Unless you have prior experience, you may not be aware of all the steps you need to take to get your business going. Here are the general requirements for business formation in Washington state. Keep in mind that not all processes are required for every type of business.
The Washington Small Business Association has developed an amazing roadmap geared towards helping small businesses navigate through the procedures of new business formation. Let us help by highlighting the steps in more detail below!
Ground Zero: Create a Business Plan
Our biggest recommendation for new business owners is to develop a detailed business plan. While technically not required by the state, a little extra planning and research in this phase will help your business start off in the right direction.
The most valuable aspect of writing a business plan is the experience you gain from researching and writing your plan. At a minimum, business plan should:
- Highlight your target market
- Include demographic information on potential customers
- Outline the financial commitment: startup costs & operational expenses
There are thousands of resources available for helping entrepreneurs develop their business plan and you may be tempted to hire someone to prepare a business plan for you or even buy a one-size-fits-all model. However, it’s in your best interest to be as involved as possible in preparing your plan.
Step 1: Register with the Secretary of State
The first step towards business formation in Washington is to register with the Secretary of State. Register here: www.sos.wa.gov/corps
THINGS TO PREPARE
- Business name
- Business entity classification (LLC, General Partnership, Corporation, etc.)
- Personal information of owners
- Social Security Number
- Permanent address
- Other filing requirements:
- Bylaws for corporations
- Operating agreement for LLC
In order to register your business with the Secretary of State, you will need to have decided on a name for your business as well as the entity classification (Limited Liability Company, General Partnership, Corporation, etc.). Check out more detailed information on business entity types here! In addition, you will need to provide personal identification information for all governing individuals. There are additional legal requirements for each type of business entity such as bylaws if you are a corporation or an operating agreement if you are an LLC.
WHAT HAPPENS AFTER YOU REGISTER?
Once you register, the Secretary of State will issue your business a Unified Business Identifier (UBI) number and send formation documents via email and through the mail. Keep your UBI handy. You will use your UBI when dealing with all Washington state agencies.
Washington Secretary of State Corporation Website
Phone: (360) 725-0377
Step 2: Apply for a Business License
After you have registered your business with the Secretary of State, you can apply for a business license with the Department of Revenue. You must have a valid business license to be recognized as a Washington business. File a business license application online at: www.bls.dor.wa.gov/file.aspx
THINGS TO PREPARE
The application will ask you the following questions:
- What is your physical address? (Your physical address must be in Washington if you have employees)
- How much do you expect to make the first year?
- Will you have employees?
- Will any be under age 18?
- If you won’t have employees, would you like to sign up for optional Workers’ Compensation coverage?
- What percentage of ownership do your owners and governing people hold?
- Will your business sell, manufacture, or redistribute alcohol? If yes, find more info here.
The DOR will then send you a business license with information on your tax reporting responsibilities and provide information on how to create a taxpayer account online.
Washington State Department of Revenue Website
Phone: (360) 705-6741
Step 3: Check Local Licensing Requirements
Make sure to research local licensing requirements prior to applying for your business license. In some instances you may be able to apply for city and county licenses through the WA DOR business license application process. Other local governments require businesses to apply directly. If you apply for local licensing or certain endorsements after you initially file for a business license with the DOR, you should receive updated business licenses as different licenses or endorsements are approved.
Refer to this small business guide for general help understanding government requirements or research specific city and county requirements.
Step 4: Apply for an Employer Identification Number
A federal Employer Identification Number (EIN or FEIN) is used to identify your business with the Internal Revenue Service and required for every organization, even if it will not have employees. Sole proprietors are allowed to use their social security number in place of an EIN. Do not apply for an EIN until your organization is legally formed. Apply online at: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
After you complete and submit the application, you will get your EIN immediately. You should download, save and print your confirmation notice.
Step 5: Report Employees
Employers are required to report all new or rehired employees to the Department of Social and Health Services at: www.dshs.wa.gov/newhire.
If you plan to hire minors, review the rules established by the Department of Labor & Industries and complete the required forms. Keep in mind that you’ll also be required to create and distribute a safety plan to your employees. Create your own or use a sample safety plan from the Labor & Industries website.
Here’s what happens when you report employees:
- Department of Social and Health Services (DSHS) will forward all new hire information to other applicable agencies in Washington.
- Department of Labor & Industries (L&I) will automatically set up your workers’ compensation account and provide you with more information about your class codes, rates and reporting responsibilities.
- Employment Security (ESD) will automatically set up your Unemployment Insurance account and provide you with more information about your rates and reporting responsibilities.
Additionally, you will need to notify the Internal Revenue Service (IRS) of your intentions to hire employees if you didn’t already at the time you applied for your federal Employer Identification Number (EIN). They will provide more information on your federal payroll and employee withholding requirements.
Step 6: Apply for Permits (Industry Specific)
SELLING INVENTORY? APPLY FOR A RESELLER PERMIT
If you plan to sell products that you will purchase and resell, apply for a Reseller Permit. A reseller permit allows you to purchase wholesale items tax free with the assumption that you will charge the end-user sales tax in a future transaction. Apply online and the Department of Revenue will send you confirmation and issue a Reseller Permit within about 10 business days.
WORKING IN CONSTRUCTION? REGISTER AS A CONTRACTOR
This step is only required for construction contractors! It is highly recommended that before you register as a contractor that you read about contractor requirements on the Labor & Industries website. Have your UBI ready. After you register with L&I, you will be entered into their database with your registration posted online for public access. It will share basic information such as general contact, license and bond, worker’s compensation history, and safety audit record.
DEALING WITH FOOD? APPLY FOR A FOOD HANDLING PERMIT
Check with your local health department for requirements for food handling permits and regulations. Also consider other requirements for businesses dealing with food or manufacturing and distributing liquor. Contact your local health department for requirements.
Step 7: Open a Business Bank Account
Opening a bank account is not required by the state, but it is extremely important in order to keep your personal and business finances separate. Most banks require personal information on owners with greater than 20% stake in the company and authorized signers. You will need your organization’s EIN in order to open a business account or apply for a business loan. Contact us for our recommendations on the best banks for small businesses.
After you have met the above requirements you can open for business! Here are some further questions to help guide your efforts to legitimize your business:
- Do you have your bookkeeping and accounting software set up?
- Do you have inventory?
- Do you have an e-commerce or online store?
- Do you have general business insurance?
- Do you have procedures in place for your operations?
- Do you have a website?
- Do you have a marketing plan?