A limited liability company, or LLC, is a business structure that protects you from double taxation and provides protection against liability for financial loss. It has features of both a corporation and a partnership. If you are interested in forming your own LLC, there are certain rules you must follow, and these rules vary by state. While the general guidelines to forming an LLC are the same across the United States, you will want to pay particular attention to the rules for the state which will approve your LLC. In Washington, while LLCs are both affordable and relatively easy to form, there are some idiosyncrasies in the application process which you must be aware of.
Heed Washington’s naming requirements.
There are specific naming requirements for LLCs in each state, including Washington.. Washington law requires that the words “Limited Liability Company” or “Limited Liability Co.” or the abbreviation “LLC” or “L.L.C.” be included in the company name.
Choose a unique name.
Your business name must be unique from the name of any other company on file with the Secretary of State. It must be a company name that cannot be confused with any for-profit or not-for-profit corporate, reserved or registered corporate, limited partnership, LLC, limited liability partnership, or forced fictitious names.
Check name availability.
You can check name availability at the Washington Secretary of State business name database. This is a free online database of all business registered within Washington state. The Secretary of State website for Washington can be accessed at http://www.sos.wa.gov/Corps/.
You can reserve a business name for 180 days by filing a Name Reservation. This is also done through the Washington Secretary of State. There is a fee of $30 associated with reservation of a name.
Avoid “restricted designations.
” These are words that cannot be used in corporate names in the state of Washington. These words are referred to as “restricted designations.” Words that are considered to be restricted designations include:
“Bank”, “banker”, or “banking”
“Corporation”, “incorporated”, or the abbreviation “corp.”
The abbreviation “ltd.”, “inc.”, “LP”, or “LLP”
Combinations of “industrial” and “loan”
Combinations of “building”, “savings”, “loan”, “home”, “association”, and “society”
Appoint a registered agent.
A registered agent is a person or business entity who agrees to accept all legal papers on the LLC’s behalf if it is sued. The agent will also receive and send papers on your behalf, including annual state filings. When you are choosing a registered agent, you should ensure that he or she is a Washington resident or corporation or LLC permitted to do business in Washington state. Additionally, check that your registered agent has a physical street address in the state of Washington.
If you fit the above requirements, you can elect yourself as your LLC’s registered agent, or choose another individual within the company.
You can consider using a registered agent service. There are several benefits to using a registered agent service, including the ability to form an LLC in Washington if you do not reside in the state, the reliability of a service that is always open during regular business hours, and the utility of having someone to advise you in finding state-specific accountants and legal professionals.
Access and complete the certificate of formation.
This certificate is available on the Secretary of State’s website. This is essential for any company wishing to form an LLC in Washington. The form can be accessed here: http://www.sos.wa.gov/_assets/corps/LLC2010.pdf.
Include all necessary data.
The certificate is a fill-in-the-blank form, and must include the following:
LLC’s name (that meets state requirements) and registered address
Name, signature, and address of the LLC’s registered agent
Effective date of formation
Whether its terms of existence is perpetual or limited (i.e. dissolution date)
Whether the LLC will be member-managed or manager-managed
Names and addresses of the organizers of the certificate of formation.
Submit your certificate of formation.
This form can be submitted either online or by mail. Online filings will be processed in 2-3 business days.
Pay the filing fee and submit your application.
The filing fee in the state of Washington is $180 for a certificate of formation sent by mail, while filing online costs $230 (for expedited service). If filing by mail, you will be able to pay by check (made payable to the Washington Secretary of State), debit card, or credit card; if filing online, a card is required.
If filing online, follow the on-screen directions on the Washington Secretary of State’s website.
If filing by mail, you will should send your certificate of formation to the following address: Secretary of State, Corporation Division, 801 Capitol Way S, PO Box 40234, Olympia WA 98504-0234.
Obtain an Employer Identification Number (EIN).
An EIN is a number used to identify a business entity; it can be thought of as a social security number for the company. An EIN is necessary to open a bank account, to file federal and state taxes, and to hire employees. It is required if there are two or more members in your LLC.
You will get you EIN from the IRS. You can apply for your EIN using the online application fee provided by the IRS website. There are no fees associated with applying for an EIN.
If your LLC is a single-member LLC (that is, you are the only employee), you could choose to use your social security number instead of a separate EIN. However, among other benefits, an EIN can help separate your personal and business finances and can be used to establish a business credit history.
File the Business License Application.
The Business License Application is a form that you must file when you first start a business. Filing the Business License Application is an important part of starting an LLC in Washington because it will officially register your business.
You will receive a unified business identification (UBI) number when you file a Business License Agreement. This UBI number is a nine-digit number required in the state of Washington to conduct business. It will link your business to the Department of Revenue, the Business Licensing Service, the Office of the Secretary of State, and the Departments of Employment Security and Labor and Industries.
You will receive a state business license (required for all businesses in Washington) that will allow you to register a “trade name” for your business. This trade name will allow you to operate your business under a name that is different than the one that you listed on the certificate of formation.
The Business License Application also allows you to create a state employment account. A state employment account is required if you have employees in Washington. It should be hired if you plan to employ someone within the next 90 days.
The filling fee for the Business License Application is 20$. You can mail the application to State of Washington, Business Licensing Service, PO Box 9034, Olympia, WA 98507-9034.
File an Initial Annual Report with the Secretary of State.
You will need to file this report within 120 days of filing the certificate of formation, and it will cost $10. This report can be filed online at the Secretary of State website if you filed your certificate of formation online (you will be required to enter an online application ID that was given to you as well as your UBI number). If you filed your certificate of formation by mail, you will receive the Initial Annual Report form by mail from the state.
After you file your Initial Annual Report, you will begin to file annual report and license renewals that carry a fee of $69. The due dates for these renewals will be determined by the Secretary of State.
Register for state tax.
Many LLCs are “pass-through tax entities.” This means that the responsibility for paying taxes is the responsibility of individual LLC members. Washington does not have a personal income or corporation income tax, so most LLCs will pay no state income taxes. Washington does, however, have a business and occupation (B&O) tax, which applies to LLCs. Visit the Department of Revenue website for more information on specific rates and classifications of LLCs in relation to the B&O tax rate. Generally, if your LLC makes less than $7,000 in a quarter, you will not be required to pay B&O tax that quarter; however, it is still necessary for your to complete the excise tax return.
If your LLC has employees, you will need to play employer taxes. Additionally, you must inform the IRS and the state of Washington whenever an employee is hired. All necessary details can be found on the IRS website under the “Hiring Employees Section”
All businesses that hire employees are required to register for workers’ compensation and unemployment insurance. This can be done when you file your Business License Application.