This article will walk you through using the online filing system of the Washington State Department of Revenue. This may be helpful if you are familiar with filing business paperwork or incorporating in Washington but new to the process.
We will provide steps to fill out some of the primary forms and file them with your state. We hope this guide can help ease any new user into the process.
How to Form a Corporation in Washington
1. Choose a Corporate Name
The first step is to choose the name of your corporation. This must be unique and available before filing. The state provides a search tool for this purpose on its website. It should match the name on your DBA (doing business as) paperwork if you have completed that process using a fictitious business name, or check with your bank if you are using an assumed name.
You can also look up businesses in Washington by checking with the Washington State Department of Revenue’s Business Licensing Service Electronic Filing System.
2. Prepare Articles of Incorporation
After your form is completed, you must submit it to the State of Washington Department of Revenue. This filing fee is $70 plus an additional $50 per member on the articles, for a total of $120. You can generally pay by credit or debit card or use a check or money order if required.
3. Appoint a Registered Agent
Next, you will need to appoint someone in the state of Washington who can accept official documents on behalf of your corporation. This agent must have a physical address in the state.
You must keep this information up-to-date, so it is essential to update this when changing addresses or adding directors or officers. It’s also good practice to give notice when moving outside the state so that nothing interrupts the smooth flow of business.
Registered agent requirements:
- Must have the authority to accept service of process
- It cannot be an existing corporation or LLC in Washington
- Cannot be a director, officer, member, or incorporator of the new company
4. Prepare Corporate Bylaws
Prepare your corporate bylaws. This document is also known as the Articles of Organization. It does not need to be filed with the state, but this gives you specific rules on how the corporation will run and who has what responsibilities.
5. Appoint Directors and Hold First Board Meeting
At this point, your corporation is created, and you can appoint directors and hold a first board meeting. It is not required to file these documents with the state, but they should be kept for reference.
Who can be a director?
- Anyone at least 18 years old
- The legal resident of Washington state has not been convicted of a felony or any crime involving dishonesty or deception.
What do directors oversee?
They appoint officers and set their compensation, as well as approve expenses and contracts. Their responsibility is to the corporation and sees that it operates according to its bylaws and charter. Directors also agree on significant changes, including mergers and dissolution.
6. File Initial Report and Annual Report
Every year you must file a report with the state, so they have up-to-date information. The report is due at the end of your corporation’s anniversary month in Washington.
7. Obtain an EIN
An Employer Identification Number (EIN) is required to open a bank account for your corporation, file with the IRS, apply for business license and permits, etc. This number can be obtained on the IRS website or by completing an application through their Electronic EIN Pilot program.
Pros and cons of Washington Corporation
- No personal liability for unpaid debts or taxes
- Can be a shareholder, officer, and director
- Limited liability for lawsuits against shareholders
- Can conduct business in other states
- Shares can be sold to non-residents of Washington
- Must pay taxes on profits distributed to shareholders
- To dissolve, all members must vote, and approval is required by 75% or more. If not enough votes are gathered at the meeting, a second may be held a month later.
Obtain Licenses and Permits
When starting a business, you may need to obtain specific licenses and permits depending on their type. This can be done through the state of Washington Department of Revenue’s Business Licensing Service Electronic Filing System.
- Articles of Incorporation or organization certificate from the Secretary of State
- Application for Resale Permit or Certificate of Authority from each municipality in which you will be operating your business
- Federal Tax Identification Number (EIN)
- Sales and Use Tax Permits from any other city where that city requires sales tax.
Note: If using a PO box, use the physical address of the corporation as well so it can receive mail there. Otherwise, all notices and official correspondence will be sent to your home address.
Tax Filing Requirements
After you start your business, you must begin to file state and federal taxes. These may vary depending on the type of company you have and how many employees it has. You will need to file with the IRS (Form 1023), the Washington Department of Revenue (Form 309), and any other municipality where that city requires sales tax (in addition to state and federal).
The U.S. Tax System:
- Corporations are taxed separately from their owners, called shareholders or members, depending on the corporation’s structure
- Can be taxed differently than its owner if different accounting periods are used, such as calendar vs. fiscal year
- Can pay estimated quarterly tax payments using Form 1120ES
Washington State has a sales tax of 6.5% as of 2015, but counties and cities can charge an additional amount, which will vary depending on the location. Can collect sales tax from customers who bring their bags; this is called a “regressive” tax because it takes up more income for lower-income families than higher-income ones.
Estimated quarterly payments
Form 1120ES (Quarterly Estimated Tax for Washington Corporations) must be filed if you expect to owe at least $500 in federal taxes (including self-employment tax) or 50% of your current year’s federal taxes by the end of the year. These payments are due April 15th, June 15th, September 15th, January 15th of the following year.
Washington State has a corporate tax rate of 8.84% as of 2015, applying to the taxable income left after deductions and credits (Standard Deduction and Personal Exemptions do not apply to Corporations).
There are several options for filing your taxes:
- Single-member LLCs taxed as corporations file Form 1120 with Schedule H attached. The net income or loss from this form then gets transferred to the 1040 line 21. The amount that would typically be subject to self-employment tax (~15%) will instead be added to the shareholder’s other wages on Line 7 of their 1040, so they can pay both state and federal taxes at once through withholding or quarterly estimated payments.
- If you were an anS-Corp, you would have paid this self-employment tax at the corporate level, which would have reduced the amount that went through to your personal taxes.
- These single-member LLCs taxed as corporations can also file Form 1120S if they expect to have under $50k in revenue and no employees. This is called filing an election under Subchapter S of the Internal Revenue Code. Any income after deductions goes on Schedule K-1 and gets transferred to 1040 line 21 and then added to their other wages on line 7 of their 1040. The shareholder will then pay both state and federal taxes at once through withholding or quarterly estimated payments. If you were an S-Corp, you would not need to do this since your subchapter S election would have already taken care of this for you.
- Multi-member LLC taxed as a corporation file Form 1120 with Schedule E attached. The net income or loss from this form then gets transferred to the 1040 line 20 and the amount that would normally be subject to self-employment tax (~15%) will instead be added to the shareholder’s other wages on Line 7 of their 1040, so they can pay both state and federal taxes at once through withholding or quarterly estimated payments. Unlike the Single Member LLC taxed as a Corporation, however, if your multi-member LLC files as an S-Corp, you must file Form 2553 (Election by Washington Business Corporation Act), which subjects you to double taxation unlike the Single Member LLC taxed as a corporation
- Multi-member LLCs taxed as partnerships (where all members are also actively involved in the business, unlike the multi-member LLC taxed as a corporation where only some of them need to be) file Form 1065 with no Schedule E attached. Any income after deductions goes on line 22 and gets transferred to the 1040 line 12 and then added to their other wages on line 7 of their 1040. Unlike Subchapter S Corporations or Single-Member LLCs taxed as a Corporation, this does not have any effect on federal taxes since you are already being taxed at the individual level rather than through withholding or quarterly estimated payments. Just like the two types of LLCs before it, these are still partnerships for state tax purposes if they have no subchapter S elections, so there may be some savings on self-employment taxes for members of the LLC.
Federal income tax
For federal income tax purposes, all LLCs are classified as “pass-through” entities, meaning they are not subject to an entity-level tax. Instead, the income is allocated among the owners who pay federal taxes on it through their 1040 individual returns.
The amount that would normally be subject to self-employment tax (~15%) will instead be added to their other wages on Line 7 of their 1040 and they can pay both state and federal taxes at once through withholding or quarterly estimated payments.
Sole Proprietorship vs. Single Member LLCs Taxed As Corporations
A sole proprietorship is default for someone who does business under their own name without filing any special paperwork with the state. The owner pays all of the taxes on profits from their business through their individual 1040 tax return at year’s end via Schedule C.
While they enjoy limited flexibility when it comes to entity formation, there are also some major disadvantages to being treated this way including the fact that they are personally liable for anything their business does or fails to do. If litigation arises, the owner’s personal assets could be at risk.
- For example, if a customer slips and falls on your storefront property, you may be held liable for your lack of due care regardless of who was actually at fault in the accident. Another way this might happen is if one of your suppliers sold you faulty goods that were directly related to an injury someone received (for instance, faulty tires), then you could be held accountable for the resulting damages despite having no direct involvement in or knowledge of any wrongdoing on your supplier’s part.
Washington Articles of Incorporation: Walk Through Guide
Article 1: Name of Corporation
The first step is to file the Articles of Incorporation. This form requires:
- The name must include “corporation,” “incorporated” or “limited”.
- It cannot contain words like “general” that imply it is a business that can carry on activities other than those allowed by its articles.
- The name must end with one of these: ” corporation,” “incorporated,” or “limited.”
- It cannot contain any words such as, but not limited to: company, corp., co., and terms such as general and professional (implying you can practice something outside the scope of your articles).
Article 2: Number of Authorized Shares
This step requires you to input the number of shares your corporation will have. The amount can be any whole number from 1 to 100,000,000. (All corporations, regardless of the number of shares they have, must set their Authorized Shares to 1000000. This is a Washington state requirement).
Article 3: Class of Shares
This step requires you to choose if your shares will be classes of common, preferred, or a combination of both. It is important to note that one class is required for all corporations and more than one cannot be created.
A corporation can have just common stock or it can have a combination of common and preferred stock. This choice affects how the dividends are paid out on the board’s resolutions for a particular dividend period. If a corporation has no separate classes of stock then there must be only one class of stock which is common stock.
Article 4: Effective Date of Incorporation
The effective date is when your corporation becomes an entity that can do things like open bank accounts and enter into contracts. State the month, day, and year your corporation was created.
Washington requires this be no sooner than the 15th of the month and no later than the last day in February. As long as you meet these requirements you can choose any date within those parameters to use as your incorporation date.
Article 5: Tenure and Terms
This is where you will enter the starting and ending dates of your board members’ terms in office.
State the month, day, and year when each member’s term begins. Then indicate if they serve a “one-year” or a “two-year” term. A one-year term would be from January 1 to December 31. A two-year term runs from January 1 of one calendar year to December 31 of the next year. For example: If a member was elected on January 3, 2016, their tenure would end on Dec. 31, 2017 (a two-year term).
Article 6: Washington Registered Agent and Office
Enter the physical address and contact information (name, address, phone number) for your corporation’s registered agent. A registered agent is a person or business that must stay in Washington and be available during regular business hours to accept important documents on behalf of your corporation.
The Registered Agent is required by law to maintain a street address within the state of WA. AP.O. box cannot be used as the registered agent’s address.
Please note: General partnerships are not permitted as Registered Agents for corporations doing business in WA State.
Article 7: Incorporators
This is where you will enter the names and addresses of the incorporators.
The incorporators are responsible for filing the Articles of Incorporation with the WA Secretary of State, not for managing the day-to-day operations of your corporation.
Articles of Incorporation Facts
Articles of incorporation are the most frequently filed documents at the Washington Secretary of State.
More than 600,000 articles have been filed with the Secretary of State over the past decade.
How to File Washington Articles of Incorporation?
Washington Articles of Incorporation need to be filed by postal mail. The paperwork can be filled online and submitted for filing at the Washington Secretary of State office.
You can file your articles online through our Online Filing Center. Or you can print out your completed articles and mail them to:
Washington Department of Licensing
PO BOX 9033
Olympia WA 98507-9033
If you mail in your articles please include a cover sheet that contains your name, address, phone number, fax number (if available), corporation name, and federal identification number or social security number for each person filing. You should also include a self-addressed, stamped envelope to ensure you receive your confirmation of filing.
The fee you will pay depends on the number of members (shareholders) that owns your corporation: 1-10: $25; 11-50: $35; 51-100: $75; 101-300: $150; 301+: $250.
Before Filing Your Articles of Incorporation
Before filing your articles of incorporation, you’ll need to have a board of directors and at least one shareholder.
You will also need to choose a name for your corporation. Your corporation’s name must contain the words “corporation,” “incorporated” or “limited” unless it is a bank, insurance company, or professional corporation. You can search Washington state business names on our website
The name cannot be the same as, or too similar to:
- Any existing corporation’s name;
- Any other active or reserved WA business entity’s name;
- The name of an incorporated city;
- The WA fictitious business (FB) name used by another newly formed FB-only company;
- Any trademarked/copyrighted product (including phrases); or
- Any “Washington state” trademarked/copyrighted phrase.
There is a separate process if you want to reserve a name, which you can do before filing your articles.
How to Reserve Your Corporation Name in Washington State?
Before you file your articles, you can reserve a name for 120 days
To reserve the corporation’s name:
- Visit an SOS office and pay $25 (online filings discount not available).
- You should receive a Certificate of Reservation once your reservation is approved.
- Get help from an attorney or other professional to make sure your reserved name complies with state requirements.
- File your articles within 120 days after receiving approval for the name reservation. The articles must include the correct spelling of the reserved name as it appears on the certificate of reservation.
The SOS offers expedited service for a fee if your corporation needs to be formed immediately.
Federal Tax Number or Social Security Number
If you plan on having employees, you may need a federal tax number (EIN), which is the same as your social security number used by the company. A W-9 form must be completed and filed with the Washington Secretary of State before any employee can be paid by the corporation.
This requirement applies even if no employees are hired or wages will initially be paid from corporate funds. For more information about EINs go to the Internal Revenue Service website.
How to Elect S-Corporation Status?
An S-corporation is a special corporation formed under state law and recognized as a pass-through tax entity. The income, gains, losses, and deductions of an S-corporation are “passed through” to its shareholders for federal income tax purposes.
If the election to be taxed as an S-corporation is made, you must file IRS Form 2553 with the Internal Revenue Service by the 15th day of the third month after the beginning of your taxable year.
Before filing articles for incorporation, you should consult with an attorney or other professional familiar with business laws if you’re not sure which business structure is best for your company.
How to File Articles of Incorporation for a Nonprofit Corporation?
A nonprofit corporation must file Articles of Incorporation with the Secretary of State to form a legal nonprofit.
Your articles must state:
- The name of your nonprofit;
- The purpose for which it is formed (this cannot be unlawful);
- If you want to raise money for religious, scientific, literary, or charitable purposes.
You may also need to submit other documents providing more information about the incorporation process. See our page on Nonprofit corporations in Washington.
How Much Does It Cost?
The following fees apply when filing either type of business entity with the Washington Secretary of State: $50 filing fee for general partnerships, limited liability companies (LLCs), or trademarks/service marks; $75 for banks or insurance companies; $25for articles of incorporation or any other business entity; $25 for each amended filing; and $200 to close a business, dissolve, or withdraw.
Fees are set by the Washington State Legislature each year. The revenue is used to support the functions of the SOS.
Washington State is home to many corporations including Microsoft, Amazon, Boeing, and Starbucks. This article has covered how to form various types of business structures in Washington. If you want further help to file your documents please visit the Secretary of state’s website here or contact a lawyer for assistance.