Washington offers new businesses a favorable environment in which to get going. According to the Tax Foundation, the state has the 11th best business tax climate in the country. Individuals don't file personal income tax returns with the state, for example, and for small businesses the first $43,000 of revenue is tax free. Washington is also ranked fifth in access to funding and has the sixth strongest economic climate.
This guide will show you how to start a small business in Washington state.
How to Start a Business in Washington State:
1. Form a business entity.
All businesses operating in Washington need a state business license or Unified Business Identifier (UBI) Number. Depending on your business's legal structure, you can get this license from either the State of Washington Business Licensing Service or the Washington Secretary of State.
For a sole proprietorship or partnership you need only submit a Business License Application to the Business Licensing Service. You can file online, by creating an account and following the prompts. It takes ten days to process. You can also file through the mail, by printing out the Business License Application form, attaching supporting documents, and mailing the lot to the licensing service. This takes up to six weeks. The processing fee for a Business License Application is $19.00.
Limited liability companies, limited partnerships, and corporations must file formation documents with the Washington Secretary of State before applying for a business license. This can be done online through the Secretary of State Corporations and Charities Filing System portal. It takes about two days to process, but fees vary depending on the business structure. Before the process can be finalized, the Secretary of State requires that newly formed LLCs, limited partnerships, and corporations file an initial report within 120 days of filing formation documents.
Fees for Registering LLCs, Limited Corporations, and Corporations in Washington:
Fee (Paper Form)
Foreign Profit Corporation
For Profit Professional Service Corporation
Social Purpose Corporation
Limited Liability Company
Foreign Limited Liability Company
Professional Limited Liability Company
Foreign Nonprofit Corporation
Nonprofit Professional Service Corporation
Limited Partnership (LP) and Limited Liability Limited Partnership (LLLP)
Foreign Limited Partnership (LP) and Limited Liability LImited Partnership (LLLP)
How do I set up an LLC in Washington state?
- Choose a name.
- Elect a Registered Agent.
- Create a Certificate of Formation.
- File with Secretary of State.
- Create an Operating Agreement.
- Receive your Unified Business Identifier number.
- File initial report.
To form your business entity you will first need to name it. Check to see if your chosen name is available with the US Patent and Trademark Office, Washington Department of Revenue, or Washington Corporations and Charities Filing System. If it is available, you can register a trade name for $5.00 while completing the business license application process. Here is an article to help you name your business.
2. Get an Employer Identification Number (EIN).
Every business needs to have an Employer Identification Number (EIN). An EIN is a number that the IRS uses to identify your business when it comes to the taxes that you deduct from your employee's wages.
The IRS issues EINs. Go here to complete an application online, and save your EIN confirmation notice once you receive it.
3. Open a bank account.
To maintain accurate records and protect yourself, you must open a small business bank account. With a business bank account, you can obtain statements and access products that would not be available to you as an individual.
Seek the advice of a business representative at your local bank. They can take you through the process and help you set up an account in the name of your business. You can also authorize other employees or company representatives to have access to the account.
Best Banks for Small Businesses in Washington:
4. Hire employees and report them to the state.
Every business, whether new or established, must submit a Business License Application (BLA) before hiring an employee. By completing the BLA you are already registered for Workers' Compensation Insurance with the Department of Labor and Industries, and for Unemployment Insurance with the Employment Security Department. Each will send you information on employee quarterly report forms.
Each new hire must be reported to the Department of Social and Health Services. This can be done online using your Secure Access Washington login details and must be done within 20 days of the employee's first day of work. This also applies to rehires, provided 60 days have gone by since they last worked for you.
There are special requirements for hiring minors or employees under the age of 18. For employees under the age of 18, you must file for a minor work permit. And for employees under the age of 16, contact the Department of Labor and Industries for requirements.
5. Comply with state tax regulations.
When you file for your business license, you are automatically registered for tax with the Department of Revenue.
While Washington state has no personal income tax, it does have a business and occupation tax, sales tax, use tax, and business personal property tax.
Business and Occupation Tax: A tax on a business's total revenue, whether the business has been profitable or not. For most businesses, the B&O tax is 1.5% of their total revenue, but businesses in some industries are taxed at a different rate. Check the Department of Revenue's tax classification for more information.
If a business's gross income is under a certain amount, it receives a tax credit against the B&O.
Washington Sales Tax: Businesses selling taxable products and services must collect a 6.5% sales tax on behalf of the state plus a local county or city tax rate on top of that.
Washington Use Tax: A tax paid on items you didn't pay sales tax on, such as second-hand furniture and vehicles, or purchases made out of state. Use tax equals the sales tax in your area.
Business Personal Property Tax: Administered by local governments, this is a tax a business pays on the current market value of all its assets.
What is the B&O tax rate in Seattle?
The Business and Occupation tax rate in Seattle depends on what industry your business is a part of. Most service and related activity businesses pay 1.5% of their total revenue, but businesses in retail, for example, pay only 0.4% of total revenue.
6. Obtain applicable Washington state licenses and endorsements.
Apart from a business license, some businesses also need to apply for city license endorsements and specialty endorsements. There is an extensive list of licenses and endorsements per city on the Business License Service City license endorsement page and another extensive list of specialty endorsements on the Specialty endorsements page. You apply for the licenses and endorsements when you file your Business License Application.
Specialty endorsements cost between $10.00 and $850.00.
7. Purchase insurance.
To protect yourself, your employees and your business assets, get insurance. The most common types of business insurance you should consider are:
How much does a business license cost in Washington state?
The processing fee for a Business License Application in Washington is $19.00.
Do I need a business license in Washington?
Yes, every business entity operating in Washington state must have a business license from the Business License Service, managed by the Department of Revenue.
How much does it cost to set up an LLC in Washington state?
In Washington setting up an LLC online costs $200.00 and setting one up through the mail, $180.00.
How long does it take to get an LLC in Washington?
It takes two working days to properly register an LLC with the Washington Secretary of State.
How do I register my business name in Washington state?
You can register your business's name by filing a Business License Application with the Business License Service.
Do I need a Seattle business license?
Yes, apart from the state business license you need a city license endorsement to operate in Seattle.
Does a sole proprietor need a business license in Washington?
Yes, a sole proprietor does need a business license in Washington. Sole proprietors and partnerships get a license from the Business License Service, and need not register with the Secretary of State to get one.
What is a Washington UBI number?
The Unified Business Identifier number is a nine-digit tax registration number. Having one registers you with several state agencies and gives you permission to do business in Washington State.
Is UBI the same as EIN?
They are similar because they are both forms of tax registration numbers. An EIN, or Employer Identification Number, is a federal tax number issued by the IRS. A UBI, or Unified Business Identifier, is a state-issued tax and business registration number.
Do I need a UBI number?
Yes, you need a UBI number to do business in Washington.
How do I register my small business in Washington State?
If your business is a sole proprietorship or partnership, file a Business License Application with the Washington Business License Service online or through the mail. If your business is an LLC, limited partnership, or corporation, you must first register your business with the Washington Secretary of State, and then apply for your business license.
How do I change my business name in Washington?
Log in to your Department of Revenue account online at www.bls.dor.wa.gov and click on "Change Name." It will cost $5.00.
Browse The SMB Guide for more helpful articles for small business owners, and be sure to download our How to Start a Small Business checklist.