washington, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.

Related: What business licenses are needed in Washington?

Does Washington allow single member LLCs?

An LLC in Washington can be operated by one individual or many. An LLC owned by one person is referred to as a single-member LLC.

What is a Foreign Limited Liability Company?

A foreign LLC isn’t a special type of LLC. Instead, it’s an LLC that was formed in another state that wants to physically operate in Washington. Physically operating means having a presence, such as having an office or hiring an employee.

Related: What is a foreign LLC?

What is a Professional Limited Liability Company?

Businesses that require occupational licensing in Washington, such as accountants, architects, veterinarians, etc., can register for a Professional Limited Liability Company (PLLC) instead of an LLC. Filing for a PLLC is very similar to that of an LLC.

Related: What is a Professional Limited Liability Company?

Is an LLC the same as a corporation?

The LLC is one of four main types of business entities. You can learn more about each here:
What is a sole proprietorship?
What is a general partnership?
How to form a Washington corporation

Should I use an LLC formation service or do it myself?

Following our guide, most people will be able to form an LLC on their own, however, LLC formation services like IncFile and IncAuthority will guide you through the process and guarantee it’s done right – and it doesn’t cost any extra to do so!

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