Everything you need to know to start your business in Washington State
Have a brilliant business idea but not sure how to build it? In this post we'll teach you how to establish every possible business structure in Washington State.
Startup ecosystem in Washington State
Before starting a business in any location, it's important to have a clear understanding of its startup ecosystem.
Let's have a look at some of the important startup statistics in Washington:
As you can see, Washington is very accommodating to ambitious startups!
Planning your business in Washington State
After validating that there's a demand for your business solution with proper market research
, the next step is to create a business plan.
Not only will a business plan help you logically plan your business launch, but it may also help you secure investor funding before you spend any of your own money.
Here's how to structure a business plan:
Sales and marketing
Thankfully, we've written an in-depth guide to crafting a winning business plan
Structuring and registering your business in Washington State
There are 7 main business structures, and all are applicable to both brick and mortar businesses and e-commerce businesses:
Limited Liability Company (LLC)
Procedures for all business types in Washington State
Regardless of which the business structure you choose, you'll need to follow a few key steps:
Get your EIN
An EIN, or Employer Identification Number, is mandatory for all business structures if you'll be hiring employees.
Sole Proprietors and Partnership that will not be hiring employees
, aren't obligated to obtain an EIN, although it's still recommended to formalize a business structure.
It's mandatory for LLCs, Corporations and Nonprofits to obtain an EIN.
Register a business name with Washington State
If you want your business to have a different name than your given name, you'll need to register a trade name
Get your licenses and zoning permits
Certain business in Washington State require a license
to operate. If you'll be conducting business in various cities, depending on your business type, you may need to also apply for city licenses
Certain business locations also may require a zoning permit
to be used commercially. This especially might be the case if you'll be running your business from home.
You should contact your local Washington county
to check for any specific updated licensing requirements in your city.
File a business business license application
This is different from the business licenses mentioned above. Filing a business license application
registers your chosen business structure with Washington State.
Once your business license application is approved, a State Business License will be automatically issued to you.
If you don't receive a state business license, or if you want to check on the status of your application, you can contact the Washington State office directly on 360-705-6741.
Create a SecureAcess Washington login
You need to create a SecureAcess Washington
(SAW) login to access online services such as business registrations.
Submit New Hire Reports
Open a business banking account
You should always keep all business transactions separate from your personal transactions by opening a business banking account.
Tax details for all businesses in Washington
You can also learn more about the specific tax classifications of your business here
All of the federal tax forms pertaining to every business type can be accessed from the IRS website
Domestic vs Foreign business in Washington State
To make sure you're accessing the correct forms, it's important to understand the difference between a Foreign and Domestic business.
A Foreign business in Washington State is one that is headquartered outside of the state.
A Domestic business in Washington State is one that is headquartered within the state.
Now let's discuss the processes of establishing each individual business structure.
How to start a Sole Proprietorship business in Washington State
If you're launching a business alone, the simplest structure you can establish is a Sole Proprietorship. Most entrepreneurs begin as Sole Proprietors and then upgrade to a more complex structure as their business grows.
The primary drawback of a Sole Proprietorship is the unlimited personal liability of its owners. What this means is that Sole Proprietors undertake all financial obligations of the business and risk losing all of their assets if the business goes under or is sued. You can mitigate this risk with the right insurance policy.
If you follow all of the steps we've outlined so far, there are no additional steps to forming a Sole Proprietorship in Washington State.
How to start a Partnership in Washington State
If you're launching a business with another cofounder, a Partnership is the simplest business structure you can choose.
Partnership members have unlimited personal liability for all business debts, so they should protect themselves with appropriate business insurance.
There are three different types of partnerships in Washington State:
General Partnership (GP)
This is the standard form of partnership. All general partners share the profits as well as all business debts. All general partners also have full jurisdiction over all business decisions.
To register a General Partnership in Washington State, no additional registration forms are required other than a Business License Application
Limited Partnership (LP)
A Limited Partnership is comprised of both General and Limited partners. Limited Partners, as the name suggests, limit their personal liability to the extent of the investment in the business.
These partners are also known as "silent partners" because they have little to no jurisdiction over business decisions.
To form a Limited Partnership in Washington, you need to register with the Secretary of State before submitting a Business License application.
For instructructions on forming a Domestic or Foreign Limited Partnership click here
Limited Liability Partnership (LLP)
In a Limited Liability Partnership structure, each member is not held responsible for any negligence or fraud committed by other members.
Both Foerign and Domestic Limited Liability Partnerships should be registered
prior to submitting a Business License Application.
Limited Liability Limited Partnership (LLLP)
In an LLP partnership, Limited Partners are completely protected from business debts and General Partners are are partially protected.
Create a Partnership Agreement
This is not a requirement in Washington, but we still recommend it. Having a written Partnership Agreement makes your startup more appealing to potential investors.
A Partnership aAreement outlines all of the roles each partner agrees to undertake as well as the laws that will govern the business.
You can design this agreement however you like, or, alternatively, use a premade template
How to form an LLC in Washington State
LLCs protect the personal assets of their members while still serving as pass-through entities. In other words, tax liability passes through the LLC and is reported on the owner or owners' personal income taxes.
LLCs can either be managed by their members or by a designated manager.
Naming an LLC in Washington State
All LLCs in Washington State need to end their business name in any of the following suffixes:
Limited Liability Co
Limited Liability Company
Appoint a registered agent in Washington State
It's mandatory for all LLCs in Washington State to appoint a registered agent. Registered agents are responsible for receiving all mail on behalf of a business and then forwarding it in a timely manner to each business owner.
All registered agents in Washington State must meet the following criteria:
Be located in the state of Washington
Accept mail via a residential or business address (not via a PO BOX).
Guarantee availability during business hours.
Guarantee the timely forwarding of all accepted mail to respective business owners.
Should you be your own Registered Agent in Washington State?
You can act as your own registered agent or appoint your cofounder, but it's not recommended because you can never guarantee your availability to accept mail in person during business hours.
Alternatively you could appoint a friend, relative or any of the following professional registered agents in Washington State:
Submit Certificate of Formation in Washington State
This document can be filed online or by mailing it to the Secretary of State:
Secretary of State Corporation Division
801 Capitol Way S
PO Box 40234
Olympia, WA 98504-0234
Once approved, you'll receive a UBI number. You should wait until you've received this UBI number before applying for a business licence.
Submit initial report for your Washington State LLC
Within 120 days of the approval of your Certificate of Formation you must submit an initial report. This is the first submission of your LLC annual report.
If you're submitting your Certificate of Formation online, your initial report will be included in this process. Otherwise you'll need to mail this report
alongside a check to pay for the submission fee.
Create an operating agreement
To ensure all the members of your LLC are always aligned with business decisions you need to create an operating agreement.
An operating agreement clearly outlines how your LLC should be governed and the roles of each of its members.
This is not a Washington State requirement, so you are free to create it however you like, but here is a list of suggested topics to cover:
Business decision procedures
Member voting procedures
Allocation of profits amongst members
Separate to this, an official list of bylaws should be created collaboratively by all members during your initial corporate meeting.
Host initial Corporate meeting
During this meeting you should appoint initial term directors, discuss any matters that require attention prior to launching and create your corporate bylaws.
If there are any high value purchases that must be made to accompany the launching of your LLC in Washington, they should be finalized during this meeting.
Meeting minutes should be recorded during this meeting, as well as all subsequent corporate meetings, and stored in a Corporate Records Book.
A Corporate Records Book aggregates all important company documentation. It should be readily accessible to all members in your principal office location.
Submit a Washington LLC Annual Report
A report must be filed with the Secretary of State every year to ensure that the most up to date record of your business is stored.
The Washington Secretary of State prefers these annual reports
to be filed online
How to form a Corporation in Washington State
A Corporation is the most advanced and complex business structure in Washington State. Due to its complexity, you may want to consult an attorney to help you set it up correctly.
There are two different types of Corporation structures in Washington State:
This is the default structure for a Corporation. C-Corporations can have unlimited members and issue all classes of stock. The downside of C-Corporations is the double taxation process that occurs at both the corporate and the personal income level of its members.
S-Corporations are only taxed once at the personal income level of its members. They're also limited to 100 shareholders (members) and can only issue one class of stock.
To choose an S-Corporation status, you need to submit Form 2553
with the IRS.
Naming your Corporation in Washington State
All Corporations in Washington State need to add any one of the following suffixes to the end of their business name:
You can check the availability of your prospective Corporation name by searching the Secretary of State name database
Submit Corporation Articles of Incorporation in Washington State
Appoint a registered agent for your Corporation in Washington State
The process of appointing a registered agent for Corporations is the same as the process for LLCs above.
Host initial Corporate meeting
The following procedures should be completed during this meeting:
All members should vote in the initial directors that will serve during the first term
All members should agree upon a set of bylaws that will govern the Corporation
Stock certificates should be distributed to members
Any important business purchases should be finalized
Procedure for the allocation of profits among members should documented.
Meeting minutes should be recorded and stored in a Corporate Records Book alongside all other important business documentation.
Submit annual Corporation reports
It's the responsibility of all Corporations in Washington State to ensure that the State holds the most up-to-date details of their business by disclosing them in an annual report
An initial report
should be submitted to the Washington Secretary of State once the Articles of incorporation have been approved.
Foreign Corporation in Washington State
How to form a Nonprofit in Washington State
If you want to establish a business that's focused on helping others, you should consider choosing a nonprofit business structure. A nonprofit is a form of Corporation that protects the personal assets of its members, while rewarding their charitable work with tax exempt status.
Appoint a registered agent in Washington State
The process of appointing a registered agent for nonprofits is the same as the process for LLCs.
Submit Nonprofit Articles of Incorporation in Washington State
In order to register your nonprofit with the state of Washington, you'll need to submit the Nonprofit Articles of Incorporation
. If you plan to also apply for Federal tax exempt 501(c)(3) status, you must include specific IRS standard statements in your Articles of Incorporation. For more guidance, refer to the section "Articles of Organization" on page 25 of this IRS document
Submit a business license application and register charity
Host initial Corporate Meeting
During this meeting all members should work together to create the bylaws that will run the nonprofit and also officially plan the launching of the nonprofit.
Meeting minutes should be recorded and stored in the nonprofit's Corporate Records Book.
Apply for nonprofit tax exemption in Washington State
To obtain a 501(c) tax exemption with the IRS, nonprofits in Washington need to file Form 1023
with the IRS. Smaller nonprofits may be eligible to submit the simpler Form 1023-EZ
Register for fundraising activities in Washington State
If you'll be undertaking fundraising activities you'll need to register
your intention to do so with the State.
Certain nonprofits are exempt
from collecting tax from fundraising activities.
Protecting your business in Washington State
Nonprofits need to submit an annual report
to keep an updated record of their business with the State of Washington
Protecting your business in Washington State
Some recommended insurance policies for your startup in Washington State are:
Business owners policy (BOP)
Business owners policy insurance is a combination of both business liability insurance and business property insurance. It protects your business from any loss of income that may result from disasters, theft, fire, etc.
Commercial property insurance
An important policy that protects all of your business inventory and other business belongings.
General liability insurance
This policy protects your business from any advertising copyright infringements, property damage, personal injuries and more.
Business income insurance
This insurance policy supplements any lost income while your business recovers from disruptive damage.
Workers compensation insurance
This policy offers compensation to any employees injured at work.
Helpful resources for businesses in Washington State
A central platform that allows you to access online forms and file for a business license.
This is a great resource for small business news, tips and advice, market research and industry-specific links.
The US Small Business Administration offers advice, advocacy and instruction for small businesses across the country.
Our own guide to launching your startup will walk you through every step of starting a business, from concept to execution.