How to start a business in Washington
Planning a new venture and wondering how to start a business in Washington state? You’ve come to the right place.
Renowned for its rich history, diverse culture and robust economy, Washington serves as an attractive base for many budding entrepreneurs and small business owners.
Whether your dream is to open a café in Seattle, pioneer a new tech startup in Bellevue or establish an organic farm in the Yakima Valley, Washington's supportive startup culture and vast market can really benefit your business and its growth.
First, though, you'll need to learn the ropes of starting a new business. Being your own boss comes with its own set of challenges and responsibilities and requires some perseverance and determination — and this comprehensive, step-by-step guide can help.
Here, we'll cover how to start a business in Washington in clear terms.
What are the steps to opening a business in the state of Washington?
Develop your business idea
Determining a business concept that captivates your interest and has the potential to thrive in the market isn't always an easy task, but it is, of course, a necessary part of learning how to start a business in Washington. Consider your strengths, passions and hobbies, and examine how these could be combined into a viable and rewarding business.
If you already have a business idea in mind, pat yourself on the back. But don't go all in just yet. It's essential to validate your idea to verify that there is substantial demand for your product or service before you make a financial commitment to it. Conduct some market research to pinpoint existing businesses in your chosen niche and assess the success they’ve had. If there are no competitors, it could suggest a lack of interest in your business idea, which could become a significant obstacle in the future. Even a moderate degree of competition typically signals a robust market demand — which is exactly what you're looking for.
To see if your idea may be a good fit for your goals and the market, consider:
Soliciting genuine feedback from people you trust — all the better if they’re in the industry or own a small business
Analyzing your sector, market, competitors and emerging trends to identify potential prospects and challenges
Understanding the needs, desires and values of your potential customers
Embracing feedback and criticisms to enhance your business and applying recommendations to modify or enhance your offerings
Create your small business plan
Your business plan acts as a blueprint and should include all of the crucial components of your new business. This means including information about your goods or services, intended market, financial projections, company framework, leadership team and promotional strategies. The more you pack into your plan, the better prepared you will be to confront obstacles that emerge as you grow your business. Keep your plan updated, and it can help you make strategic decisions along the way.
When crafting an effective business plan, aim to be concise and straightforward. Use strong language and visual aids to communicate your ideas, and be honest about your goals. It's also beneficial to have a mentor or adviser review your plan before its finalized.
Here's what you should include in your business plan:
A brief review of your business outlining your goods or services, targeted market and unique selling proposition.
A succinct explanation of the purpose, core values and objectives of your business.
An outline of your business and its functions, including its legal formation, location, backstory and team.
A thorough investigation of your competition and your target audience, including their demographic information and buying patterns.
A quick rundown of your business's managerial hierarchy, describing the duties and responsibilities of each team member.
Products and services
A description of your products or services, elaborating on their features, benefits and cost.
Financials and funding
A detailed look at your business financials, including anticipated revenues, startup costs and capital requirements.
Sales and marketing plan
An overview of your value proposition, target market, advertising strategy and promotional methods. (In a digital world, this one changes often — be sure to include all the latest channels available to market your product, if it’s relevant to your business.)
Any relevant resources or documents including customer surveys, financial reports or additional marketing/branding assets.
Secure necessary funding
If you're wondering how to start a business in Washington with adequate capital, you might consider obtaining a loan from a third-party provider that specializes in supporting small businesses in early development. Companies like Heartland offer capital lending solutions designed for startups of all sizes, with business loans that range from $5,000 to $5 million depending on your specific needs and qualifications.
Crowdfunding or personal investments can also be used to accumulate capital, but they might not fulfill all of your financial requirements, particularly in the initial stages. Most people tend to avoid borrowing money from friends or family members, so unless you're sitting on substantial personal savings, capital lending solutions such as those offered by Heartland may be the best choice for your burgeoning business.
Regardless of how you fund your business, it's vital to ensure you have enough capital (and then some) to launch your business.
Choose your business name
As you’ve probably figured out during your research learning how to start a business in Washington, choosing a business name is a crucial – and fun! – step. You want to shoot for something that will stand out and uniquely and easily describe what your business does and who it serves. Once you have selected a business name, you can use the Washington Secretary of State business lookup tool to see if it’s available. If it is, the name can be registered during the formation of your legal entity, such as an LLC or a corporation. This secures your rights to the name and prevents others from using it.
If you aren't quite ready to establish your legal entity, you can reserve your business name by filing a name reservation form with the Washington Secretary of State. You can reserve a business name for 180 days, and the cost is $30. But remember, to truly protect your name and ensure that nobody else can use it, you'll need to form a legal entity.
Pro tip! Reserve your website domain name
After choosing a business name, it's a good idea to purchase a matching domain name and then create social media accounts with the same name. This will help you build an online business presence and provide a great way for customers to find and connect with you on the social apps they frequently use.
Identify your business structure and business entity type
In Washington, it’s important to select the correct business entity as it impacts your personal liability, paperwork, financing and tax obligations. Each business structure offers distinct pros and cons, so if you don't know which to choose, consider seeking advice from a legal professional or an accountant before making your decision.
A general partnership refers to a business with two or more individuals who share in the profits and losses of the business. Partners in a general partnership are personally liable for all business obligations, meaning their personal assets could be at stake in the event of a lawsuit or creditor collection. (Often, partners will purchase business insurance in an effort to mitigate this risk.)
While there isn't a formal registration requirement to establish a partnership, it's generally advised to draft an operating agreement. This document defines the roles and responsibilities of each partner, which helps to reduce any potential conflicts or misunderstandings.
On the tax front, since general partnerships aren't registered legal entities, each partner is required to report their share of the income or loss on their personal tax returns. Partners pay personal income tax on their respective shares of the business profits, the same way a self-employed individual does.
Starting a sole proprietorship in Washington is a straightforward process as there are no formal registration requirements. However, if you want your business to operate under a trade name or doing business as (DBA) name, a state-level name search and registration would be required.
Choosing a sole proprietorship means you're choosing to form a non-registered entity, which doesn’t offer limited liability protection. Sole proprietors in Washington are personally liable for business debts and liabilities, posing potential risks to their personal assets if things were to get messy.
Taxes for these businesses are reported on the owner's personal income tax returns, as the IRS treats all business profits from sole proprietorships as the owner's personal income.
Limited liability company (LLC)
A limited liability company (LLC) is the most common business structure for small businesses. An LLC protects its owners (referred to as members) from being personally liable for the business’s debts or obligations with limited liability protection. This means assets owned by the business are separated from the members' personal assets, thereby protecting those personal assets in the event of legal action or collection. Members can be individuals, corporations, other LLCs or even foreign entities.
One of the advantages of an LLC is that it can choose how it wants to be taxed. Your LLC can either be taxed as a pass-through entity, where the income and expenses are passed on to each member’s individual tax returns, or as a corporation, where the LLC pays taxes on its own income and then distributes dividends to its members.
To create your LLC in Washington, you'd need to file articles of organization with the Washington Secretary of State. For tax purposes, a single-member LLC has to file IRS Form 1040, while multi-member LLCs have to file Form 1065. These requirements help your Washington LLC stay in compliance with both state and federal tax laws.
Subchapter "S" corporation (S corp)
An S corp is a registered corporation that opts for pass-through taxation. This means the S corp’s income and losses are passed on to the shareholders’ individual tax returns like an LLC, avoiding the double taxation that usually applies to corporations.
S corps have limited liability protection, so the personal assets of the owners are separated from the business and thus protected in the event of a lawsuit or collection action.
To become an S corp, a corporation has to meet certain requirements. These include having no more than 100 shareholders, only one type of stock and shareholders who are either individuals, estates, trusts or specific kinds of charitable organizations. Once these criteria are met, a corporation can file Form 2553 “Election by a Small Business Corporation” with the IRS to officially become an S corp.
Subchapter "C" corporation (C orp)
A C corp is a registered legal entity separate from its owners or shareholders. This means that the owners are not personally liable for the corporation’s debts or liabilities. Every C corp has to file an annual report, elect a board of directors and hold an annual meeting for its shareholders.
C corps in Washington can raise funds easily, as they can issue stock and have an unlimited number of shareholders who can be individuals, corporations or other legal entities. However, they also face double taxation, which means that the corporation pays taxes on its income, and the shareholders pay taxes on the dividends they get from the company. In this way, net income is taxed twice, hence the term "double taxation".
For federal tax purposes, a corporation has to file Form 1120 with the IRS. This regulatory compliance helps the corporation stay in good standing at the state and federal levels.
Nonprofit organizations are registered businesses that do not pay federal income taxes, as long as any income they generate is used for charitable purposes. Nonprofits can raise funds through donations, which are usually tax-deductible for the donors. Like registered corporations, nonprofits also have limited liability protection.
To gain this tax exemption, a nonprofit has to meet specific requirements. Mainly, the business has to serve a charitable purpose that benefits the public interest, and it cannot be run for profit or take part in any political activities. Any profit made must be put back into the organization to support its mission.
Nonprofits have to file Form 1023 with the IRS to apply for tax-exempt status. Once approved, they have to file an annual Form 990 and ensure that both transparency and accountability are part of the organization’s operations.
Register your small business in Washington
To start a new small business in Washington, you'll need to designate a registered agent, file articles of organization (or articles of incorporation) and pay the state filing fee. The most efficient way to do this is online through the Secretary of State website. The filing fee for business formation (LLC or corporation) online is $200 or $80 for nonprofit organizations. You can also pay an additional $50 for expedited processing if you need quick approval.
What is a registered agent?
A registered agent is a person or a business entity that agrees to receive legal documents and official notices for your business. Registered agents have to have a physical address (no P.O. boxes allowed) in the state where your business is formed and must be available during normal business hours. With a registered agent, you're far less likely to miss important deadlines or notifications, as your agent’s job is to send all legal correspondence quickly and efficiently.
What are articles of organization?
Articles of organization, certificate of formation and articles of incorporation are all different names for the same legal formation documents that officially form an LLC or other business entity. This documentation must be submitted in order to register your new business either by mail or online. In Washington, LLCs file articles of organization while corporations file articles of incorporation.
Your articles of organization need to include certain information that will be checked for approval by the Washington Secretary of State, which includes:
The business name and physical address
The name and physical address of the registered agent
The names and physical addresses of all owners and managers
A statement explaining the purpose of the business and its mission
New entrepreneurs learning how to start a business in Washington can file articles of organization through the Washington Secretary of State website.
Apply for an Employer Identification Number (EIN)
A federal employer identification number (EIN) is a nine-digit identifier number issued by the Internal Revenue Service (IRS) to businesses for tax-related purposes. In Washington, any business that has employees or those that file federal tax returns is required to have an EIN.
Getting an EIN for your business has several benefits. It lets you use your EIN instead of your social security number (SSN), it can be used to apply for business loans or to open business banking or credit accounts and it lets you legally hire employees.
Getting an EIN is free, easy and can be done online via the IRS website. The process is fast, and you’ll get your EIN right away after submitting your application. Once established, your EIN will need to be used on all of your business tax forms and other official documents.
Open your small business bank account
Opening a business bank account is a great way to keep your business and personal finances separate, allowing you to track income, expenses and taxes without the risk of accidentally mixing in personal expenses. This can help you avoid any possible tax issues.
Additionally, business bank accounts and credit cards can help build credit for your business, which you’ll need when looking for business loans. Business accounts also give you access to online banking services, the ability to accept payments and other features to make your daily financial tasks easier.
Be sure to compare several banking options to find the institution and account type that best fits your needs. Look for banks that offer low or no fees, time-saving features and convenient locations near your business.
Obtain your business licenses and permits
Washington requires businesses to obtain a Washington business license if they meet specific criteria, like if you plan to hire employees or generate more than $12,000 per year in revenue. But your local municipality will likely require you to obtain a license to do business as well. As a result, it’s a good idea to check with your county, city or town to find out which business licenses and additional permits you may need to operate in compliance with local regulations and bylaws.
Depending on your industry and business activities, you might be required to obtain specific permits or licenses that pertain to the products you sell or the work you perform. Be sure to check with the Washington Secretary of State business licensing service as well as your local municipality to double-check all permit and licensing requirements.
Understand your Washington business taxes
Everybody has to pay taxes, but it's important to note that taxes vary across each state. All registered businesses in Washington must pay state-specific taxes as well as federal taxes to remain in good standing with the IRS. Here are the taxes that your small business in Washington state should keep in mind:
Sales and use tax
Businesses that sell products, as well as some specific services, must collect the Washington sales tax at the time of sale. Washington's sales tax rate is 6.5%. Use tax is also 6.5% and applies to businesses that purchase products sold in another state by a vendor who doesn't charge the Washington state sales tax.
Business and occupation (B&O) tax
The state of Washington charges businesses a gross receipts tax called the business and occupation tax, which is essentially a price your business pays for the opportunity of doing business in Washington. This tax is measured on either the total value of goods sold, proceeds of all sales or the total gross income that your business generates. The rate of this tax varies from 0.471%, the lowest rate, to 1.5%. The state has a list of B&O tax rates for various business types that you can review, should you need it.
Corporate income tax
There is no state income tax in Washington, just like in eight other states across the country. There is also no corporate income tax to pay, which makes Washington an attractive place to set up a new business. However, businesses in Washington are still required to pay the federal corporate tax rate of 21% on corporate income. Even if your business didn't earn any income or doesn't owe federal taxes, you'll still need to file an annual return.
All state business taxes are paid to the Washington Department of Revenue, and as the business owner, you're responsible for ensuring that you meet all tax obligations for your LLC or other entity type. If you're unsure which taxes you owe or how to pay them, you can find more information on the Washington Department of Revenue website or by consulting with a licensed tax professional.
What is a DBA?
In Washington, a business can use a doing business as (DBA) name, also known as a trade name, fictitious name or assumed name, instead of its registered legal name. The DBA is not a separate legal entity, but businesses do have to register a DBA along with their legal name with the state to use it.
A DBA can offer several benefits for a business. A business may choose a DBA to create a brand name that is more memorable than its legal name, to accommodate the growth of its services over time or to adapt to a different purpose. For example, “Evergreen Landscaping Services LLC” might decide to use “Evergreen Residential Lawn Care” as a DBA to appeal to a more specific target market.
Frequently Asked Questions (FAQs)
How much does it cost to start a business in Washington?
The cost to start a business in Washington state varies depending on the type of business structure you choose. For instance, the filing fee for an LLC, a limited partnership, or a profit corporation is $180 plus a $20 online processing fee. If you need expedited filing, there's an additional fee of $50.
What qualifies as a small business in Washington?
A small business in Washington is one that employs a smaller number of workers (usually between 1 and 50 employees) and generates less than around $3 million per year in revenue.
How do I become a business owner in Washington state?
To become a business owner in Washington state, you'll need to choose your business structure (sole proprietorship, general partnership, LLC or corporation, etc.), decide on a name for your business, designate a registered agent and then register your business with the state. If you choose an LLC or corporation, you'll need to file a Certificate of Formation or Articles of Incorporation, respectively, with the Washington Secretary of State. Once your business name and structure are in place, you can obtain the necessary licenses and permits.
How long does it take to qualify a business in Washington?
The time it takes to qualify a business in Washington depends on the specific requirements of your business type, the processing time for your filings and the time it takes to obtain any necessary licenses and permits. For example, online applications for a business license takes approximately 10 business days to process, and if city or state endorsements are required, it could take an additional 2-3 weeks to receive your business license.
What are the different types of businesses in Washington state?
Washington state allows you to form various types of businesses, including sole proprietorships, general partnerships, limited partnerships, limited liability companies (LLCs), corporations, charitable trusts and nonprofit organizations.
What are the qualifications to start a business in Washington?
To start a business in Washington, you'll need to choose a name and a registered agent, then register your business structure. If you're starting an LLC, you'll need to file a Certificate of Formation with the Washington Secretary of State. If you're filing a corporation, you'll need to file Articles of Incorporation.
What are the requirements for a sole proprietorship?
Sole proprietorships don't require any state or federal paperwork unless you choose to register a trade name or DBA name with the state. If you choose to use a trade name or DBA name, you'll need to ensure it's unique and available.
What are the business license requirements in Washington state?
In Washington, you're required to register with the Department of Revenue and get a business license if your business meets any of the following conditions:
You require city, county or state endorsements
You are doing business under a name other than your full legal name
You plan to hire employees within the next 90 days
You are selling products or services that require the collection of sales tax
You have a gross income above $12,000 per year
You are required to pay taxes or fees to the Department of Revenue
You are a buyer or processor of specialty wood products
Your business meets Nexus threshold reporting requirements
Ready to work with a company that knows what it’s like to start a business?
Whew! Now you know how to start a business in Washington. Forming a small business or startup is, well, no small feat — but with the guidance above and from some of our other resources below, you’ll be welcoming customers in no time.
As you begin working toward becoming a successful business owner in Washington, we invite you to check out the Start-Up Path for Entrepreneurs. It’s a totally free, jam-packed resource that complements the information here, and you can reference it anytime as your business grows or shifts.
From interactive worksheets and planning tools to advice from real entrepreneurs who have been in your shoes, The Start-Up Path features invaluable content available to move through on your own schedule.
We know you’re busy, so if on-the-go know-how works better for you, tune in to our Entrepreneur’s Studio podcast wherever you subscribe to podcasts. Hear empowering and inspiring stories from Washington’s own, the duo behind the up-and-coming Sugar + Spoon cookie dough food truck, as well as Shake Shack founder Danny Myer and many others.
Whenever you’re all set to launch your business in Washington, Heartland is here to assist you.
Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us