How to Form an LLC in Washington: The Affordable Way

Author: Mathew Abraham

There are several advantages of conducting business through an LLC. These include flexibility in operations, minimal filing requirements, and protection of personal assets.

Washington is a great place to start an LLC. This article provides a one-stop checklist for all the steps involved in starting an LLC in Washington.

For example, how to name your LLC? How to file the Articles of Organization? What incentives and schemes does the State provide for its LLCs? We answer these questions and many more.

Name Your Washington LLC

Naming your LLC is a very important step. You must have a unique and appropriate name for your company. While naming your LLC, make sure you follow all the naming guidelines the State of Washington has laid down.

Naming Guidelines

The following general naming guidelines must be met by the name you select for your LLC:

The name must be unique and must not be similar to the names of other entities in the State. The name must include the words ‘LLC’ or ‘Limited liability Company’ or ‘L.L.C.’.

The name you select should not create an impression that your business is associated with the government. So, ensure the name does not contain words like “F.B.I.,” “Treasury,” etc.

Similarly, using some restricted words like “Bank” or “Attorney” in the name of your LLC will require you to get additional permissions. It may also need certain licensed professionals like lawyers to be part of the entity.

To get a better understanding of the naming rules for an LLC in Washington, you may read Section 23.95.305 of the Washington State Legislature.

Does Your Business Require a DBA?

You would be required to file for a DBA if you want to conduct business under a name different from your legal name. DBA is short for ‘Doing Business As.’ DBA is also referred to as a ‘fictitious name,’ ‘trade name’ or an ‘assumed name.’

For example, if the legal name of your LLC is ‘ABC LLC’ and you want to conduct business under the name ‘XYZ,’ then you can do so by registering ‘XYZ’ as your DBA. You can also open a bank account under your assumed name once it gets registered. It is important to note that registering a DBA would not automatically give you trademark rights in the registered name.

To register a DBA, you must conduct a name search on Washington’s business lookup website. Ensure that the DBA name you choose also follows the naming guidelines.

APPLY FOR A DBA IN WASHINGTON

Option 1: Apply for a DBA Online

Apply Online – OR –

Option 2: Apply for a DBA by Mail

Download Form

Mail to:
Department of Consumer and Regulatory Affairs
Corporations Division
P.O. Box 92300
Washington, DC 20090

Fee: $55

Doing a Name Search and Name Reservation

The name you select for your business should be distinguishable from other entities registered in the State. You should properly check the name chosen for your LLC to avoid rejection later on. You can use the Advanced Business Search portal of Washington to see if the name you desire is available.

You can reserve a name of your choice in Washington state for 180 days. Go through the name reservation form for all the required details concerning the same.

RESERVE YOUR LLC’s NAME IN WASHINGTON

File by Mail With the Washington Secretary of State

Download Form

Mail to:
Secretary of State
Corporation Division
801 Capitol Way S
P.O. Box 40234, Olympia, Washington 98504-0234

Fee: $30

Additional Expedited Fee: $50

Registering your business domain

Your business’s website address needs to match your LLC’s name. The address of your website is how customers find you online. So before you select a name for your LLC, it is recommended that you ensure that the domain name you need is also available. Always check the currently available domain names.

Choose a Registered Agent in Washington

The state of Washington requires you to have a registered agent. A Registered Agent is an individual or another business entity responsible for receiving all official communication on behalf of the LLC. The registered agent shall also receive any process service concerning a lawsuit against your company.

Who Can Be a Registered Agent?

The state of Washington provides specific requirements that your registered agent must comply with. The agent you select for your LLC must be:

  • Above the age of 18 years
  • Have a physical street address in the state
  • An individual resident of the State of Washington or
  • A business entity that has obtained authorization to conduct business in the State  

The registered agent should be available during business hours on all working days. You can appoint yourself or any of your friends or family as the registered agent of your LLC. Alternatively, you can also hire a professional service.

Individual v. Registered Agent Service

While you can appoint yourself as the registered agent for the service of the process, it may not be advisable for all businesses. It is advisable that you hire a professional registered agent service as it has many advantages.

A professional registered agent service ensures that you don’t fail to duly respond to any notice or other communication that may be sent to your LLC. They remind you when your returns and other filings are due and help ensure you don’t miss any deadlines.

The registered agent’s address is available for the public to access on the concerned websites. So if you work out of your home or a private office, having a professional registered agent service will help you maintain privacy.

Professional help lets you focus your energy and time on core business areas. If you are your own agent, you risk receiving sensitive documents like notice of a lawsuit in front of your employees or clients. Having a professional registered agent service helps you handle the situation discreetly. They receive such sensitive documents at their address and deliver them separately.

File the Certificate of Formation with Washington

Certificate of Formation also referred to as ‘Articles of Organization’, is a legal document needed to form and legally incorporate your LLC. In Washington, you can officially set up your LLC by filing the Certificate of Formation with the office of the Secretary of the State.

You can complete this procedure by following three simple steps. First, acquire a copy of the document. You may do this by creating an account on the portal of the Washington Corporations and Charities System website.

The next step is for you to fill out the Articles of Organization form. You should duly complete the form by filling out details related to the following:

  • Name of your LLC
  • Address of the registered office
  • Name and address of the registered agent
  • Effective Date and Duration

The third and final step is for you to file your Articles of Organization with the office of Washington’s Secretary of State. You can file it either online or by submitting a copy of the duly filled form in person or by mail.

FILE CERTIFICATE OF FORMATION WITH WASHINGTON

Option 1: File Online

File Online – OR –

Option 2: File by Mail

Download Form

Mail to or Submit in-person:
Secretary of State
Corporations Division
801 Capitol Way S
P.O. Box 40234, Olympia, WA 98501

Fee: $180 for filing by mail, or $200 online. The Initial Report is included with the online filing at no cost. If it is filed at a later date (within 120 days), it is $10 by mail or $30 online. Payable to the Secretary of State (Nonrefundable)

Expedited Filing

The processing time for articles of organization in Washington is 10-12 business days if filed through the mail and 7-8 business days if filed online. The State offers an expedited filing service through which you can reduce the processing time by paying an additional fee. This is only available in mail filings and not online filings.

To avail of this service, you simply have to write ‘EXPEDITED’ on the envelope and attach the requisite fee. Refer to the fee schedule to find out what the required fee is.

Publish Notice

The Washington Department of State does not require its newly formed LLCs to publish a public notice declaring their formation.

Create an Operating Agreement for your Washington LLC

Let’s say you include two of your friends as members of your LLC. What are the duties and responsibilities of each member? Who gets to make certain decisions?

An operating agreement can be an effective solution to this problem. It contains the rules of your LLC’s internal operation and provides a framework concerning the duties of members of the LLC and its managers.

Most states, including Washington, do not require an Operating Agreement mandatorily. However, irrespective of the nature of your business, it shall be advisable for you to have a well-drafted operating agreement.  

There are no prescribed templates for an operating agreement in Washington. Your operating agreement should ideally cover the following aspects:

  • Organization Details 
  • Ownership 
  • Duties of Members and Managers
  • Management and Voting 
  • Capital Contributions
  • Division of Profit and Losses
  • Bookkeeping Procedures
  • Procedure for adding new members
  • Requirements concerning Meetings and Procedures thereof
  • Dissolution

These are just a few examples. You may incorporate more provisions to your operating agreement as you deem fit for your business.

Writing the Operating Agreement Yourself v. Hiring a Service

You can create your operating agreement, or you can purchase templates that you can customize to draft the operating agreement of your LLC. It is, however, recommended that you seek the help of an attorney or a professional in preparing your operating agreement.

Being experts in Washington laws, these attorneys or professionals will help you draft an operating agreement that suits the needs specific to your business model.

Limits of Operating Agreement

There is no fixed format for this agreement. You have all the freedom to include the terms of agreement you feel are necessary for your LLC. However, the terms are limited to the law. You cannot include something prohibited by the laws of Washington.

Obtaining an EIN for your Washington LLC

EIN (Employer Identification Number or Federal Identification Numbers or FEINs) is an identification number allotted by the IRS. The IRS uses the EIN to identify an operating business entity for taxation purposes.

It will also be necessary to open a bank account, file tax returns, and hire employees. The IRS issues an EIN, and you can apply for it online or through the mail. 

GET AN EIN

Option 1: Request an EIN from the IRS

Apply online – OR –

Option 2: Apply for an EIN by Mail or Fax

Download form

Mail to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

Fax: (855) 641-6935

Fee: Free

File Annual Reports in Washington

An annual report is a document used by the authorities to get the latest and updated information about all the business entities operating in the State. Most states require you to file this report annually. The state of Washington requires you to file annual reports with the office of the Secretary of State Corporations and Charities Division.

These reports should include the details with regard to the following:

  • Members and Officers of the LLC
  • Registered Agent of the LLC
  • Address of the business
  • Type of business

The first report (called the ‘Initial Report”) is to be filled within 120 days of forming the LLC. A renewal report is filled thereafter every year by the end of the month in which you formed your LLC.

Failure to file the document may result in your LLC getting penalized. The State charges a penalty of $25 for the first default. Repeated failure to file can put your company at risk of being shut down by the authorities.

Tax Liability for your Washington LLC

The way your LLC will be taxed depends upon the number of members in your LLC. There are four ways in which LLC will be taxed:

  • Sole-proprietorship: a business owned by single person
  • Partnership: a business owned by multiple people
  • C – Corporation: income is split, or segregated, for taxation
  • S – Corporation: tax liability is split between the business and its owners

Federal Tax Liability

You must pay Federal self-employment tax (presently 15.3%) on the profits you take from your LLC. You are eligible for certain deductions in the nature of business expenses.

You are also liable to pay Federal Income Tax. The income tax you have to pay will vary depending on your income, filing status, deductions, etc. However, if you treat your LLC as a corporation for tax purposes, federal corporate taxes must be paid.

If you’re a single-member LLC, your default taxation type will be that of a sole proprietor or ‘disregarded entity’. The LLC has to report its activities under Schedule C, Schedule E and/or Schedule F of Form 1040

If your LLC has more than one member, it will be taxed as a ‘partnership’ by default. In this case, apart from filing Form 1040, you’ll have to file your partnership return in Form 1065 and provide information in K-1 of each partner. 

If you would like your LLC to be taxed like a C-Corp or S-Corp, you can do so by filing Form 8832 and Form 2553, respectively.

State Tax Liability

If your LLC is engaged in selling certain physical products or specific services, you will be required to pay “Sales and Use Tax” in Washington. For this purpose, you must first obtain a seller’s permit from the State.

Visit the Washington Department of Revenue website to know the other state taxes that may be applied to your business based on the nature of your business.

Miscellaneous Taxes

In addition to the taxes mentioned above, if your LLC has hired employees, you must sign up for Unemployment Insurance Tax. Additionally, the State of Washington requires most business entities to pay Business and Occupation Taxes also. This can be paid using the online portal of the Washington State Department of Revenue.

Permits and Licenses

An LLC operating in Washington must comply with State and Federal regulations. Accordingly, your business will be subject to three licensing jurisdictions: Federal, State, and Local.

Federal Licensing requirements will depend on the business activity carried on by your LLC. If your company is engaged in any area of business regulated by the Federal Government, you will be required to obtain relevant Federal Licenses and Permits.

Some business activities requiring Federal Licenses and Permits are

You will need a State business license to conduct business in the state through your LLC. Similarly, you also need to get registered with the Washington Department of Labor and Industries if your business employs people.

Depending on where you operate your business, you may also be required to get the local government’s license and permit. It is advised that you get in touch with your local administration to understand the local licenses that your business will need.

For more information regarding;

Business Bank Account & Phone Number

It is always prudent to open a separate Bank Account for your LLC and have an individual designated phone number. Having a different account helps you to avoid mix-ups and helps ensure that your personal assets are not affected in case of insolvency or lawsuits.

Using your phone number for your LLC can prove to be very inconvenient. Therefore, it is best either get a separate phone number for your business or hire a phone answering service. Doing this would protect your privacy, look professional and reduce the risk of missing important calls.

Final Thoughts

Washington is a great place to form an LLC. The Evergreen State has nurtured and fostered some of the biggest businesses like Amazon, Boeing, Microsoft, Starbucks, and Costco. In addition, many sectors, including mining, manufacturing, and life sciences, are doing increasingly well in the State.

Washington also has an excellent climate for start-ups. It provides several good incentive schemes for businesses, such as the Washington Foreign Trade Zone Program and Washington Opportunity Zone Program. Get in touch with your local county or city government office to determine if your LLC is eligible for any of these incentives.

On completing the above steps, your LLC is legally incorporated and ready to do business. Enjoy your LLC!

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