How to Form an LLC in Washington: The Affordable Way

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. The State was ranked second in the best State for doing business by CNBC in 2022.

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 crucial step. You must have a unique and appropriate name for your company. It should be catchy and easy to remember. Remember, the name of your business is its identity.

While naming your LLC, follow all the naming guidelines the State of Washington has laid down.

Naming Guidelines

The name you select for your company should contain the words “limited liability company.” You can also use the words “limited liability” and abbreviation “Co.,” Alternatively, you may opt for a simple abbreviation such as “L.L.C.” or “LLC.”

Ensure that your name does not contain words or abbreviations that imply your business is anything other than an LLC. Therefore, avoid using words such as “Cooperative,” “partnership,” “corporation,” “incorporated,” or the abbreviations “Corp.,” “Ltd.,” or “Inc.,” or “LP,” “L.P.,” “LLP,” “L.L.P.,” “LLLP,” “L.L.L.P.”

If you are an LLC providing any professional service, your name should contain the words “professional limited liability company.” You may also use the words “professional limited liability” and the abbreviation “Co.” Abbreviations such as “P.L.L.C.” or “PLLC” may also be used.

The name must be unique and not similar to other entities in the State.

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 better understand 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?

DBA stands for “Doing Business As.” It is called a “Trade Name” in Washington. If your LLC wishes to operate under a different name than one registered with the Office of the Secretary of State, you can register for a trade 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.

There may be many reasons why you want to operate under a different name. You may be entering a new market, adding a new product to your portfolio, or you may want to reinvent your brand and marketing strategy.

To register a DBA, you must conduct a name search on Washington’s business lookup website. Ensure that the trade name you choose is distinguishable from the name of other entities.

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.

Registering your business domain

Customers nowadays prefer the comfort of sitting at home and making purchases online. The internet has changed how business is done, and its popularity is increasing daily. So, you should plan for it even if you do not have immediate plans for starting a website or doing business online.

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.

The LLC must execute a registered agent filing with the State to appoint a registered agent. The registered agent must provide prior written consent, and it should be filed with the Secretary of State. For more information, read the provisions of RCW 23.95.415.

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:

• An individual resident of the State of Washington (above 18 years) or
• Another entity that has obtained authorization to conduct business in the State.  

The registered agent should be available during business hours on all working days and must possess a street address in the State.

Individual v. Registered Agent Service

You can appoint yourself or any of your friends or family as the registered agent of your LLC. However, you should hire a professional registered agent service as it has many advantages.

A professional registered agent service ensures that you can focus on growing your business. You do not need to be available during business hours, and you may travel according to your needs. Additionally, a registered agent service brings in their expertise and experience, which will benefit your LLC.

A registered agent is available in the public domain. If you are someone working from your home office, consider having a registered agent service, as it helps you maintain your privacy.

Most registered agent services have offices in different States. This can come in handy if your LLC decides to expand its business outside Washington State.

Hiring a professional service means you no longer have to worry about missing any important communication from the State. Also, it helps you avoid situations like receiving sensitive documents like a lawyer’s notice or a court subpoena in front of your employees or clients.

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 out 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 Certificate of Formation 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
• Name and address of person executing the certificate of formation.

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.

Before you start filling the form, ensure that you have carefully read the instructions in the certificate of formation.

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.

Section 25.15.006 of the Revised Washington Code refers to the operating agreement as a “Limited liability company agreement.” It states that such an agreement can be written, oral, or implied from records. It should effectively contain provisions for managing the company’s affairs and business conduct. 

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.  

Section 25.15.018 of the Revised Washington Code states that if an LLC has an operating agreement, then its provisions shall govern the relationship between the LLC and various stakeholders. The operating agreement shall also govern matters concerning the rights and duties of managers.

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 purchase templates online that you can customize to draft the operating agreement of your LLC. Or, if you feel comfortable enough, you may draft it yourself after calling for a meeting and reaching a mutual consensus.

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 the 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.

For example, your operating agreement cannot vary the ability of an LLC to sue and be sued in its name. You also cannot, through a clause in your operating agreement, eliminate certain duties of the members.

To know about all the restrictions, read the provisions of Section 25.15.018 of the Revised Washington Code.

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.

If you are a multi-membered LLC, an EIN is mandatory. On the other hand, single-membered LLCs will only need an EIN in certain instances, like if it plans to hire employees.

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

File Annual Reports in Washington

Every LLC in Washington must file an initial report with the Secretary of State within 120 days from the date of incorporation. It is a legal document that provides necessary details about your LLC to the State authorities.

After the initial report, Washington requires LLC to file an annual report every year. The initial report and the annual report should contain details about the LLC, such as:

• Name and Jurisdiction of the LLC
• Details of the Registered Agent
• Street and Mailing Address of the LLC’s principal office
• Details of the Governors of the LLC
• The nature of business carried out by the LLC

An annual report must be filled out annually by the end of the month you formed your LLC. You can file both the initial report and the subsequent annual reports using the Washington Corporations And Charities Filing System portal online. Alternatively, you may download Washington’s annual report form and mail a duly filled copy to The Corporations and Charities Division, P.O. Box 40234, Olympia, WA 98504.

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.

To know more, read RCW 23.95.255.

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 a 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

If you’re a single-member LLC, your default taxation type will be that of a sole proprietor or ‘disregarded entity.’ The LLC does not need to file a separate tax return. Instead, the income and expenses of the LLC will become part of the member’s tax return. You would have to report the LLC’s income and expenses 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, the LLC does not need to file a separate tax return. Instead, each member will have to pay taxes on their income from the LLC. In this case, apart from filing Form 1040, you’ll have to file your partnership return in Form 1065 and provide information in Schedule 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. In such an event, your LLC will have to pay corporate tax.

State Tax Liability

Washington does not impose a State income tax or corporate tax on LLCs. However, the State’s LLCs are labile to pay a “Business and Occupation Tax.” It is charged on the gross receipt of the LLC, and the rates will vary according to the business’s classification (such as retailing, wholesaling, manufacturing, etc.) You may visit Washington’s Department of Revenue Website to know more.

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

States are responsible for regulating businesses and ensuring that they comply with the law. Doing business means you will have to obtain the necessary permits from the concerned authority.

In Washington, depending on your business, the LLC may 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

• Agriculture
• Alcoholic beverages
• Aviation
• Firearms, Ammunition, and explosives
• Fish and wildlife
• Commercial fisheries
• Maritime transportation
• Mining and drilling
• Nuclear energy
• Radio and radio and television broadcasting
• Transportation and logistics.

An LLC in Washington must obtain a State Business License if it meets certain criteria. An LLC will need a business license if it requires city and state endorsements, operates under a name different from its full legal name, plans on hiring employees within the next 90 days, sells products or provides services subject to sales tax, its gross income is $12,000 or more, is required to pay taxes or fees to the Department of Revenue, or is engaged in buying or processing specialty wood products. You can visit the Department of Revenue website to obtain the license.

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;

• Washington business licensing wizard
• Washington business licensing service
• Federal Permits and License

Business Bank Account & Phone Number

Once you have incorporated your LLC, you must consider applying for a separate business bank account. It offers credibility to your enterprise and saves your own money from any mix-ups in case you have a joint bank account. Having a business bank account also makes it easy to file your tax returns.

Additionally, consider applying for business credit cards. It helps you build your LLC’s credit scores and thereby helps you to get loans for your business.

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!