How to Start a Business in Washington State
Whether you live in Washington or not, we probably don’t have to tell you that the Evergreen State boasts headquarters to some of the world’s largest corporations, like Starbucks, Boeing, and Microsoft (oh, and did we mention Amazon?). But Washington is an equally viable home to small businesses, meaning it’s a great place to start a business. As of 2018, small businesses made up 99.5% of all businesses in the state. So if you’re curious about joining the ranks of these small businesses (and, potentially, huge businesses), we’ve got you covered in this step-by-step guide on starting a business in Washington state.
However, the process of starting a business in Washington state will look slightly different depending on your business’s particular needs and circumstances. For example, you’ll need to understand your employer obligations if you plan on hiring employees. If you don’t yet have a physical location, you’ll need to add choosing a business location to the list, as well. And every business will need to implement a small business marketing strategy ASAP, though this step will extend well beyond the startup phase.
But with that in mind, every entrepreneur in Washington should expect to complete the following nine steps in order to get their ventures off the ground. Let’s dive in.
How to Start a Business in Washington State: A Step-by-Step Guide
1. Write a Business Plan
The first step in starting any business, regardless of the state in which you’re launching, is to write a business plan. Your business plan lays the foundation for your business, and it’ll be an important foothold as you begin the process of starting and running your business—so it’s important not to skip this step.
We recommend consulting our step-by-step guide on how to write a business plan, but for a brief overview, your very first business plan should aim to address at least the following points:
- Summarize your business’s product or service, pricing, and the pain points your business aims to address
- How your product or service differs from its competition
- Your business’s ownership and management structure
- A hiring plan, if applicable
- An overview of your target market, demographic and customers, and competitors
- How much money you currently have, how much startup capital you need, and how much capital you’ll need after you launch
- How long it will take to break even, and how long it’ll take to make a profit
- An overview of your small business marketing plan
That said, your very first business plan doesn’t necessarily have to be extremely detailed, and you’ll be inherently limited by your lack of experience running this particular business. At this stage, prioritize conducting thorough research and making your best possible estimates. You can, and should, revisit your business plan to amend, augment, or change certain details as your business gains traction, and as you gain experience running it.
2. Come up With Your Business Name
If you haven’t done so already, use this pre-launch phase to come up with your business name. The best business names are memorable, easy to pronounce, descriptive or indicative of the product or service you’re selling, reflective of your business’s larger brand strategy, and allow your business room to grow. Check out our comprehensive guide on how to come up with a business name for tips, advice, and creativity-boosting exercises to help facilitate this crucial step.
Most importantly, however, your business name has to be available for use in the state of Washington. So before you start ordering merch and business cards emblazoned with your name, search for your potential name on Google, conduct a business name search with the Washington Secretary of State, and check for trademark filings with the U.S. Patent Trademark Office.
Once your name is cleared for use, buy your domain name so you can get started on your all-important business website. It’s a good idea to create social media accounts under your business name, as well, so you can launch your marketing efforts as soon as possible.
3. Determine Your Legal Structure
The type of business entity you choose will determine how your business is taxed, its management and ownership structure, your ongoing legal requirements (such as annual reporting and operational agreements), and the degree of legal protection you’re afforded in case a suit is brought against your business. So choosing a business entity is one of the most important decisions you’ll make during this pre-startup phase.
The four most common types of business entities for Washington businesses are sole proprietorships, general partnerships, limited liability companies (LLCs), and corporations. Of these four legal structures, LLCs are probably the most popular option. Their ongoing requirements are minimal, owners can elect whether they’d like to be taxed as a business or an individual, and they afford the owner liability protection. We have a comprehensive guide on types of business entities for your research, as well. But with that in mind, we highly recommend consulting with an accountant or attorney for advice about which legal structure makes the most sense for your particular business.
4. Register Your Business
Sole proprietorships and general partnerships aren’t required to register their entities with the state of Washington. However, these types of businesses will need to register a DBA (“doing business as”) with the state if they choose to operate under a trade name—aka a name that is not the proprietor’s own, legal name, which you would have come up with back in Step 2.
But if you’ve chosen to structure your business as an LLC or corporation, then you will need to register your entity with the Washington Secretary of State by filing the appropriate formation documents (LLCs will file a Certification of Formation, and corporations will file Articles of Incorporation). For either of these entities, filing fees cost $180 if you register by mail, or $200 if you register online. Your filing will be processed in five days if you’ve registered online, or up to three weeks if you’ve registered via mail without expediting.
After your business registration is filed, you’ll receive a Washington State Unified Business Identifier (UBI) from the Washington Secretary of State. The state will use this nine-digit number to identify your business. You’ll also need your UBI to file your initial report, which for both LLCs and corporations is due 120 days after you formed your business.
5. Obtain Business Licenses and Permits
In order to legally operate your business, you’ll first need to obtain Washington’s universal business license, also known as a Master Business License (you’ll need your UBI for this, as well). You can apply for your Master Business License through the Business Licensing Application. Applying through the Business Licensing Application will also automatically register your business with multiple state agencies, including the Department of Revenue, the Department of Employment Security, and the Department of Labor and Industries.
You may be able to apply for any specialty licenses your business requires through this portal, too. Search the Business Licensing Wizard to find out about your particular business’s additional licensing and permitting requirements. Depending on your profession, you might also need a professional license to operate legally—and for that information, you’ll need to contact your industry’s licensing board.
And on top of those requirements, you may need to obtain local licenses in the city or town in which your business operates. Use either the Department of Revenue’s list of city license endorsements, or contact your locality directly to find out about these requirements.
If applicable, you may also choose to certify your business as a woman, minority, or economically disadvantaged business, or a veteran-owned business.
Depending on your industry, business activities, and whether you have employees, you’ll need to obtain additional licenses. Licenses also require annual renewal. We highly recommend consulting with an attorney, accountant, or business professional to find out about your particular requirements. If you don’t have a guide on hand, contact your local SCORE or SBA chapter to connect with a professional.
6. Understand Your Tax Obligations
Next, you’ll need to get a handle on your business’s tax obligations at a federal, state, and local level.
The first step in this process is arguably the easiest: head over to the IRS website to apply for an EIN (employer identification number). An EIN acts a bit like your business’s social security number, as the federal government uses your EIN to identify your business for tax purposes. EINs aren’t required for sole proprietorships and LLCs, but they’re still recommended. You’ll likely need an EIN to open a business bank account, apply for a business loan, and hire employees. And applying for an EIN online only takes a matter of minutes.
Washington state doesn’t have a state income tax, but essentially all businesses (including LLCs, corporations, partnerships, and sole proprietorships, whether for- or nonprofit) are subject to the state’s business and occupation tax, which is calculated according to gross income from business activities.
Other potential taxes to stay on top of? Local business and occupation taxes, retail sales and use tax, and taxes dependent upon your business activities. If you use personal property in your business—such as equipment, furniture, and supplies—then you’ll also be subject to a personal property tax. You can contact your local county assessor’s office for more information about this tax.
7. Obtain Business Insurance
At this stage, it’s a good idea to look into purchasing business insurance. Your insurance needs will differ depending on the type of business you run, whether you have a physical location, whether you have employees, and other risks inherent to your business activities and operations. At the very least, virtually all businesses can benefit from general liability insurance, which protects your business from some of the most common potential claims.
In addition to consulting with an insurance professional or attorney, take a look at our guide to small business insurance for more information about the most common types of insurance, and which businesses are best suited to each type.
And if you have employees, and noted that on your Master Business License application, then the appropriate agencies will automatically set you up with workers compensation and unemployment insurance accounts.
8. Get Startup Funding
As you wrote your business plan, you likely decided whether you need capital to start your business. But most brand-new business owners don’t obtain a traditional small business loan through their banks, or even debt-based loans from online lenders. Without the years’ worth of financial history to evaluate, lenders don’t have the material they need to determine whether a business is solvent enough to repay additional debt—which, more often than not, leads to rejection.
But there are so many other forms of startup funding you can pursue beyond a traditional, debt-based business loan, and most business owners use a combination of methods to launch their ventures. Personal savings, friends and family loans, and personal loans for business are among the more common, and accessible, forms of startup funding. Depending on the nature of your business, you might be a good candidate for launching a crowdfunding campaign, or for obtaining a Kiva loan. Certain types of SBA loans, such as SBA microloans, are suitable for startups, as well. You can also leverage your professional networks to seek angel investors or another type of equity financing if you don’t want to create debt.
And it’s always a good idea to look into state-sponsored funding initiatives. The Washington Department of Commerce has an online guide to Washington State Business Grants and Loans. You can also take a look at the state’s open grants and loans for economic development and community funding opportunities.
9. Organize Your Finances
Responsibly using a business credit card is an ideal supplement to any form of business financing you choose to pursue; it can even act as an accessible and flexible form of business funding within itself.
Applying for a business credit card online only takes a few minutes, and even brand-new businesses with limited financial histories can typically be approved for one. Use your business card for your business’s smaller, daily expenses, but err on the side of caution. If you can’t repay what you owe in full and on time every month, you’ll end up harming your credit score—and healthy business credit is crucial for obtaining quality business loans, working with reputable lenders, and more. Take a look at our guide to the best business credit cards to determine which type of card makes the most sense for your business.
At the same time, we recommend opening a business bank account to keep your business and personal finances separate. Start with a business checking account for easy access to your business’s working capital, and you can consider opening a business savings account as you grow. We’d recommend looking into your personal bank’s business account options, since it’ll be easier for you to manage your finances if they’re all housed with the same institution. But if you’re not happy with your bank’s business offerings, or if you’d simply like to see what else is out there, consult our guide to the best banks for small business in Washington.
You’ll need a method of organizing and managing your finances, too—and for that, there’s nothing better than accounting software, which will automate most of these complex processes for you.
The Bottom Line
We hope this guide has given you the information you need to start your Washington business off on the right (and legal) footing. But remember that starting a business in Washington doesn’t mean going it alone. You can always consult a business professional, SCORE, your local SBA office, or Fundera if you run into any snags along the way. But right now, it’s all up to you: Pull the trigger and dive into drafting that business plan.