The state of Washington has several tax advantages for business owners, such as a reduced corporate franchise tax rate, reduced capital gains tax rates as well as decreased costs of hiring and training.
The following step-by-step guide will show you how to start a corporation in Washington.
1. Select a name for your corporation
The first step in forming a corporation in the state of Washington is choosing a business name. Additionally, when choosing a business name, ensure that it complies and adheres to Washington corporation naming requirements.
General corporate name guidelines
Ensure that your Washington corporation name adheres to the following guidelines:
- Your Washington corporation name must be unique and significantly different from any other existing businesses in the state. This rule also applies to Washington reserved names
- Your Washington corporation name cannot include any of the following phrases or words: bank, trust, banker, banking, cooperative, lone, industrial, savings, building, loan, society, or association
- Your Washington corporation name must include the word company, corporation, limited, incorporated, or at least an abbreviation of any of these terms
For additional guidance when choosing a Washington corporation name, refer to the Washington state statute.
Once you’ve decided on a suitable name for your Washington corporation, it’s time to start thinking about protecting your business name. You may also want your brand to stand out from the competition.
One of the best ways to ensure that this happens is to register your business name as a trademark. Ultimately, it will protect your business from intellectual property misuse and theft and avoids brand disputes down the line.
A trademark is essentially a slogan, word, or symbol that identifies the source of the business’s goods and services. It also ensures that customers are never confused about who they are doing business with.
If you’d like to go ahead and trademark your Washington corporation name, there are three ways to do so.
The first option is to trademark your Washington corporation name via the US Patent and Trademark Office. This option offers your business name the broadest protection.
The third option is to trademark your Washington corporation name both with the state’s office as well as the federal office.
Your Washington corporation’s entity name is simply its legal business name. This is the name that you’ve registered with the federal and state governments and is also the name that you’ve stipulated on all your formation documents. Essentially, the state identifies with your business through its entity name.
DBA (Doing-business-as) name
A DBA is short for (doing business as) name. In the state of Washington, it’s known as a trade name. If you’d like to conduct business using any other name aside from your entity name, then you need to register a DBA.
If you’d like to go ahead and register a trade name in Washington, you’ll first need to check whether the name is available. Refer to the Washington Department of Revenue’s Business LookUp Website to check if the trade name isn’t already in use.
2. Nominate a registered agent
Registered agents are also known as resident or statutory agents. These individuals fulfill a critical role within the corporation. Their primary role is to accept service of process, and compliance documents from the state on your corporation’s behalf.
Therefore, prior to forming your Washington corporation, you will need to have nominated a statutory agent.
You may nominate any individual or natural person to serve as your corporation’s statutory agent, however, the individual must meet a few of the requirements below:
- The Washington statutory agent must maintain availability during normal business hours
- The Washington corporation agent must have a physical address in the state of Washington where business activities are conducted
- The Washington statutory agent must be of the legal age
- The Washington statutory agent must consent to the appointment
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3. Appoint initial directors at the organizational meeting
It is essential that you hold an organizational meeting prior to filing the Articles of Incorporation. During this organizational meeting, a few company formalities will need to be concluded, such as determining your Washington corporation’s share structure, selecting your Washington corporation’s initial directors, creating, approving, and ratifying bylaws, as well as executing an incorporator’s statement.
When nominating initial directors, note that you’ll need to have a minimum of one director on the board. This individual is known as a corporate director and will oversee the operations of the Washington corporation until such a time that the first shareholder meeting is called.
The corporate director has a responsibility to adopt, amend and repeal corporate bylaws as well as elect, supervise and remove corporate officers.
4. File Articles of Incorporation
In order to legally form your Washington corporation, you will need to file the Articles of Incorporation with the state. The Articles of Incorporation act more or less like a Constitution for your corporation.
The document is short and simple and may be prepared in a matter of minutes by filling in the form provided by the state’s office.
However, since your Articles of Incorporation officially forms your Washington corporation, it will need to contain some of the following information:
- The Washington corporation’s name
- The number and class of shares your Washington corporation is going to issue
- The tenure of the corporation
- The effective date of incorporation
- The street address of the Washington corporation’s initial registered office
- The name of the initial statutory agent at that office
- The name and address of all the corporation’s incorporators
Once you’ve gathered the relevant information, go ahead and file the articles online with Washington Corporations and Charities Filing System. Once you’ve filed the Articles of Incorporation, you will receive a Certificate of Incorporation, which officially forms your Washington corporation.
5. Create and approve bylaws
The corporate bylaws lay down the operating procedures of the corporation and usually include the number of corporate officers, and corporate directors, the procedures for holding shareholder meetings, the frequency of annual meetings, and the procedures for electing and removing directors as well as the requirements for keeping corporate records.
While no two corporations’ bylaws will be exactly the same, they should supplement the law as well as information contained in your corporation’s Articles of Incorporation.
Additionally, while the corporate bylaws do not need to be submitted or filed with the state, they should be kept on file for reference as and when needed.
6. Select a share structure
The next step in the process of forming a Washington corporation is choosing a share structure. The unit of ownership of a corporation is indicated by a share of stock. Therefore, each share of stock indicates a ratio of ownership of the corporation.
So if your corporation issues stock or issues one share of stock to a shareholder or stock owner, then a hundred percent of the corporation is owned by that individual.
Additionally, your Washington corporation may have multiple classes, and each of those classes can hold any sum of shares. Shares may also be structured into classes, and these classes are also known as the share classes.
7. Obtain an EIN
Your Washington Corporation needs an EIN, which is short for Employer Identification Number. The purpose of this Employer Identification Number which is more or less a federal tax identification number is to identify businesses in the states. The unique nine-digit code is assigned by the Internal Revenue Service, or federal government.
Obtaining an EIN is useful when it comes to hiring employees, submitting paperwork for federal and state tax purposes, opening up a business bank account, etc. To obtain your EIN, you’ll need to file an application with the Internal Revenue Service.
There are no costs or fees involved in the application, and when completing the application online, you will receive the EIN immediately. Alternatively, if you’d prefer to download and file a hard copy, you made download the EIN Application Form and then have it mailed directly to the Internal Revenue Service.
8. File Washington state taxes
Your Washington corporation may be liable for one or more corporate taxes depending on your business type or business structure.
The good news is that Washington does not have a corporate income tax, and neither do they have a personal income tax. However, just because Washington businesses do not pay these two types of taxes doesn’t mean that there aren’t any other taxes in the state.
In fact, the state does tax the gross receipts of most businesses or corporations through its business and occupation tax.
- Employer taxes: All Washington corporations hiring employees will need to register for employer taxes via the Washington Employment Security Department’s website.
- Washington to the sales tax: All Washington corporations that are selling or reselling physical products will need to register for a seller’s permit via the Washington Department of Revenue’s website. The application will result in a certificate that allows you to collect sales tax on the goods that you’re selling or reselling.
9. Washington business licenses and permits
Depending on the type of corporation you’re running, your business may be required to secure one or more licenses and permits prior to legally operating in the state of Washington.
Washington has a statewide business license that all business structures will need to obtain before being allowed to operate in the state legally. Failure to secure a state of Washington business license means that you could be ordered to stop doing business, or you could perhaps be faced with a fine.
- Professional license: If you’re running a professional corporation offering services such as accountants, lawyers, medical professionals, architects, engineers, etc., then you’ll need to secure a professional license prior to offering your services legally in the state of Washington.
10. Annual report requirements in Washington
11. Costs of starting a corporation in Washington
The filing fees below apply to all Washington corporations:
- Name reservation: $30
- DBA name: $5
- Articles of Incorporation: $180
- Annual report: $60
- Washington Certificate of Good Standing: $20
Next steps after forming a corporation
After forming a Washington Corporation, it’s time to start thinking about the future. The following steps will help protect your business and keep it running efficiently for as long as possible:
Obtain a corporate bank account
One of the best ways to separate your personal and business finances is to open up a business bank account for your Washington corporation. Ultimately, this will also streamline your business’s accounting processes and tax filing. To open up an account for your Washington corporation, you’ll need to submit your EIN as well as your corporation’s formation documents.
Build your businesses credit score
One of the best ways to build your Washington corporation’s credit score is to open up a business credit card. This will also separate your personal and professional expenses and help you raise capital for your corporation. The higher your business credit score, the higher credit limits and loans you will be able to obtain.
Sole proprietorships and partnerships do not offer any type of limited or personal liability protection of your personal assets. Therefore, in the event of a lawsuit, your bank account, car, and home may be exposed and used to pay off your business’s debt.
The key difference between nonprofit corporations and LLCs is what they do with the money they generate. LLCs are formed to generate profit and distribute it to the owners, while nonprofit corporations generate revenue which is cycled back into the nonprofit corporation to further the cause.
A C corporation or C corp experiences double taxation because the corporation is taxed once, and then dividends paid to shareholders are taxed on the shareholder’s personal income as well.
Almost every type of business structure needs an EIN, irrespective of whether it is a small business or a large business. This is because the IRS assigns the EIN to keep track of tax reporting and identify businesses in every state.
Corporations are considered separate legal entities and are distinct from their owners. They also possess many of the rights and responsibilities of natural persons. Therefore, corporations are able to borrow and loan money, hire employees as well as pay personal taxes.