Setting Up A Washington LLC
Setting up an LLC, or limited liability company, in Washington State is extremely easy. You only need to step through a simple, online wizard (available here) or fill out and then submit a simple two page form (available here) in order to form the entity. And both the wizard and the form ask for pretty basic information: the name you want for the LLC, its address, and so on.
The process is also fast. If you use the online wizard, for example, you get basically instantaneous formation. Stepping through the wizard on a Tuesday afternoon will mean that your LLC will get formed (in effect) on that Tuesday. Note that the Washington State Secretary of State actually takes 2-3 days to officially tell you that, yes, your LLC got formed the day you used the wizard.
A final quick point: The LLC formation process is also pretty economical-especially as compared to some states. At the time I'm writing this (fall of 2014), you pay $200 for the online formation for example. And once formed, other than a modest $69 annual fee, Washington State doesn't burden the small business owner or investor with a bunch of add-on fees or taxes.
Accordingly, because the LLC formation is so easy, fast and economical, I think you can do many formations yourself. In other words, in many situations, a small business or real estate investor can easily and successfully fill out and submit the forms to the appropriate state and federal offices.
Two Free Resources To Make LLC Formation Easier
We give away a couple of free resources from other websites, which you may want to know about...
First of all, we give away a free downloadable ebook that walks you through the steps for forming and fully setting up a Washington LLC. The free book, by the way, doesn't just give instructions for using the Secretary of State's online wizard. The free book also provides you with instructions for getting a tax identification number, or FEIN, for your new LLC and then example forms. And it provides blank, recyclable sample operating agreements you can use for your own LLC.
If you're interested in downloading this free resource, you can visit this web page, free Washington LLC kit download, at our LLCs Explained website. Also, two quick points about the Washington LLC kits we give away. First, we used to sell the Washington LLC kit and its forms and sample operating agreements--and if you look hard enough, you'll probably still find the odd web page that suggests this is case--however as long as you have the discount code, you get the kit for free. Here's the discount code: stephenlnelsoncpa.
Second, if you don't want to take the minute required to walk through the handful of steps needed to download the free ebook, know that you can also get much of the instructional information at our blog. You can click here (Forming a Washington State LLC) to get to the post that provides the steps you take.
Banking Your New LLC
After you form your LLC, get its EIN and activate the operating agreement, you should be ready to open a bank account.
More specifically, to open a bank account, you should only need the LLC certificate (which the Secretary of State's office will send after it processes your formation documents), an EIN, and a signed copy of your operating agreement. Again, that's all you should need to open a bank account...
Unfortunately, some banks or at least some bank branch employees also think you automatically need to have a Washington State Master Business License to open a bank account for an LLC. Banks or bank branch employees who think this are wrong. Only businesses operating in Washington State need a master business license--so your LLC only needs a business license if it'll operate a business.
If you use an LLC for investing in stocks, mutual funds, bonds or real estate, for example, you don't need a business license for the LLC. Real estate investors, a common category of LLC users, do not need and shouldn't be able to get master business licenses. Real estate rental property isn't a business.
If you will operate a business via your LLC, however, you will need and so should get a master business license for the LLC. (Here's the link to the Washington State Department of Revenue web page you use to get licensed.)
Deciding on Your LLC's Tax Treatment
After you set up your LLC, you need decide what tax form your LLC should use. Single-member (single-owner) LLCs can be treated as sole proprietorships, C corporations, or S corporations. Multiple-member (multiple-owner) LLCs can be treated as partnerships, C corporations, or S corporations.
By default, single-member LLCs are treated as sole proprietorships and multiple-member LLCs are treated as partnerships. However, owners can often realize huge tax savings—thousands and thousands of dollars each year—by electing to be treated as a C corporation or an S corporation.
For help assessing whether you should operate your business as a sole proprietorship, partnership, C corporation or S corporation, you probably want to confer with a tax advisor. If you would like our firm's help--and we'd welcome the opportunity to discuss providing your venture with services--please email me at firstname.lastname@example.org or telephone me at 425-881-7350. You and I can arrange either an in-person or telephone meeting where we together estimate the benefits you'll receive from the different entity forms. If you're well-organized and have even a rough business plan, this meeting should take less than a couple of hours.
Tip: Your tax savings from the optimal entity classification don't start until you make the correct entity classification elections. Each month of delay may cost you and your partners (if you have them) hundreds or even thousand of dollars in extra taxes.
A Special Offer to New Entrepreneurs
If you want help getting started in a new venture, our firm does provide hourly consulting services for new business owners and entrepreneurs.
Typically, new or prospective business owners find that meeting for, say, an hour in my offices to go over basic entity setup questions (such as "should you use an LLC?"), explain how you get your accounting system up and running, and identify some of your most important tax planning opportunities (such as whether or not you should elect "S" status) delivers outstanding value.
To set up an appointment for this sort of one-on-one consulting, email me at email@example.com. But a tip: Make sure you have your list of questions in hand before we meet... (We'll use that list of questions as our agenda.)
- Business Tax Planning for an Obama Presidency
- Estate Tax Basics
- Federal Income Tax Preparation
- How S Corporations are Taxed
- How to Save Taxes with a Health Savings Account
- How to Save Taxes with an S Corporation
- Important Tax Due Dates
- Last-minute 2008 Checklist of Business Tax Reduction Techniques
- Real Estate Profits: Capital Gain or Not?
- Real Estate Tax Traps
- Rental Property Tax Benefits
- State Income Taxes
- Tax Forms
- Tax Tips, Help and Advice
- Wages for S Corporation Shareholder Employees
- Washington State Sales Tax Income Tax Deduction