START your business

Have you prepared your business plan?

You won’t want to start your business before you have completed your business plan! You may want to go to the PLAN section of the Small Business Guide for some business planning guidelines. For planning assistance and more in-depth information regarding any of the steps on this page, you may wish to check out the following resources:

• U.S. Small Business Administration
• SCORE
• Business Impact NW
• Washington Center for Women in Business
• Washington Small Business Development Center (contact after you have a draft plan)

Are you buying an existing business?

If you are buying a business or even just some of the assets of a business, be aware that you may inadvertently be buying past liabilities in the form of unpaid taxes and experience ratings. Get competent legal advice before purchasing a business because these past liabilities are not necessarily part of the regular financial documents.

• For potential liabilities related to the Department of Revenue, you should require the owner to provide a Tax Status Letter with regard to any outstanding taxes by the business. You may also need to pay Use Tax to the Department of Revenue on the value of tangible assets included in the purchase, such as equipment, furnishings, supplies, etc. For more information, see our Tax Topics article titled Buying the assets of a business.
• For workers’ compensation, the purchaser of a business is potentially liable for premium owed, outstanding or pending audit assessments, as well as inheriting the claim responsibilities and their impact on future premium rates. Potential purchasers should request the seller for data and information listed on this Buyer Beware publication.
• For unemployment insurance, you may inadvertently be buying past liabilities and be held accountable for the predecessor’s debt.

Choose a business structure

What form of business structure you select is an important decision that can have long-term impacts, it is important to do your research on what is best for your long-term plans.

Keep in mind that there is not a graduated process for starting a business and upgrading the structure when you get bigger. The idea is not to start as a sole proprietor and eventually grow to be an LLC.

It is best to consider what you think your business will be like in five years and start with that business structure. If you move from a sole proprietorship to an LLC, you are starting over from the beginning and lose valuable business history.

Washington State business and organization structure considerations:

NOTE: This information is for reference only, for detailed considerations, contact your trusted legal or tax advisors.

Determine your business name

Legal entity names become recorded when you file a legal entity such as a Limited Liability Company or Corporation. You can register a trade name when you complete your Washington Business License Application, at a cost of $5 per name. If you also want to trademark a name, you may want to consult an intellectual property attorney. If your business activities will extend beyond Washington State, file for a trademark with the U.S. Patent and Trademark Office. If your business activities will stay within Washington, file for a trademark with the Washington Secretary of State.

When deciding on a business name, there are many things to consider:

• Will it appeal to your potential customers?
• Will it work well in graphic design and marketing?
• Is anyone else using the name? If so, could there be confusion in the marketplace, or could you be infringing on their legal name, trademark, or service mark? Learn the difference between a “Legal Entity Name (Article 3 RCW 23.95),” “trade name,” a name used in the course of business, and a “trademark,” an exclusive right to use a name. You can do searches through the U.S. Patent and Trademark Office, the Washington Secretary of State – Corporations and Charities Division, and through various web search engines.
• If your business is a corporation or limited liability entity, the name must indicate the type of entity (such as Corp., Inc., LLC, etc.).
• When you submit your origination to the Secretary of State, the business name selected will be reviewed to be sure it is available for use.

NOTE: Prior to submitting your documents you may reserve the name you intend to use. This is done by filing a Name Reservation with the Washington Secretary of State. A Name Reservation is valid for 180 days.

Register your corporation or LLC

If you have chosen to operate your business in Washington State, submit your origination documents to the Corporations and Charities Division (with the exception of Sole Proprietorships and General Partnerships – Start at Department of Revenue).

• If you do the initial registration in another state, you will need to register in Washington as a “foreign entity.” You will not save anything in state registration, licensing, and tax costs for your Washington operation, but you will have the added costs of the other state.
• Determine who will be your “registered agent,” the Washington-based person who will receive your official service of process and business entity notifications. It can be you or an outside party.
• Complete either a "Certificate of Formation" (Limited Liability Company) or "Articles of Incorporation" (Corporation) and file the document with the Washington Secretary of State Corporations and Charities Division. You may draft these documents following the requirements listed in law or the Washington Secretary of State provides an online form or paper form for your use. Both can be located at WA SOS.
• By filing, you will receive your Washington State Unified Business Identifier, or UBI number (state business identification number).
  NOTE: be sure to use the issued UBI number when working with other state agencies.
• Create the governance document for your entity: “Bylaws” (corporate entity); “Operating Agreement” (limited liability entity); or “Partnership Agreement” (partnerships).

Determine your business location

Your business may have a clear location, such as a retail store, a restaurant or a practitioner’s office, or it may be mobile or web based. Regardless, to license your business you will need to identify a physical location. Consider the following when determining where to locate your business:

• Will the location appeal to your customers?
• Have you accounted for all site-related start-up and operational costs in your business plan?
• Is the location zoned appropriately?
• If it will involve a lease, what will the terms be?
• What special permits, if any, will be required at that location?
• If home-based, what restrictions will your city or town, county, or homeowner association place on your business?

Get federal tax number and consider federal tax filing options (Limited Liability Companies and Corporations)

If your business is a sole proprietorship or one-owner Limited Liability Company and you won’t have employees, you can use your Social Security Number as the business’s federal identification number, although many business owners choose not to for confidentiality reasons. Otherwise, you will need to obtain a federal ID number (also called taxpayer ID number and employer ID number).

The federal tax form for sole proprietorships is 1040-Schedule C, and for partnerships, Form 1065. For standard corporations, tax filing is with Form 1120. If you wish to be treated as an S-corporation (Form 1120S for pass-through taxation), you must complete Form 2553 – Election by a Small Business Corporation within 75 days of forming your business (see Form 2553 Instructions). The IRS doesn’t recognize Limited Liability Companies as a classification for tax purposes. LLCs default to sole proprietorship taxation if one owner, and partnership taxation if more than one owner. However, Limited Liability Companies can elect to be treated as standard or S-corporations for federal tax purposes through IRS Form 8832. Consult your tax professional for further information and advice.

Obtain required licenses and permits

Most businesses are required to be licensed at both the state and local levels, and many need professional licenses too. You will likely need licenses in every location where you do business; not just where you’re based. Also, some businesses require additional permits.

The online Business Licensing Wizard is a helpful tool. Use it to learn the licensing and permitting requirements for your specific business. Enter your intended business activity, location, and other key information, and receive an online list of specific licenses and permits that are likely to be required.

When you file your Washington Business License Application, be prepared to address the following:

• Whether you will want unemployment insurance coverage for corporate officers. Officers who provide services in Washington State are automatically exempt from unemployment insurance unless the employer specifically requests to cover them. If you want to cover your corporate officers, you must submit a Voluntary Election Form. Find out more here.
• General business information including physical location and ownership.
• A rough estimate of your expected gross annual revenues.
• Whether you intend to hire employees within 90 days of start-up.
• Whether you will want optional workers’ compensation coverage for business owners.
• The Business License Application is the state business license form and establishes your accounts with multiple Washington state agencies, including the Washington State Departments of Revenue, Washington Employment Security, and Washington State Department Labor & Industries. Some local and specialty licenses can be obtained by using the Business License Application. Follow the links above for information on local and specialty license fees.
• For information about local licenses NOT handled through the Business License Application, contact each city or town where you will be conducting business.
• Some businesses require professional licenses, such as architects, engineers, health care providers, counselors, attorneys, certified public accountants (CPAs), etc. For information and requirements, contact the licensing authority for that profession.
• Food-related businesses (such as restaurants, coffee stands, caterers, food product manufacturers, etc.) will need kitchen and food handler permits. Contact your county health department. Food and beverage manufacturers and processors will need licensing from the Washington Department of Agriculture. If you plan to sell, serve, or produce alcoholic beverages, contact the Washington State Liquor and Cannabis Board to find out what kind of license you need to apply for. For cannabis-infused products, you will need a cannabis license. Contact the Business Licensing Service for more information on how to apply. For help opening a restaurant in Seattle, visit the Seattle restaurant site.
• Businesses in the construction trades must be registered as contractors, which requires bonding and insurance. Be aware that even marketing or bidding for a construction job requires you to be registered as a contractor.
• Some service businesses require contractor registration if their services extend into contractor specialties. Examples: (a) Garbage haulers haul construction debris; (b) lawn maintenance services modifying flower beds, building paths, planting plants, cutting branches with something more powerful than loppers, or using power equipment to remove unwanted plants; (c) janitorial services that remove construction debris when cleaning new construction; (d) pressure washing services that clean buildings or decks. There is a minimum $1,000 fine for performing contractor services without contractor registration. There are over 60 different specialities. See the descriptions of all specialty contractor classifications. NOTE: contractors cannot hold more than one specialty license and would instead need to register as a general contractor at that point.
• If your business activities could affect air, land, or water, you may need environmental permits. The Washington State Department of Ecology issues most state environmental permits, along with certain licenses and certifications that help protect Washington’s environment. Some permits are issued by county planning departments. Visit Ecology’s website to see what you may need. If you think you need permits from multiple agencies you can contact the Washington State Office for Regulatory Innovation and Assistance. They can help connect you to the appropriate agencies.
• Lodging establishments such as hotels and motels, must be licensed through the Washington State Department of Health.
• Businesses providing residential care and businesses providing medical and health services must be licensed through the Washington State Department of Health. Long-Term Care Professionals and Providers such as adult or residential care services are licensed by the Washington State Department of Social and Health Services.
• Child care businesses must be licensed through the Washington State Department of Children, Youth and Families.

Set up your operations

• To set up your business bank account, you will need your federal ID number, state UBI number, your governance documents (if you are a Corporation or Limited Liability Company), and a cash deposit. When selecting a bank that best meets your needs, consider the following:
  • Access to credit (loans, credit cards).
  • Business products and services fees..
  • Convenience (location and hours).
  • Staff relationships.
• Ensure understanding of regulatory and tax requirements, including those items listed below (NOTE: the RUN Your Business chapter can help you):
  • U.S. Internal Revenue Service – income tax, Social Security tax, Medicare, federal unemployment tax.
  • Washington State Department of Revenue – business and occupation tax, sales tax, use tax, specialty taxes.
  • Washington State Department of Labor & Industries – contractor licensing, workers’ compensation, wage and hour laws.
  • Washington State Employment Security Department – state unemployment tax, Paid Family and Medical Leave premium collection.
  • Your county – property tax, food-related requirements, environmental requirements.
  • Your cities, towns, and counties – license renewals, signage ordinance, zoning restrictions, local business and occupation tax.
• To streamline and expedite the application and permitting process, Washington State Department of Commerce has developed a Regulatory Roadmap for specific industries. This includes restaurants (Seattle, Tacoma, Spokane, and Spokane Valley), manufacturing (Arlington, Lynnwood, and Marysville and coming soon are Piece County and Sumner) and contracting (Kennewick).
• Set up your accounting system, ideally with assistance from an accountant or skilled bookkeeper.
• Secure business insurance.
• Decide upon employee benefits, such as health insurance (see section Employee Benefits – Health Insurance under the “Plan Your Business” section).
• If you want your business to be certified as a woman, minority or economically disadvantaged business, or a veteran-owned business, complete the certification paperwork.

Hire employees

Prepare to hire employees, if needed. Having employees with the right attributes and skills for your business is critical for successful growth. There are resources to help you with employment planning, including Labor Market Information.

Offering health benefits or supporting employees in finding individual health coverage may help you recruit and retain quality employees. Learn more about your options through the Washington Health Benefit Exchange.

There are also programs to help you find and train qualified employees.

• WorkSource can bring you applicants that are skilled and ready to work.
• Job fairs and free, online job posting can help increase your pool of applicants.
• Tax credits can help lessen the cost of new employees.
• Options for employee training assistance.
• On-the-job training wage subsidies.
• Career Bridge – Employee training resources
• Apprenticeship programs
• WorkSource Apprenticeship
• Work study employees

If you noted on the DOR Business License Application form that you would be hiring employees, information from your application will be forwarded to the Washington State Employment Security Department to set up a state unemployment tax account, and the Washington State Department of Labor & Industries to set up a workers’ compensation insurance account and issue your minor work permit, if applicable. You will have quarterly filing responsibilities with both agencies, plus the Internal Revenue Service (see the RUN Your Business chapter of the Small Business Guide).

Employment is an area that has a lot of regulations, including minimum wage, overtime pay, leave and benefits, pregnancy accommodations, employment of minors and family members, workplace safety, significant recordkeeping, tax responsibilities etc. It’s important that you understand those regulations and costs as you plan and operate your business.

• Job postings for employers with 15 or more employees must include a wage scale or salary range, a general description of all benefits, and a general description of other compensation in job postings.
• Employers cannot require a valid driver’s license as a condition of employment or include such a statement in a job posting unless driving is one of the essential job functions or is related to a legitimate business purpose for a position (Equal Pay & Opportunities Act).
• Every new employee will need to complete the federal I-9 Employment Eligibility Verification Form within three days of hire, and the Internal Revenue Service W-4 Form.
• The use of independent contractors is a frequently misunderstood area. Reporting someone’s employment with a 1099 form does not necessarily make them an independent contractor. All your workers in Washington are entitled to workers’ compensation insurance, paid by you, unless they fit a strict legal exemption. To be an independent contractor, someone must pass what is called the “6-part test” (seven for construction), and all parts of the test must be true to be an independent contractor.
• Report all newly hired and rehired employees within 20 days of hire to the Washington State Department of Social and Health Services, Division of Child Support – New Hire Reporting Program.
• Submit reports online through Secure Access Washington (SAW) using DCS Online. If you don’t have a SAW account, create one and add the DCS Online service.
• Information required:
• Employer: Name, address, and Federal Employer Identification Number (FEIN)
• Employee (from W-4): Name, address, Social Security Number (SSN)
• Additional details: Date of hire and date of birth
• For assistance, contact the DCS Employer Relations Team at 800-562-0479

Labor law

• Wage and hour laws (such as minimum wage, overtime, breaks, etc.)
• Workplace poster requirements
• Employment of minors
• Non-Discrimination Laws
• Independent contractors (Washington State Labor & Industries)
• Independent contractors (Washington State Employment Security Department)
• Independent contractors (U.S. Internal Revenue Services)
• Workplace safety (including required written accident prevention program)
• Federal payroll taxes
• Child Support Withholding Laws
• Restrictions on noncompete agreements
• Equal Pay and Opportunities Act (including prohibitions against salary history and requiring salary secrecy)
• Isolated worker protection
• Overtime requirements

Worker benefits

• State unemployment taxes
• Workers’ compensation insurance
• Washington Health Benefit Exchange
• Washington Healthplanfinder
• Paid sick leave
• Paid Family and Medical Leave
• Other types of leave
• Retirement marketplace

NOTE: Many regions across Washington state have a local minimum wage rate. If there is a higher rate, the more generous wage must be applied. Check your local ordinances to see if there is a local minimum wage. For a current list, visit the local minimum wages section of the Labor and Industries’ website.

Open your doors

Congratulations – and good luck!

Need assistance?

State of Washington Small Business Liaisons can help you get the information and resources you need.

Help us improve the Small Business Guide by filling out a short, confidential survey.

Commerce’s Startup website has excellent resources, including articles, technical assistance, and sections specific to women-owned and veteran-owned businesses.