INSIGHTS

Starting a Business in Washington State

ARTICLE | February 19th, 2025

Starting a new business in Washington doesn’t have to be confusing or overwhelming if you follow a few steps. The following information provides an overview of the actions you’ll need to take to get
your new venture off the ground.

Many of the decisions you make in launching your business can have a lasting impact on how your business operates and is taxed. Laying a strong foundation is key to preparing your business for future success.

Step 1: Determine Your Entity Type

There are eight main business entity types from which to choose. Which one you select determines how your busi- ness will be taxed, how it will be managed, and what level of liability you will have as the owner. Some businesses start as one type and change their type as they grow and expand.

Sole Proprietorship

One individual or married couple in business alone. This type of business is simple to form and operate.

Liability: Sole proprietor has unlimited liability.
Management: Sole proprietor has full control of management and operations.
Federal Tax: Not a taxable entity. Sole proprietor pays all taxes on individual return.

Limited Liability Company (LLC)

Formed by one or more individuals or entities through a written agreement. The agreement details the organiza- tion of the LLC, provisions for management, assignability of interest and distribution of profits/losses.

Liability: Members are not typically liable for the debts of the LLC.
Management: Members have an operating agreement that outlines management.
Federal Tax: Not a taxable entity. Income/loss is passed through to members.

General Partnership

Two or more persons who agree to contribute money, labor and/or skill to a business. Each partner shares the profits, losses and management.

Liability: Partners have unlimited liability.
Management: Typically, each partner has an equal voice unless otherwise arranged.
Federal Tax: Not a taxable entity. Each partner pays tax on his/her share of income.

Limited Liability Partnership (LLP)

Similar to a General Partnership except that normally a partner doesn’t have personal liability for the negligence of another.

Liability: Partners are not typically liable for the debt of the LLP.
Management: All partners have the right to manage the business directly.
Federal Tax: Files taxes as separate entity; must meet certain criteria to avoid being taxed as a corporation.

 

Limited Partnership (LP)

Composed of one or more general partners and one or more limited partners. The general partners manage the business and share fully in its profits and losses. Limited partners share in the profits of the business, but their loss- es are limited to the extent of their investment. Limited partners usually aren’t involved in day-to-day operations.

Liability: At least one general partner has unlimited liability.
Management: Limited partners are excluded from management unless they serve on the board of directors.
Federal Tax: Files taxes as separate entity, must meet certain criteria to avoid being taxed as a corporation.

 

S Corporation

A legal entity with certain rights, privileges and liabilities beyond those of an individual.
Liability: Shareholders are not typically responsible for the debts of the corporation.
Management: Managed by the directors, who are elected by shareholders.
Federal Tax: Not taxed at the entity level. Income is passed through to shareholders, who claim it on their personal tax returns.

 

Corporation

A legal entity with certain rights, privileges and liabilities beyond those of an individual.
Liability: Shareholders are not typically responsible for the debts of the corporation.
Management: Managed by the directors, who are elected by shareholders.
Federal Tax: Taxed at the entity level. (Dividends distributed are taxed at the individual shareholder level).

 

Nonprofit Corporation

If you are considering starting a nonprofit corporation, we encourage you to have a conversation with us first to determine if your idea falls within the requirements for nonprofit organizations as outlined by the State and IRS.

 

Step 2: Choose Your Business Name

There are a number of factors you should consider as you choose a name for your business.

  • Is it easy to remember, spell and pronounce?
  • Does it describe your service or product so your targeted buyer will understand what you’re offering?
  • Is it too similar to another business so confusion will ensue?
  • Has it already been registered by someone else?
  • Is it available as a domain name for your website?

There are numerous resources that include tips and tech- niques on naming your business. A quick Google search on “how to name a business” results in a variety of useful sites.

To determine if a name you’re considering has already been registered in Washington, check the following databases:

  • Secretary of State
  • Department of Revenue

 

Step 3: Register Your Business

If you chose a Sole Proprietorship or General Partnership for your business type, skip to Step 4.

If you chose any other business structures, you must register with the Secretary of State.

 

Step 4: Get Licenses and Permits


Your first stop is a Master Business License from the Department of Revenue. You will receive a state business license and Unified Business Identifier (UBI) number. You can complete the application online, by mail or in person.

All information regarding the application, including spe- cialty licenses, can be found through the
State of Washington Business Licensing Service website.

Note: If you filed formation papers with the Secretary of State in Step 3, write your assigned UBI number on all of your business licensing applications.

You also will need to contact each city and county where you plan to conduct business to get licenses and permits as required.

Businesses buying goods or services for resale must obtain reseller permits in order to make purchases without pay- ing sales tax. You may apply for a reseller permit online or by calling 360.705.6705.

Depending on the type of business you’re starting, you also may need certain environmental permits. To learn more, visit the Governor’s Office of Regulatory Assistance.

Once you’ve submitted a Master Business Application, you likely will receive packets with more information from some or all of the following:

  • Employment Security Department
  • Department of Labor & Industries
  • Department of Revenue
  • Office of the Secretary of State

In some cases, you may be asked to submit additional paperwork; in other cases, you simply may be receiving additional information you need to comply with tax regulations or State law. If you need assistance during any point in the process, please don’t hesitate to give us a call.

Step 5: Determine Record Keeping Method


Once you’ve registered your business and you’re ready to begin serving customers, you need to be prepared to make and receive payments. That means setting up an appro- priate record keeping system and determining if you will operate on a “cash” or “accrual” basis.

Setting up your bookkeeping system correctly from the beginning can save you considerable time and potential headaches as your business continues to grow. We can as- sist you with a variety of methods, including QuickBooks.

 

Step 6: Plan to Pay County Taxes

Washington state requires that you file a personal prop- erty listing for all tangible personal property used in your business, even if you are a sole proprietor working from your home. This includes things like computers and software, office equipment and furniture, machinery, tools and signs, as well as materials and supplies like office, shop, janitorial and promotional materials.

Each county operates slightly differently, so you should check with the Assessor in the county in which your business.

  • In Whatcom County, contact the Assessor at 360.778.5050 to request the form or learn more on the Assessor’s website.
  • Skagit County will provide you a form but doesn’t require that you complete it if you have less than $3,000 in business property. Learn more online at Skagit County Assessor.
  • In Yakima County, contact the Yakima County Assessor’s Office at 509.574.1100 or learn more on their website.
  • If in Chelan County, check out the Chelan County Assessor website or give them a call at: 509.667.6365

 

Step 7: Plan to Pay Washington State Taxes

A majority of Washington businesses are subject to one or more of the following major taxes that are administered by the Department of Revenue.

Business and Occupation (B&O) Tax applies to anyone engaged in business activities in the state.

Exemptions apply to real estate sales and rentals, farming, and fruit and vegetable processors. Visit the Department of Revenue for more information and specific rules for your business.

Transactions subject to the retailing B&O tax generally also are subject to the Retail Sales Tax. A business must collect sales tax on the selling price of an item unless it receives a reseller permit or other exemption certificate from the buyer. Sales tax you collect is remitted to the State on a schedule established by the Department of Revenue based on your activity level. Use Tax should be reported when your business purchas- es, leases or uses a taxable item without paying sales tax. Articles purchased for use in Washington are subject to either Sales or Use tax but never both.

 

Step 8: Plan to Pay Taxes in Other States

Your Business may be subject to taxes in other states. Determining if you have “nexus” is the key to preventing costly mistakes in tax reporting. We can help you deter- mine if you have attained nexus in other states and, if so, what and how to file proper tax returns. Give us a call if you have questions about doing business in other states.

 

Step 9: Grow Your Business

Many start-up businesses aren’t ready to hire employees right out of the gate. To grow, they often rely on indepen- dent contractors to assist them. However, it’s important to understand the differences in how you manage indepen- dent contractors vs. employees. We recommend reviewing our “Is Your Employee Really a Contractor” informational piece.

When you’re ready to take the next step by adding staff, please review our Hiring Employees informational piece.

 

Step 10: Seek Out Additional Resources

There are a number of local resources that can assist you in starting or developing your business:

Starting a Business in Washington
This website walks you through the steps for starting your business in Washington State.

Service Corps of Retired Executives
360.685.4259
Service Corps of Retired Executives (SCORE) offers free, confidential counseling on everything from starting a busi- ness to developing a business plan to marketing and sales. SCORE counselors are retired executives from businesses large and small. They use their hands-on experience to assist you in solving problems and moving your business forward.

Small Business Development Center – Skagit County
360.336.6114
The Small Business Development Center, or SBDC, is a no- cost, appointment-based, confidential, business advising service.

Small Business Development Center – Whatcom County
360.650.7232
The Whatcom SBDC is a cooperative effort of Washing- ton State University, WWU’s College of Business and Economics and the U.S. Small Business Administration. Its Business Advisors have access to a wide variety of research and technical data that can assist you in making business planning decisions as well as sample templates for creating important documents like business and marketing plans.

Kittatas County Small Business Development Center
509.925.2002
The Business Development Center (BDC) can help res- idents in Kittitas County make their dreams of business ownership a reality. This is a unique resource – with coun- seling services for businesses in all stages of development, workshops, classes, networking events and more – for entrepreneurs like you.

Yakima County Development Association
509.575.1140
The YCDA mission is to enhance the income, quality of life, and employment stability of Yakima County residents by retaining, expanding and recruiting new business and industry.

Small Business Development Center – Wenatchee Office
509.888.7252
The Washington Small Business Development Center (SBDC) is a network of more than 30 expert business advisors working in communities across the state to help entrepreneurs or small businessowners start, grow or buy/sell a business.

Chambers of Commerce
There are several Chambers of Commerce in Whatcom, Skagit, Island, San Juan Counties, Chelan, and Yakima counties that provide networking opportunities for you and your business:

  • Anacortes
  • Bellingham/Whatcom
  • Birch Bay
  • Blaine
  • Burlington
  • Concrete
  • Everson/Nooksack
  • Ferndale
  • Kittitas
  • LaConner
  • Lake Chelan
  • Lynden
  • Mount Vernon
  • San Juan Island
  • Sedro-Woolley
  • Sumas
  • Wenatchee Valley
  •  Yakima

Other Business Associations

You might find it helpful to join or attend an event through other local business associations. Associations, and their members can be excellent resources for your business.

  • Economic Development Alliance of Skagit County (EDASC)
  • Mount Vernon Downtown Association
  • Downtown Bellingham Partnership
  • Technology Alliance Group
  • Whatcom Women in Business
  • Women’s Professional Network
  • Whatcom Council of Nonprofits
  • Ellensburg Downtown Association (EDA)

The information provided in this document is not intended nor can it be used to avoid tax penalties levied by a taxing au- thority. Actions based on this information should not be taken without further consultation with a licensed tax professional. If you have any questions, please feel free to reach out to us at 800.447.0177.