If you want to learn how to form an LLC (Limited Liability Company) in Washington, you’ve come to the right place. First of all, congratulations on your decision to change your business structure. It’s always exciting to achieve a new business milestone, such as starting a new business or forming an LLC.
I’ll give you all the information you need to learn how to form an LLC in Washington, but first I’ll cover some basic information such as what a Limited Liability Company is and some of the benefits of owning a Washington LLC.
(If you want to skip to the “How to Form an LLC” section, click here.)
Table of Contents
What Is a Washington LLC?
A Washington LLC is a Limited Liability Company formed in the state of Washington that is governed by the laws, regulations, and statutes of the state of Washington.
Why Choose an LLC?
There are many benefits to owning a Washington LLC. However, you’ll notice three key advantages when you choose to form an LLC in Washington rather than another business structure, such as a corporation or sole proprietorship. Here are some of the reasons people choose to form an LLC:
1. Limited Liability and Asset Protection
The first and most important advantage of owning a Washington LLC is the personal liability protection and asset protection that LLC owners enjoy. As the owner of an LLC in Washington, you aren’t personally liable for the financial and legal debts or responsibilities of your Limited Liability Company because protection of your personal assets is built into the function of an LLC.
If financial hardships befall your business, the creditors of your Washington LLC are prohibited from seizing things such as your residence, car, or other personal property since their financial recourse is restricted to the assets of the Limited Liability Company.
Any unexpected event (like a natural disaster or an economic crash) can damage even the most well-prepared businesses. Because of this, the protection of your personal assets that you attain as the owner of a Washington LLC is important for anyone who appreciates the work and effort they’ve invested in creating their business.
Another advantage of forming an LLC in Washington is the protection of your personal information and identity that you’re afforded when you form an LLC.
This is important because over the past decade, cybercriminals and scam artists have significantly improved their skills. They can now use these nefarious skills and bits of seemingly inconsequential data (like your name and address) to rack up massive amounts of debt using your identity.
If you choose a different business structure, such as a sole proprietorship or partnership, your personal information is made available on the public record on the website of the Washington Secretary of State. This means that anyone can access your information, even those who would use it for criminal activities.
However, when you form your Washington Limited Liability Company, you can protect all your information.
To protect your identity and information, you’ll need to hire an LLC formation service. The LLC formation service will register their information with the Washington Secretary of State so their address is listed on the public record for your business, rather than your own address. This means that your information remains secure, as does your identity and credit score and you maintain ownership of your Washington LLC.
The third major advantage of forming an LLC in Washington are the tax benefits that Limited Liability Companies enjoy. These tax advantages are most evident when you compare Washington LLCs to corporations.
If you choose a corporation rather than an LLC in Washington, you’ll experience what is known as “double taxation.” Here is how double taxation works for a corporation:
The profits generated by the corporation are first taxed using corporate income tax rates, and then, when those already-taxed profits are given to the corporate shareholders in the form of dividends, they pay personal income tax on those payouts.
Because you wind up paying taxes twice, it’s called double taxation.
But when you form a Limited Liability Company (LLC), you circumvent double taxation entirely. Here is how Washington LLCs are taxed:
The profits brought in by the Washington LLC are taxed at company rates (not corporate rates), whereas profits paid to LLC owners and members are regarded as personal income, and are taxed as such. Therefore, if you own an LLC in Washington you’re only taxed once.
Washington LLCs enjoy more tax benefits than simply avoiding double taxation.
The 2017 Tax Cuts and Jobs Act created a new tax advantage for Limited Liability Companies (LLCs), which is known as the Qualified Business Income Deduction (QBID).
QBID enables the bulk of Washington LLC owners to obtain tax savings of up to 20%—a benefit that is not attainable if you pick another business structure.
How to Start an LLC in Washington
Now that you know what a Limited Liability Company (LLC) is and some of the advantages of choosing to form a Washington LLC, you’re better equipped to decide whether an LLC is right for you and your business. If you’re still comfortable with the idea of starting an LLC, here are the steps you must take to form a Washington LLC.
*IMPORTANT* If you find you need help cutting through the extensive red tape involved with forming a Washington LLC, dealing with all the formation paperwork, and maintaining your privacy, there are businesses that will handle the LLC formation procedure on your behalf.
These businesses are known as LLC formation services, and you can count on them to legally establish your Washington LLC with the Washington Secretary of State for as little as $0, not including the state filing fee. However, my favorite LLC formation service is Northwest Registered Agent. They currently charge $225 for their services, but we’ve organized a special deal with them for BoostSuite readers, and you can now enjoy a discounted rate of $39*.
(Excludes state fees)
If you’d like to learn more about what an LLC formation service can do for you, check out my article about the best LLC service.
1. Obtain Certificate of Formation Form
If your goal is to form an LLC in Washington, then the first step you need to complete is obtaining a Certificate of Formation form, which you can get from the Washington Secretary of State.
You can get the PDF version of the Certificate of Formation here.
Because the Certificate of Formation is the primary Washington state LLC formation document you’re required to file, the following steps will allude to this form.
2. Choose Your Business Name
The first and most important piece of information requested on the Certificate of Formation form is your LLC name.
This is more complicated than it sounds, however. You can’t simply choose a name for your Washington LLC.
Under Washington state law, every business in the state must have a name that is unique to it and differentiates it from other Washington state businesses so you have no choice but to check that the name you want is not already in use. This is a simple process, however. To check the availability of an LLC name with the Washington Secretary of State, simply use the business name database on their website.
Once you’ve found an available name that you like for your Washington LLC, you need to file a Name Reservation form. To submit the Name Reservation form to the Washington Secretary of State, you must mail the form along with a payment for the filing fee of $30 (they also offer expedited processing for an additional $50.)
If you don’t like the LLC name you’ve registered with the Washington Secretary of State, don’t worry. You have the option to use what is known as a trade name, fictitious name, or “DBA” (Doing Business As) name. To obtain a trade name in Washington, you register when you file your business license application on the Washington Department of Revenue website, or when you renew your Washington state business license.
3. Choose a Washington Registered Agent
The next step to forming an LLC in Washington state is to choose what is known as a “registered agent.”
A Washington registered agent is an individual or business entity who is available during business hours to accept mail, legal documents, and service of process on behalf of your Washington LLC. They also register their address as the principal office address for your business entity, and notifies you when you receive important correspondence from a government agency.
You have two options when it comes to choosing your LLC’s registered agent: you can become your own registered agent, or you can choose a Washington state registered agent service. I’ll explain the pros and cons of both so that you can make a decision properly.
If you take on the role of registered agent for your LLC, your personal information will be registered with the Washington Secretary of State and be listed on the public record. This leaves you vulnerable to identity theft.
You’ll also need to be available during business hours to accept mail and other correspondence for your business entity if you choose to assume the registered agent role. This is not only time consuming, it’s risky for your business.
Most Washington LLCs also operate during normal business hours, and you can’t be in two places at once to both run your business and perform your registered agent duties. If your LLC’s registered agent misses a service of process, then a default judgment may be granted against your LLC. Even more catastrophic, if the Washington Secretary of State finds that your Washington LLC isn’t complying with Washington state laws regarding registered agent services, your LLC will lose its “good standing” status, which means your LLC won’t be able to legally do business in the state of Washington.
The only upside of taking on the registered agent duty yourself is that you won’t be required to pay the fees of a registered agent service.
If you choose to hire a registered agent service, then you’re guaranteed to receive all the important correspondence sent to your business address, and you won’t have to deal with the workload of being both an LLC owner and registered agent.
The only downside of hiring a registered agent service is that you’ll be required to pay $99–$299 per year for their services.
But if you consider the fact that you could lose your business in a default judgment or fall out of good standing status with the Washington Secretary of State if you don’t hire a registered agent service, their fees are well worth it.
If you’d like to learn more about registered agent services, or if you would like to know which service is right for you, check out my article about the best Washington registered agent.
4. Choose Your LLC Address
The address you list for your LLC is equally as important as the LLC name you list on your Washington LLC Certificate of Formation. Your LLC’s business address will be listed on public record on the Secretary of State’s website.
If you haven’t hired a registered agent service, then you’re forced to list the physical street address of your business entity. If there isn’t a physical street address, your next choice is to list your home or office address. Whichever address you list, it’s important to note that you’re not permitted to use a PO Box address.
If you hire a registered agent service, however, they list their address as your business address, which will save you some hassle and protect your identity from hackers and scam artists.
5. Sign and File Your Certificate of Formation
The last step you need to take to form a Washington LLC is to file your Washington Certificate of Formation. You should check that all the information on the form is correct before filing.
Some of the information required includes:
- Your LLC name
- Whether your LLC’s duration is to be limited or perpetual
- Your LLC’s effective date
- Your registered agent’s name, address and signature
- The principal office address of your LLC
- The executor’s signature
Once you’re sure all the information is correct, you can file online or by mail. You’ll need to include a payment for the filing fee, which is $180 if you file by mail and $200 if you file online.
If you choose to file by mail, send the Certificate of Formation form to the following address:
Office of the Secretary of State
Corporations & Charities Division
801 Capitol Way S, Olympia, WA 98504
Here’s the link to file online.
Once you’ve submitted your form, the Washington Secretary of State will contact you via mail or email once they’ve processed your documents and the filing fee. This can take 2–3 business days if you file online and up to two months if you’ve filed a non-expedited form by mail.
Other LLC Activities
Filing your Certificate of Formation isn’t the last action you need to take as the owner of your LLC. There are many activities that LLCs are required to take part in so that they can maintain their good standing statuses with the Washington Secretary of State.
Each LLC in Washington is required to file a Washington LLC annual report. Washington LLC annual reports serve as a way for the Washington Secretary of State to keep up-to-date business information for your LLC and collect a yearly filing fee. You’re required to file your initial report within 120 days of the day you filed your Certificate of Formation. Subsequent due dates for your annual reports (after your initial report) will be determined by the Washington Secretary of State.
The Washington Secretary of State will send you a notice 45 days prior to the due date for your LLC’s annual report each year. Both the initial report and your annual report can be filed either online or by mail, and the filing fee is $60.
Nearly every Washington state business is required to obtain a state business license and you may be required to obtain local business licenses as well. Furthermore, you may need business licenses in every location you do business and not just for one location. You can check with the Washington Department of Revenue and use their Business Licensing Wizard to learn about the business license requirements for businesses in your location.
To obtain business licenses for your business, you can file a Business License Application online or by mail. For local licenses, you need to contact the cities or towns you conduct business in. Depending on the services you provide, you may also need a professional license. You can check out the Washington State Department of Licensing for more information about professional licensing.
If you hire and pay employees, then you’re required to pay unemployment tax quarterly. You can pay unemployment tax to the Employment Security Department here.
If your business is required to collect sales tax or earns more than $12,000 in revenue, you must register on the Washington Department of Revenue website. While it’s true that Washington state does not impose income tax on businesses or individuals, Washington does require a Business and Occupation tax that is applied to business income. To register or to learn more about the Business and Occupation tax, check out the Department of Revenue’s website.
If filing your annual report and everything else listed in this section seems like a lot of stuff to do and remember, that’s because it is. If you’d like to minimize your workload and simplify annual filings, you could hire a Washington state PEO service and consider subscribing to an online legal service.
Washington LLC Fee Summary
When you’re learning how to form an LLC in Washington, it’s only natural to wonder what are the costs of starting an LLC. Here is a look at some of the fees and taxes you can expect to encounter:
Certificate of Formation: $180 by mail, $200 online
Name Reservation: $30 (plus an additional $50 for expedited processing)
Registered Agent Fee: $99–$299 per year
Annual Report: $60
State Personal Income Tax: n/a
State Corporate Income Tax: n/a
After Starting Your Washington LLC
Congratulations! You’ve gotten through all the hullabaloo involved in forming an LLC and legally establishing it with the Washington Secretary of State. This is an important milestone for any business, so take time to celebrate it.
But don’t stay in the relaxed mode for long. There’s still important work to be done after your LLC is formed! Here are the three steps you need to take after you’ve formed your LLC.
Step 1. Create an Operating Agreement
The first step in establishing the proper business foundations for your LLC is to draft a comprehensive Operating Agreement. Many small business owners underestimate the necessity of Operating Agreements, but once you understand why, you'll be more eager to establish one for your LLC.
Your Operating Agreement details how your business will operate. Your Operating Agreement should include instructions regarding the management structure of your LLC (whether it is member-managed or manager-managed and whether it operates under a single-member or multimember LLC system), a list of your LLC members, and a designation of which LLC members have the authority to make business-related decisions. Additionally, it should include details on your LLC members' ownership percentages and their share of earnings and losses.
Your Operating Agreement is important because your firm is obligated to operate in accordance with the Operating Agreement's guidelines. Thus, drafting the Operating Agreement incorrectly might mean that your business's development is stifled by your flawed operating guidelines that did not allow for things like innovation and change. However, a well-written and comprehensive Operating Agreement should enable a Washington LLC owner to sit back and watch their company expand without being constrained by poorly worded guidelines.
If you want help in establishing your LLC's Operating Agreement, Washington LLCs have a few options.
The first approach is to use the free Operating Agreement template that Northwest Registered Agent makes available to LLCs on their website. You may subscribe to online legal services if you need assistance with parts of the document's phrasing and legalese. And, of course, if you hire an LLC formation service, they will often include the drafting of an Operating Agreement with their LLC services.
Step 2. Apply For an Employer Identification Number
The second step is to obtain a federal Employer Identification Number, or EIN. You’re required to apply for an EIN if you want to hire employees or open a bank account for your LLC, and it will qualify your business for certain licenses and permits that it wouldn’t ordinarily qualify for. However, you aren’t required to hire employees to obtain an EIN, as it is simply a tax identification number for businesses.
It’s quite easy to obtain an EIN from the Internal Revenue Service (IRS). All you need to do is navigate to the IRS’s website Monday–Friday between the hours of 7 a.m. and 10 p.m. to fill out and submit the application. And again, if you hire an LLC formation service they will typically apply for an EIN on your behalf, which makes the process even simpler and hassle-free.
Step 3. Open a Business Bank Account
The last step is to open a business bank account or an LLC bank account.
Many new business owners ignore the vital importance of opening a business bank account, but this is one step you should not neglect.
Rather than having separate bank accounts for company and personal activities, many business owners choose to do business via their personal account. They seem to believe that having a single bank account for numerous reasons is more convenient. However, there are two compelling reasons to avoid doing business in this manner.
First, even if you believe you will be able to distinguish between personal and business expenses on bank statements when it comes time to file income tax returns, you most likely won’t. It's one thing to determine the difference between two transactions that occurred on the same day, but there are sometimes hundreds of transactions that occurred many months ago. This unnecessarily complicates the process of submitting federal taxes.
Second, using your personal bank account for company spending defeats the purpose of forming an LLC, which is to provide limited liability and personal asset protection. By intermingling personal and business transactions, you negate the limited liability and asset protection established by your LLC. This exposes you to personal liability, and any funds in your personal account might be considered LLC assets rather than personal assets.
So, register a business bank account to simplify tax preparation and guarantee that you get the full benefits of restricted liability and personal asset protection.
To create a business bank account, you will need what is referred to as a “bank kit.” This package includes certified copies of numerous important formation papers, including your initial resolution, your EIN, your Operating Agreement, and your Articles of Organization. While you may compile all this paperwork on your own, an LLC formation service will often prepare a bank kit as part of their service package.
Washington LLC FAQs
Can I form an LLC in Washington from out of state?
If your LLC is based outside of Washington and you want to expand into the state, or if you are a Washington nonresident, you must complete the foreign LLC registration process. This is identical to the method for forming a domestic Limited Liability Company. The critical difference is that a foreign Limited Liability Company must register as such with the Secretary of State. This must be accompanied by a valid Certificate of Good Standing from the state in which the LLC is registered. Additionally, you must choose a registered agent with a physical address in Washington. You may register online or by mail, with a filing cost of $180 for mail-in registrations and $200 for online registrations.
Can I form a Professional LLC in Washington?
If your Washington LLC provides professional services such as legal or accounting, you must follow the rules for forming a Professional Limited Liability Company (PLLC). PLLCs are restricted to providing a single licensed professional service and all members must have the necessary business licenses and permits, or be registered with the state in order to perform the licensed professional service for which the LLC was formed. As part of the LLC formation process, you may be needed to provide a copy of each LLC member's current business license or state registration.
Forming an LLC is an incredible business victory, so congratulations on being brave enough to take control of your business’s future this way!
If you’ve chosen to forego the use of an LLC formation service (which can cost you as little as nothing but the state filing fees), here are the five steps you need to complete in order to form a Washington state LLC:
- Obtain the Certificate of Formation form
- Name your LLC
- Choose your registered agent
- Choose your LLC address
- Sign and file your Certificate of Formation
It’s easy to get overwhelmed by the amount of bureaucratic red tape, legal jargon, forms to complete and file, and fees at every step during the time-consuming process to form your LLC. But if you get through it all without hiring someone to help guide you through it, there’s nothing that beats the sense of accomplishment you get from it, which makes it worth all the effort. And forming your LLC will be only one of many important milestones for your business!
Congratulations again on forming your LLC and good luck with your future business endeavors!