The Evergreen state is a fantastic place to call home — and also a great place to do business. The state boasts the best overall ranking for quality of life, according to the US News & World Report (and many other ranking authorities). Plus, the Seattle area offers a high-tech business world to explore, as well as excellent access to venture capital.
But how do you start a company in Washington? First, you need an idea — but that’s just the beginning. This guide will explain how to start a business in Washington state, from the initial planning stages through to the day-to-day operations of the new company.
Decide on a business idea
First and foremost, you’ll need to decide what kind of business you want to start. Chances are you already have something in mind, but if not, here are some things to consider:
- What are you talented or naturally skilled at? Could this talent make you well suited to a certain type of business?
- What business does your community need? Have you talked to people to find out?
- What are you interested in? Can you combine any of your passions with a business idea?
- Is this going to be a full time business, or more of a side hustle?
These are questions to ask yourself when deciding on a business idea. Once you have decided, move on to the next step.
Plan your Washington State business
Now it’s time to start planning. This means coming up with a business plan, naming your business, researching locations, and more. There’s a lot to cover here, so let’s break it down:
Select a business name
The first thing to consider here is what you will name your business. You may already have some names in mind, but if not, now is the time to start brainstorming. Try to think of names that will be memorable for future clients/customers, and that are relevant to your product or service.
Make a list of any potential ideas you are considering. Then, check to see if they are actually available. Washington State requires that newly registered business names be distinguishable from other names already registered in the state. You can search a state database of all business names already registered in Washington.
The requirement to choose a unique name is important, but it’s not the only rule:
- Names for LLCs need to contain “limited liability company”, or select approved abbreviations such as “LLC” or “L.L.C.”
- Names for corporations need to contain “corporation”, “incorporated”, or select approved abbreviations such as “corp” or “inc”
- The use of certain words or phrases is restricted, and some financial terms require written permission to use
- Check out more information on Washington State business names here
When you have decided on the name you want (and confirmed that it’s available to register), you can move on to the next step. Or, if you’re not quite ready to do so, you can reserve the business name for 180 days. This prevents another business from registering the name for 6 months.
Washington trade names (DBAs)
Washington state allows businesses that are already registered in the state to utilize trade names. This allows an LLC or corporation to do business legally under a name other than the official name of their business. It’s helpful to keep in mind the potential to use a DBA because it expands on the possibilities for marketing and branding your business. You can learn more about Washington State DBAs here.
Register a domain name
Once you choose a name, you should immediately register a domain name for your new business. In most cases, getting a .com domain name is ideal, but there are many other extensions (.biz, .net, etc.) that are worth considering.
You can use a tool like Namechk to search for an available domain name and find a great deal on the registration cost. You may find that your desired names are taken, so you may need to get creative.
Complete market research
Once you have an idea, you’ll want to do some market research. You want to gain a better understanding of who your customers – and competitors – are. You can achieve this by conducting online research, running focus groups, sending out surveys, and more. There are also companies that can help you complete market research, for a fee.
Select a business location
Unless you plan to run a remote/virtual business, you will need to find a physical location for your company. Research commercial property in your area, and take note of typical costs. For customer-facing businesses (retail and some services), location is very important, so take your time in selecting the right area for your business.
Create a business plan
You will now need to create a detailed business plan for your new venture. This plan is helpful for your own purposes, and will also be necessary in order to obtain funding from a bank. A good business plan should contain these elements:
- Finances: How much funding does the business need to get started? How many sales does it need each month to break even on expenses?
- Product: What do you plan to sell? Is it a product or a service? What problem does your business solve, and how is it distinct from your competitors?
- Marketing: How will you drive sales? What marketing and sales efforts do you plan to employ? How much money will you set aside to fund marketing efforts?
- Staff & partnerships: How many people will you need to hire, and what skill sets do they need to have? Will you have any partnerships or arrangements with other local businesses?
If you need help, you can find business plan templates online that will help walk you through the steps you need to take to draft a detailed business plan. If you plan to seek funding, you
Decide on a business structure
Before you form your business as a legal entity, you will need to decide which business structure you will use. There are a few different types of businesses, each with its own pros and cons.
Sole props are single-person operations. Examples include freelancers, gig economy workers, and consultants. A sole proprietorship business is very easy and inexpensive to form, and tax reporting is also fairly simple. As a sole proprietor, your business taxes are reported as part of your personal tax return.
The downsides to a sole prop are that you cannot hire employees, and you don’t have the legal liability shield that something like an LLC or corporation would provide. 100% of the debts and liability of a sole proprietorship go to the sole owner: you.
A general partnership is an unincorporated business structure similar to a sole proprietorship, except with two active owners/participants. Partnerships do not have liability protection.
Limited Liability Company (LLC)
A limited liability company, or LLC, is a popular choice for business owners because it provides liability protection to the owners. It separates the business from the owners, which means the personal assets of owners will not be at risk if the company gets sued or goes into bankruptcy.
LLCs are also a bit easier to form than corporations. Even so, there is definitely more work involved with an LLC than there is with a sole proprietorship.
A corporation is owned by its shareholders and is a separate entity. There are a few different types of corporations (C-corp, S-corp, etc), with the main differences being the way they are treated tax-wise.
Corporations are more regulated than LLCs, which makes them more attractive to outside investors. For this reason, most large companies are corporations. The downside is that it takes more effort, and more paperwork, to form a corporation.
A nonprofit is a legal entity that is set up with charitable status, meaning that its goal is not to make a profit, but rather to address a certain cause. Nonprofits are funded by donations, rather than investors, and are subject to many regulations. They are exempt from most forms of taxation, although tax returns must still be filed.
Register your business in Washington State
Now, the time is finally here to formally register your new company. You will need to submit some paperwork to the Washington Secretary of State and complete some other steps (outlined below). Paperwork may be submitted online or through the mail.
You can choose to do all the work yourself (more info on how below), or you can opt to use a paid business formation service. If you go this route, good options include Northwest Registered Agent, ZenBusiness, and Incfile.
Business formation services save you time and hassle by helping you navigate the business formation process. They provide a simpler, more efficient business formation process.
If you do decide to do the work on your own, the process involves:
- Naming your company
- Choosing a registered agent (this agent is tasked with receiving legal documents on behalf of the business). You can be your own registered agent, appoint an employee, or use a service
- Filing paperwork with the state
- Registering for state franchise and excise taxes
- Obtaining business licenses and permits if necessary
- Applying for an EIN from the IRS
The specific process does differ a bit, depending on the type of business you plan to form (LLC, corporation, etc.) More on this below.
Form a Washington sole proprietorship
Follow these steps:
- Determine if you will operate under your own legal name, or use a trade name
- If you plan to use anything other than your legal name, you will need to register a trade name/DBA
- Apply for a business license and/or other necessary permits from local governments (city/county), as needed
- More information here
Form a Washington LLC
Follow these steps:
- Name your new LLC (see notes above)
- Choose a Washington Registered Agent (or use a service such as Northwest Registered Agent). Your Registered Agent will receive legal documents and notice of lawsuits on behalf of the company.
- File the LLC Certificate of Formation online or by mail, and pay the filing fee ($180 by mail, $200 for online)
- Draft an LLC operating agreement
- Apply for an EIN with the IRS
Form a Washington corporation
Follow these steps:
- Decide on your desired corporate tax structure (S corp or C corp)
- Name your new corporation
- Choose a Registered Agent for your business (or use a service)
- Hold an organizational meeting and appoint directors
- File the Washington Articles of Incorporation online or by mail, along with the filing fee ($180 by mail, $200 for online)
- File an initial report with the state
- Apply for an EIN from the IRS
Apply for business licenses and permits
Registering your business and forming an LLC or corporation is an important part of starting your business – but in order to operate legally, you will likely also need to obtain certain permits and/or business licenses.
The specifics vary depending on the type of business you are running, as well as your location. For example, restaurants will need health permits, bars will need liquor licenses, and medical service providers will need various professional licenses and federal permits. You will need to research the specifics that relate to your business type.
There are different requirements at each level of government:
- Local: Cities and counties may require certain business licenses or permits. Contact your county clerk for details.
- State: Washington may require additional permits and/or licenses in order to operate legally in the state. Explore the Washington Department of Licensing website for more information.
- Federal: Federal permits/licenses may be required for certain regulated industries, such as construction, medicine and legal services. Check the Small Business Administration (SBA) guide for more details.
At this time, you should also apply for an Employer Identification Number (EIN). An EIN is a federal tax ID that is required to hire employees. You can apply for an EIN online with the IRS – the application is free and quick.
For most businesses, some startup funding will be necessary in order to get started. In step #2, you should have calculated your funding needs while drafting a business plan. Use this information to determine how much funding you need to raise.
For bootstrapped companies, you may be able to get by with your own personal savings, or some seed investments from friends and family. If your funding needs are small, this is likely your best route.
If your business plan indicates that substantial funding is needed, you will likely need to apply for a loan and/or a grant.
- Small business loans are offered by banks, credit unions and other lenders. They can range from as little as a few thousand to hundreds of thousands. Specifics will depend on your business, as well as your personal creditworthiness. Most small business loans are issued in a lump sum, and paid back on a monthly basis, with interest.
- Small business grants are offered by government agencies and some nonprofits. They are essentially business loans that don’t need to be paid back – but they usually have substantial fine print. It’s worth looking into, however, as there may be grants available, particularly for businesses serving an important social need, or for underprivileged entrepreneurs starting their first business.
Set up your business finances
Beyond securing funding, there are other routine tasks that you need to take care of to get your business’ finances in order. This includes:
- Opening a business checking account. You should have a separate business bank account that you use solely for business purposes. You can open this account at most banks, credit unions and financial institutions. Call ahead to see what documents will be required to open this account.
- Open a business credit card or line of credit. This is not strictly necessary, but most businesses can benefit from having a business credit card, and/or a business line of credit. This can be used for day-to-day expenses and purchases, and may also earn you some rewards.
- Set up your accounting system. As a business owner, you will need to keep very detailed records about all revenue and expenses. To do this, you’ll want to set up the proper foundation from day one. This could be investing in an account software such as QuickBooks or Xero, hiring a bookkeeper, or at the very least establishing a spreadsheet to track everything. If you do not have any accounting experience, it’s wise to hire a professional to help.
- Purchase business insurance. Most businesses should have some form of liability insurance, and potentially other forms of business insurance as well. Insurance policies can help protect your equipment and buildings from costly damage, and help shield your company from liability if a worker or customer is injured or otherwise harmed. Speak with a local business insurance provider to get started.
Create a business website
In this day and age, having a solid web presence for your business is very important. And social media profiles, while important, are no replacement for an actual website. You will want to build a professional business website that you can use to drum up business, inform your customers, and stay connected with your clientele.
The simplest way to build a website is to use a website builder from a web hosting provider. When you register a new domain name, look for a provider that also offers web hosting and a site builder, so that you can purchase everything at once and get your site set up quickly.
Building a strong team is essential to the success of your business. Unless you plan to operate a solo business (with you as the only worker), you will likely need to hire some employees.
Before you hire any employees, you must obtain an Employer Identification Number (EIN) from the IRS. You can apply for an EIN online in just a few minutes (there is no cost to apply). You’ll also need to apply for federal employer tax accounts.
Then there are Washington State’s own requirements for employers. WA Employers must report new hires to the state, within 20 days of the hire date. And employers will need to register for Business & Occupation tax, as well as unemployment insurance tax. Washington has no state income tax, so there is no state-level income tax withholding (although there will be federal withholding).
This is also the time that you’ll need to start setting up a payroll system to ensure that federal and state payroll taxes are collected accurately (and your employees are paid on time). You can do this yourself, but it’s generally recommended to use a payroll service.
Run and grow your business
Now it’s time to get down to business and engage with the day-to-day activities that are sure to bring your business success. This means marketing your products and services, maintaining good relationships with your return customers, and setting yourself apart from the competition.
Washington State business FAQs
Still have questions about running a business in Washington State? Here are some answers to frequently asked questions.
What are some business resources in Washington State?
A great place to start is the Washington Small Business Development Center (SBDC). The WA SBDC provides a variety of free resources to business owners, including no-cost business consultation, business coaching, and more. The SBDC can also help connect entrepreneurs to local resources. Business.Wa.Gov also maintains a database of useful resources and guides in the state, and SCORE Seattle is a good resource for Seattle-area businesses.
What is the minimum wage in Washington State?
The Washington minimum wage is $13.69 per hour. The minimum wage will increase each year, based on the increase in the consumer price index (CPI). In 2022, the wage is scheduled to increase to $14.49 per hour.
There is an exception for workers who are 14 and 15 years old. These employees may be paid 85% of the adult minimum wage.
Washington State does NOT have an exception for tipped employees, so even employees earning tips must be paid the standard state minimum wage.
Keep in mind that it is possible for cities or counties to establish their own minimum wage laws, which may exceed the Washington minimum wage. For instance, both Seattle and Seatac have a minimum wage of over $16 per hour. Check with city/county officials to ensure that you are complying with all applicable labor laws in your area.
What business taxes does Washington State have?
Employers must register for and pay Washington employer taxes, unemployment insurance tax. Most companies will need to pay Business & Occupation tax. Washington State does not have a personal or corporate income tax.
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