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Forming an LLC in Washington State

You have a great business idea and you are thinking about forming a Washington State Limited Liability Company. A Limited Liability Company (LLC) is a business entity that many small businesses choose as a way to organize themselves when they are just getting started. An LLC has a few advantages for small businesses but may not be appropriate for larger ventures or startups that are seeking investors. In addition, LLCs have a unique business structure that can get very technical.

You should look closely at other business entities like partnerships and S Corporations, before launching a Washington State LLC.

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Advantages of LLCs:

  • Limited personal liability for members for business debts and lawsuits.
  • Fewer reporting and recordkeeping requirements than other kinds of entities, including corporations.
  • Avoiding the double taxation—business and personal—of corporations if taxed as a pass-through entity.
  • Unlike corporations, Washington State LLCs do not have to file annual or biennial reports with the state.

Disadvantages of LLCs:

  • An LLC is not a good investment vehicle for outside investors.
  • LLCs and S and C corporations pay commercial activity taxes, unlike sole proprietorships and partnerships.
  • LLC owners may pay self-employment taxes.

Registering Foreign LLCs in Washington State

Any foreign (out-of-state) LLC that wants to do business in Washington State must register online with the Secretary of State. There is a $200 filing fee.

Step-By-Step: Forming a Washington State Limited Liability Company

With all of that, you have decided to form an LLC in Washington State. You have your members, your business plan, and a little startup capital, and you are on your way.

Here is a step-by-step guide for how to create a fully operational Washington State LLC.

Step I: Name Your LLC

Creating a legally proper LLC name and then protecting it is one of the first actions in LLC formation. This is a process that can be complex and time-consuming, but it is the LLC needs to operate legally in Washington State.

The first thing you have to do is create a great name (that's up to you). Washington State law requires that the LLC's name be unique and different from any other company's name.

So your first task will be to search the Secretary of State Business Center business name availability search page to make sure that your chosen name isn't already in use for an existing business.

This search is just a preliminary step to the state filing. You still need to go through the registration process to get your name approved by the state.

After you have decided on a name, the name you will submit to the Secretary of State must then contain one of these legal suffixes:

  • Limited Liability Company
  • L.L.C.
  • LLC

The name of the LLC cannot use any variation of the word “corporation." It cannot use language considered obscene or that claims a profession or business affiliation that does not exist. It cannot use any suffix that makes it look like it is in the banking or lending business.

Professional LLCs

Washington State law allows for professional LLCs (PLLC), comprised of members who are licensed professionals who organize for the purposes of rendering professional services. The suffix must be “Professional Limited Liability Company," Professional Limited Liability Co.," P.L.L.C.," or “PLLC."

Dentists have a different set of rules.

Step II: Appoint a Registered Agent

The State of Washington State requires an LLC to have a Registered Agent for service of process before formally filing with the state. A registered agent is designated to receive process (legal documents) on behalf of the LLC. A Washington State registered agent can be an individual or a company (domestic or foreign), but it must have a physical Washington State street address. A forming LLC will often choose a professional registered agent service or may choose the company lawyer. A Washington State corporation can only have one registered agent; the business itself cannot act as its own agent.

Reserve Your Business Name With the State

Washington State allows you to reserve your business name through the Washington State Business Express website for 180 days while the formation process is going forward. Your name reservation is not a guarantee that your name will be approved, but it keeps anyone else from using it for that time.

Step III: Legally Protect Your Business Name

Next, make sure that no one else can use it in business or on the internet. This means that you have to make sure that no one else is using that name. You do this by doing a name search to make sure that the Internet Domain Name is available. If it is available, grab it immediately (that will only cost a few dollars).

If you want to do business nationally, or you want to operate in several other states, you should trademark the nonprofit's name with the United States Patent and Trademark Office (USPTO). This process takes some time and money. The name is still protected as a common law trademark while that application is pending.

Once you receive your federal trademark, you can register it as a Washington State trademark or service mark through the Secretary of State. You may also trademark the Washington State LLC name only with the state, without a federal trademark.

Now that name is yours, you can keep anyone else from using it, and it conforms to Washington State law.

Step IV: Structure the Business

An LLC has a particular, unique business structure.

To begin with, the stakeholders of an LLC are called “members." There is no stock issued, so they cannot be “stockholders." This is the primary reason that an LLC is not a good investment vehicle for either the founders or potential investors.

There is no number of members required. You can have a single-member LLC-- say, for a one-person office.

Then you should write an LLC Operating Agreement. This is not required under Washington State law, but it is a good idea, to keep everybody's interests clear.

A Washington State Limited Liability Operating Agreement should contain the following points:

  • Percentage of members' ownership
  • Voting rights and responsibilities
  • Powers and duties of members and managers
  • Distribution of profits and loses
  • Holding meetings
  • Buyout and buy-sell rules (procedures for transferring interest or in the event of a death)

An LLC may be managed by the members (member-managed), or it may hire an outside manager (manager-managed).

Step V: Write and File Your Washington State Certificate of Formation With the Washington Secretary of State

You are now ready to compose and register your Washington State LLC Certificate of Formation with the Washington State Secretary of State. Fill out the online forms and follow the directions, or print them out and mail them in.

Foreign LLCs cannot use this process. They must register separately, as noted above.

Your Washington LLC Certificate of Organization must contain the following:

  • LLC name, principal office address, and contact information
  • Nature of the business.
  • Name and physical address of the registered agent. Must have a Washington State street address.
  • Effective date that the LLC begins to exist. Can be any time from the filing date until 90 days after that date.
  • Duration of the LLC. Can either be a limited time or perpetual.
  • Executor. The LLC must have at least one executor. This is the person forming the LLC and signing the Certificate of Formation.
  • Governor. Each business must have at least one governor. This is the person listed on the annual report and is usually a member or manager.
  • Return address for filing (email and/or street address).
  • Signature of executor.
  • Filing fee of $200 for online filing ($180 if you mail in).

The normal processing time is two business days.

After you file, your LLC will receive a Washington State Unified Business Identifier (UBI). You will use this number when communicating with all state agencies.

After You File Your Certificate of Formation

You will have numerous state and federal requirements for your new LLC after you file with the state.

State Business Licenses

Certain Washington State businesses require professional and/or business licenses. There will also be local business licenses that you may need to obtain from local governments.

Washington State Employment Rules

Your LLC will be subject to state rules if it has employees—even if the employees are also members.

All new hires must be reported within 20 days of hire to the Washington State Division of Child Support.

You may have to pay unemployment insurance.

Most employers are required to carry workers' compensation insurance.

Taxation

You will be subject to both state taxes and federal income taxes. This is a job for your accountant, but here is a brief outline of your tax obligations.

You will be subject to both federal withholding tax if you have employees and, of course, to business income taxation.

LLCs also have very specific requirements for filing taxes. You may choose one of several different tax designations for your LLC, including C or S Corporation, partnership, or pass-through organization with personal liability for the members. Consult with your accountant for the best approach.

You must file to receive an IRS Federal Employer Identification Number (FEIN) on the Internal Revenue Service website if you will have employees. You must also apply for your FEIN if the LLC has more than one member. You will be subject to all federal tax-withholding rules.

Washington State Business Taxes

Once you obtain, your federal EIN, you then must obtain your state EIN.

Washington State does not have personal or corporate income tax. However, LLCs that engage in business in the state are subject to Washington State business and occupation (B&O) tax, which is determined by the business's gross receipts.

If your company sells goods and collects sales tax, you'll likely have to register with the Washington State Department of Revenue.

Initial and Annual Reports

A Washington LLC must file an Initial Report with the Secretary of State within 120 days of formation. After that, Washington State LLCs must file an annual report with the Secretary of State.

Want Help Forming an LLC in Washington State

Fortunately, forming an LLC can be a straightforward process with FindLaw’s Business Formation Service. If your needs require expertise, look no further than to an experienced legal professional who can give you legal advice. Get help from a business organizations attorney in your area today.

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