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How to Form an LLC in Washington: The Benefits of Doing Business as a Washington LLC
There are many requirements that go in to getting your Washington LLC up and running, some of which can be overwhelming when starting a new business.
However, with the right support, you’ll be able to successfully form your Washington LLC so you can start doing business as a limited liability company. Below you will find an overview of each step:
The Washington LLC formation process has nine easy steps:
1. Choose a Name for Your Washington LLC
2. Select a Registered Agent
3. Obtain a Certificate of Organization
4. Create an LLC Operating Agreement
5. Get an EIN
6. Complete an Annual Report
7. Complete the Business License Application
8. Understand Taxes for Your LLC
9. Open a Business Bank Account
What is a Limited Liability Company (LLC)?
A Washington state LLC is a legal entity that protects your personal assets from business assets. Many business owners choose to form an LLC to protect themselves from personal liability in the event of a business lawsuit.
An LLC can also help ensure that the individual business owner or LLC members are not personally responsible for business debt. You can start an LLC in Washington state in order a run a business or to buy and hold assets under the LLC business structure.
Washington State LLC Benefits
There are distinct benefits that come with forming an LLC in Washington state. In comparison to other types of entities, an LLC is simple to set up. It is also more flexible for owners to operate and has easier reporting requirements.
- Limiting personal liability for business debts – When you protect your business with an LLC, a business creditor or lawsuit can only cite the assets of the LLC. This prevents creditors from staking a claim on personal assets (including homes and property) for use in judgments to satisfy business debts.
- Raising capital from investors – If you eventually plan to raise capital from investors, you will need to demonstrate a properly organized business. An approved Washington LLC will have a Certificate of Formation and other ways to document business records from the state. The LLC also allows you to bring in additional members to contribute funds or services to the business.
- Tax Advantages – An LLC often works as a “pass-through” tax entity. Pass-through entities allow owners or members to report profits and losses on individual Form 1040 tax returns (thereby avoiding a “double-tax” that you may encounter with other types of business entities).
A look at the following guide to setting up an LLC in Washington state can provide a detailed overview of your business. If you need help along the way, contact the professionals at LLC Formations so we can help you get your Washington LLC up and running.
1. Choose a Name for Your Washington LLC
Prior to filing an LLC with the Washington Secretary of State, you must check the availability of your potential business name within the state database. The easier way to check this is to perform a Washington State LLC name search on the official website. For more information check out our main resource page.
Conduct a Name Search for Your Washington LLC
The purpose of this advanced search is to ensure that your business name is distinguishable from other entities that operate within the state of Washington. Washington is one of the strictest states in terms of this distinct business name requirement.
Attempts to file LLCs without distinguishable and unique LLC names warrant an automatic rejection from the state. This rejection also means losing all non-refundable filing fees. You can use this website to check if your ideal business name is available before you form an LLC in Washington.
LLC Designator Rules for Washington LLCs
Washington law requires that all LLCs must end with an appropriate designator. The purpose of this is to distinguish an LLC from other types of business or legal entities.
Washington state permits your LLC name to end with one of the following designators:
- LLC (by far the most common designator)
- Limited Liability Company
- Limited Liability Co.
Prohibited Designators for Washington LLCs
In the state of Washington, your LLC cannot use a designator from a different type of organizational entity. For example, your LLC name should not end with any of the following designators:
- LP or L.P.
- LLP or L.L.P.
- LLLP or L.L.L.P
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2. Choose a Washington Registered Agent for Your Washington LLC
When forming an LLC, each LLC must list a registered agent for the business. A registered agent is a person or representative who receives legal documents (known as “Service of Process”) for the LLC and is required in order for you to form your Washington LLC.
Because such documents are usually certified, a registered agent must have a physical office or home address in the state. The state of Washington does not permit registered agents to use P.O. boxes. A registered agent must also be available to receive documents during standard business hours.
Who Can Be a Washington Registered Agent?
1. Be your own registered agent
If you own the Washington LLC, you can serve as the registered agent for your company. To do so, you must be a legal resident of Washington and at least 18 years old, maintain a street address in the state, and be available during standard business hours.
2. Choose a friend or family member
This person must consent to serving as your registered agent and be available to receive service of process during standard business hours. They must be at least 18 years old, live as a resident of Washington, and have an office or home address in the state (no P.O. boxes).
3. Hire a commercial registered agent service
You can hire a company to serve as your Washington registered agent. Many business owners enlist the help of a registered agent service for privacy purposes or if they do not have an office or home address in the state.
A registered agent service can serve as your official representative to receive all legal documents related to your business. The registered agent service then scans and forwards these documents directly to you. A reliable registered agent service can save time and help keep your business logistics organized and stress-free.
3. File the LLC Certificate of Organization
The next step in starting an LLC in Washington state is to file a Certificate of Formation and Initial Report. You will also need to pay the one-time filing fee of $200 for the state to process your Certificate of Formation so you can be approved as a Washington LLC.
Filing Online vs. Filing by Mail
Filing online is the preferred method for obtaining a Certificate of Formation from the state of Washington. When you file online, the state begins processing your application right away and includes the Initial Report at no extra cost. This means that your one-time fee will cover both the Certificate of Formation and the Initial Report when you file online.
If you file by mail, however, you must submit a separate application for the Certificate of Formation and the Initial Report. You also have to pay a separate fee for each document. For this reason, the state highly recommends completing the formation step online.
How to File the Certificate of Formation & Initial Report Online
- Create a user account with the Corporations & Charities Filing System (CCFS). All first-time users must create a new account. (Once you have an LLC in place, however, there are express options for downloading and filing forms in the future.)
- Fill out your business name, applicable owner information, and registered agent information.
- Pay the one-time $200 filing fee for the certificate.
- The Washington Secretary of State will begin processing your application immediately for your certificate of approval. Approval from the Washington Secretary of State takes approximately 2-3 business days.
Washington LLC Approval Documents
Once the Washington Secretary of State approves your filing, you should receive three documents for confirmation. The Secretary of State emails the documents directly to you and also mails a print copy to your listed registered agent or registered agent service.
The approval documents include the following:
- Letter of Congratulations from the Office of the Secretary of State
- Certificate of Formation
- Copy of Stamped “Certificate of Formation and Initial Report – Fulfilled”
4. Create Your LLC Operating Agreement
The LLC Operating Agreement is a document that details the owners (a.k.a. “members”) of the LLC as well as each member’s percentage of ownership. For example, an LLC can consist of one member who has 100 percent ownership of Washington LLC. An LLC can also have more than one member with ownership percentages divided into any number of ways:
- Single-Member LLC – An LLC with only one owner should still keep an LLC Operating Agreement on file. This helps keep a clear line between business assets and personal assets in the event of a lawsuit. It also demonstrates professionalism and shows that you are operating the business properly in the event of an audit or proposed sale of your business entity.
- Multi-Member LLC – It is up to the members to decide how to divide the ownership percentages. For example, you can split the ownership in equal percentages or have a majority owner. Upon deciding, each member should sign the agreement and keep it on file with the other LLC formation documents.
Do I Need to File the Operating Agreement with the State?
Although the Operating Agreement also outlines the LLC’s tax policies, business management policies, and division of profits, it does not need to be officially filed. Since the state considers the Operating Agreement to be an “internal document,” you do not have to mail it to the IRS or to the Secretary of State and you will not need to pay a filing fee. You should simply keep your Operating Agreement on file with your other official business records.
5. Obtain an Employer Identification Number (EIN)
After creating an LLC in Washington, you must obtain a Federal Tax ID Number (EIN) from the Internal Revenue Service. This EIN is a unique identifier (similar to a social security number) used primarily for federal tax purposes. Although the EIN is the most common name of this identifier, you may also see the number described in the following ways:
- Employer Identification Number
- Federal Tax Number
- Federal Employer ID Number
- Internal Revenue Service Tax ID
Importance of State Approval
In the state of Washington, it is important to receive the state’s approval of your LLC before obtaining an EIN. Since this differs from a number of other states, some individuals make the mistake of getting an EIN before receiving LLC Washington state approval.
Once you receive approval documents, you can proceed to obtain your EIN. You can then use this EIN to open a bank account, apply for state licenses and permits (if applicable), and process employee payroll taxes for your Washington limited liability company.
How to Apply for an EIN
It is free to obtain a Federal Tax ID Number (EIN). Beware of scams that claim you have to pay a fee to apply for a business EIN from the IRS. You can apply for an EIN in one of three ways:
- Apply Online – This is the recommended method for immediate approval.
- Apply by Fax – You can fax Form SS-4 to receive approval in around four business days.
- Apply by Mail – You can mail in Form SS-4 to receive approval in approximately four weeks.
If you are applying for an EIN online, you will need to submit the application in one session at irs.gov. Those applying by mail or fax must download and complete IRS Form SS-4. Either fax the completed form to (855) 641-6935 or mail to the following address:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, Ohio 45999
EIN for Individuals Without Social Security Numbers
Anyone attempting to apply for an EIN online must have a valid U.S. social security number (SSN) or taxpayer ID number. Foreigners without U.S. social security numbers cannot use the online system to obtain an EIN. These individuals need to fill out Form SS-4 and file by fax or mail. While filling out Form SS-4, be sure to enter the word “foreign” on Line 7b so that the processor understands that you do not have an SSN to form an LLC under.
LLC With Existing Company Ownership
An LLC that is already under the ownership of an existing company cannot apply for an EIN online. Since the parent company already has an EIN in the database, the online system will return an error and your application will not be approved. Individuals with LLCs under the ownership of existing companies should submit an application via fax or mail instead.
6. File an Annual Report for Your Washington LLC
The state of Washington requires each Washington LLC to file a Washington LLC annual report. This is a yearly requirement as long as your Washington LLC is a registered entity with the state. Washington requires you to submit this report on time regardless of whether or not you have business activity, revenue, or profits for the year.
In the past, the state required each Washington LLC to submit the Washington LLC annual report to its Business Licensing Service. Starting in 2018, however, all LLCs must file the annual report with the Office of the Secretary of State.
Annual Report Filing Fees and Due Dates
The Washington annual filing fee is $60. Most businesses must submit this filing fee along with the annual report. In Washington state, the report is due on the last day of your LLC formation month. A “formation month” simply means the month that the Secretary of State first approved your LLC application. If it helps, you can also think of the formation month as your LLC’s “anniversary month.”
While the annual report is not required during the first year you form LLC in Washington, the Secretary of State requires that you file the report on your LLC anniversary for every year thereafter (due on the last day of the formation month).
For example, a Washington state LLC approved on January 10, 2018, must submit an annual report before January 31, 2019. January is the formation month for this business. Although the business did not have to file a report during the founding year, the business must file the report by the first day of the formation month for every year thereafter.
How to File the Annual Report for Your Washington LLC
To file your report, you must visit the same website used to file the Washington Certificate of Formation and Initial Report (Corporations & Charities Filing System (CCFS)). From here, log in with your user account information and select “Business Maintenance Filings” (on the left of the page).
Click “Annual Report” to complete the process and pay the annual filing fee to the Corporations and Charities Division. After completing the process, the annual report should be approved immediately and visible in your CCFS user dashboard. Download and print the report for your business records.
Failure to File Annual Report
It is important to file your report in a timely manner. If you fail to file by the due date, the Secretary of State reserves the right to dissolve your LLC without notice.
7. Obtain Business Licenses and Permits for Your Washington LLC
Any LLC in Washington must obtain the proper business licenses and permits by completing a business license application with the state’s Business Licensing Service. Although called a “business license,” it is best to think of this process as a registration. It is a required way to register your business with the following state entities:
- Department of Revenue
- Department of Labor and Industries
- Employment Security Department
How to Apply for a Washington Business License
Although you can apply by mail, the state highly recommends completing the business license application entirely online for much faster processing. If you chose to file by mail, you should know that it takes a minimum of six weeks to obtain your business license. If you file online, the process is much quicker.
Applying by Mail
You can file by mail by visiting https://bls.dor.wa.gov/file.aspx. Scroll to the bottom to print and complete the application. Enclose payment and submit it to the mailing address on the form.
- Step 1 is to create a Secure Access Washington (SAW) account. This will allow you to log in to MyDOR (“My Department of Revenue” where you can apply for the business license or licenses)
- Using the activation code from your SAW welcome email, log into MyDOR Services Page.
- Under the MyDOR Account Dashboard, select “File New Business Application.”
- Complete ownership information for your LLC. You will need names and dates of birth for each member, the LLC UBI Number (located on the Certificate of Formation), and the Federal EIN Number.
- After entering ownership information, complete the extensive questionnaire. This allows the state to automatically register your LLC with the applicable departments for your business.
- Pay the one-time $19 fee and file.
In around 2-3 weeks after completing your business application, you can expect each applicable department (e.g. Department of Revenue, Department of Labor and Industries, Employment Security Department, etc.) to mail your LLC a welcome packet along with any additional requirements.
Endorsements and Permits
Some industries and cities within Washington require permits or endorsements. For example, businesses ranging from cigarette retailers to collections agencies require a specialty endorsement (with applicable fees).
There is also a list of cities and counties that require a city license endorsement or addendum. In addition, some cities and counties require a reseller permit and/or a city permit. For information about the process, contact, or call the Business Licensing Service at 360-705-6741.
Individuals with specific questions about reseller permits or taxes should contact the Department of Revenue at 360-705-6705. You may also wish to enlist professional help from a state accountant or business license researcher.
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8. File Taxes for Your Washington LLC
By default, Washington LLCs are “pass-through” tax entities. Any profits, losses, deductions, or credits pass through the LLC, and the member(s) report this information on personal federal income tax returns instead.
- Single-Member LLC – The sole owner lists business income on the Schedule C section of a personal Form 1040. The IRS taxes the business like a sole proprietor.
- Multiple-Member LLC – After filling out a Form 1065 for the LLC, each member/owner receives a schedule K-1 and reports this information on their personal Form 1040s. The IRS taxes the members similar to a partnership.
- Special Election – Some multi-member LLCs elect to be taxed as an S-Corp by completing Form 2553. For some businesses, this may help members lower self-employment tax rates.
It is very important to consult with an accounting professional to verify all federal, state, local, and sales tax requirements for your industry. Failure to file or errors in filing can lead to losses, penalties, and interest that reflect poorly on your tax record.
Contact the professionals at LLC Formations so we can help you understand the tax requirements for your Washington LLC.
9. Open a Business Bank Account for Your Washington LLC
Once you receive approval from the state and obtain an EIN number from the IRS, you should open a separate bank account for your LLC. There are many benefits that come with opening a business bank account for your business entity, such as:
- Simplifies accounting and bookkeeping for tax purposes, deductions, and in the event of an audit
- Draws a clear line between personal and business assets (thereby protecting personal liability in the event of a lawsuit)
- Many banks offer benefits and rewards exclusively for businesses
Documents Needed to Open a Bank Account for Your LLC
You will definitely need to bring a few important documents with you when you go to open up your business bank account. These documents are:
- Copy of Certificate of Formation
- Federal Tax ID Number (EIN)
- Two forms of ID
- Minimum Opening Deposit (call ahead to verify this amount for your chosen bank)
- LLC Operating Agreement
Other Important Information
It is important to know that LLC members who wish to be signers on the bank account need to be physically present during the account opening (and submit all required forms of identification). Many banks charge maintenance fees by default, but shopping around may help you identify special offers or free checking accounts.
If you have a trade name or DBA (“doing business as” name), you will need to bring your Registration of Trade Name document from the state. In general, however, most Washington businesses use their primary LLC name on business bank accounts.
Most business checking accounts automatically come with a business debit card. Obtaining a business credit card (and using it responsibly) may help you build credit and earn cash back rewards for your LLC, which could provide you with the funds to expand your business in the future.
How Can LLC Formations Help You?
Starting an LLC takes a lot of work and energy, and most of the time, the paperwork is the most exhausting part of the process. Leave it to the professional team at LLC Formations to handle the tedious paperwork for you so you can instead focus on growing your Washington LLC.
Check out the next guide on West Virginia LLCs.