Ryan Swanson RS C Cleveland PLLC GUIDE FOR STARTING A by guy25

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									                                                                                         RS
                                                                      Ryan, Swanson
                                                                                         &C     Cleveland, PLLC

                                  GUIDE FOR STARTING A NEW BUSINESS
                                         IN WASHINGTON STATE

    Starting a new business is an exciting and                personally liable for the debts of the limited
challenging undertaking. This guide summarizes the            partnership). Limited partners are usually not
process for starting and maintaining a business in            involved in the day-to-day operation of the
Washington State. We hope this information will               business. Formal terms of the limited partnership
assist you in preparing to form your new business.            are typically contained in a written limited
Please contact Ryan, Swanson & Cleveland for                  partnership agreement.
further information.
                                                                  A Corporation is a more complex business
    I.   BUSINESS STRUCTURES                                  structure. Shareholders own the capital stock of the
                                                              corporation. Shareholders elect directors to manage
    Deciding on Your Business Structure                       the corporation. The directors, in turn, appoint
                                                              officers to oversee the day-to-day operation of the
    You may operate your business under any one               business. A sole individual may form a corporation.
of several organizational structures. Each type of            Generally, shareholders, directors, and officers are
business structure has certain advantages and                 not personally liable for the corporation’s debts.
disadvantages that should be considered. Please               Doing business as a corporation may also yield tax
contact us to determine which structure is most               or financial benefits. Corporations may be formed
suitable for your business.                                   for profit or nonprofit purposes.

    A Sole Proprietorship is one individual or                    A Limited Liability Company (LLC) is a
married couple in business alone. This type of                more recent form of business structure in
business is simple to form and operate, and may               Washington. Members own the membership units
enjoy greater flexibility of management, fewer legal          of the LLC. An LLC can be managed by one or
controls, and fewer taxes. However, the business              more members or managers (a manager need not be
owner is personally liable for all debts incurred by          a member). A sole individual may form an LLC. An
the business.                                                 LLC is similar to a corporation in that its members
                                                              and managers are generally not personally liable for
    A General Partnership is composed of two or               the debts of the LLC. Formal terms of the LLC are
more persons (usually not a married couple) who               typically contained in a written operating
agree to contribute money, labor, and/or skill to a           agreement. Compared to corporations, LLCs are
business. Each partner shares the profits, losses, and        more flexible in that owners (i.e., members) can
management of the business, and each partner is               create specific terms for management, distribution
personally and equally liable for debts of the                of profits and losses, and other LLC matters. LLCs
partnership. Formal terms of the partnership are              are permitted to engage in any lawful, for profit
typically contained in a written partnership                  business or activity other than banking or insurance.
agreement.
                                                                II. FORMING A LIMITED PARTNERSHIP,
    A Limited Partnership is composed of one or               CORPORATION, OR LLC
more general partners and one or more limited
partners. The general partners manage the business                Limited partnerships, corporations, and LLCs
and share in profits as well as losses. Limited               beginning business in Washington State must file
partners share in the profits of the business, but            formation documents with the Washington
their losses are limited to the extent of their               Secretary of State. Sole proprietorships and general
investment (i.e., limited partners are generally not          partnerships do not file formation documents with



                            1201 Third Avenue, Suite 3400, Seattle, Washington 98101-3034
                       phone 206.464.4224 | 800.458.5973 | fax 206.583.0359 | www.ryanlaw.com
the Secretary of State, but business licensing and           Now, all agencies participating in the UBI program
other requirements still apply.                              can identify a business using the UBI number, so a
                                                             business owner can use the same identifying
    Registered Agent                                         number when dealing with different state agencies.

    All corporations and LLCs doing business in                  Your UBI number will stay the same as long as
Washington must have a registered agent with a               you operate your business under the same business
Washington address. The registered agent may be              structure. If you change your business (for example,
an individual or another organization qualified by           from a sole proprietorship to a corporation), you
the Secretary of State to do business in Washington.         must apply for a new UBI number.
The registered agent receives license renewals and
other notices and forwards them to the business.                 Master Application and Master License
The agent also accepts legal papers served on the            Service
business. The formation documents for a
corporation or LLC must include a statement signed                Business owners are allowed to fulfill many
by the registered agent indicating its consent to            registration and licensing requirements by
serve. RSC Corporation, an affiliate of Ryan,                completing a Master Application form and making
Swanson & Cleveland, provides registered agent               a single payment. The Master License Service
services for a current annual fee of $280.                   (MLS) in Olympia is the main processing and
                                                             distribution point for the Master Application.
    Filing Fees and Requirements                             Applications and fees collected throughout the state
                                                             are sent to the MLS data center. Data and fees are
     The filing fee for forming a limited partnership,       then passed on to other agencies for further action.
profit corporation, or LLC is $175. The filing fee           If you need any specialty licenses, such as liquor or
for a nonprofit corporation is $30. Additional fees          lottery licenses, you will be asked to submit
and filing requirements may apply to insurance               additional information and then must await
companies, building and loan associations, public            approval from the regulating agency before
utility companies, cooperative associations, and             beginning your business operation.
other specialized profit corporations.
                                                                 MLS also produces and mails the Registrations
     Depending on your business entity type, you             and Licenses document. This document serves as
will need to annually pay a renewal fee and/or file a        your state business license and lists all state
list of officers and directors (known as an annual           licenses, registrations, and permits available
report. Renewal fees are approximately $59; annual           through MLS that have been granted to your
report fees are approximately $10.                           business. If you conduct business at more than one
                                                             location, you will receive a separate Registrations
    III.    LICENSING YOUR BUSINESS                          and Licenses document for each place of business.

    Unified Business Identifier (UBI)                            The Master Application does not include local
                                                             business licensing requirements. The applicable city
    The UBI is a nine-digit number assigned to               and county offices should be contacted regarding
your business when it is registered with the                 local licensing requirements for your business.
Secretary of State or the Department of Revenue,
Labor and Industries, or Employment Security, or                 Trade Name Registration
when a business license application (i.e., Master
Application) is submitted through the Master                     If you intend to use a trade name (a business
License Service of the Department of Licensing.              name other than its full legal name), you must
                                                             register the trade name with MLS. The Master
    Prior to the UBI program, each state agency              Application is used for this purpose. Once a trade
assigned its own business identification number.




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name is registered, the registration remains in effect       sales tax rate and code. To access the GIS system,
until the business owner cancels it.                         visit http: //dor.wa.gov.

    IV.     PAYING TAXES                                         Common State Excise Taxes

1. State Taxes                                                   Business and Occupation Tax

    Tax Registration and Reporting                               Persons engaged in business in Washington are
                                                             subject to business and occupation tax (B&O)
    Tax registration for your business is obtained           and/or a public utility tax. These taxes are based on
by submitting the Master Application as described            gross receipts, gross sales, or gross income of the
above. The Department of Revenue will send you               business. The rates vary depending on the type of
tax information after your business registration has         business activities, and range from .0138 percent to
been completed. You cannot transfer your tax                 5.029 percent. Businesses whose B&O tax liability
registration to another business owner. Your                 is below certain levels may qualify for a small
registration is valid as long as you stay in business.       business tax credit.

    Filing Tax Returns and Payments                              Retail Sales Tax

    New accounts are generally assigned a                         The state retail sales tax rate is 6.5 percent.
quarterly reporting frequency; however, your                 Local governments impose sales tax ranging from
reporting frequency may later be changed to                  0.5 percent to 2.0 percent. You should collect both
monthly or annual reporting. The Department of               state and local sales tax at the time of the sale. Sales
Revenue will notify you of any changes and will              tax is reported on the Excise Tax return to the
send the appropriate tax returns for filing.                 Department of Revenue.

    Electronic Filing (e-file)                                   Personal Property Taxes

     The Department of Revenue offers businesses                 Businesses also are responsible for reporting
the ability to file and pay their Washington State           their non-exempt business assets to the assessor’s
taxes directly over the Internet. E-file walks               office in the county in which their business is
taxpayers through the return process, calculates             located. Information regarding your county’s
taxes automatically, flags errors and omissions, and         personal property reporting requirements can be
provides online access to the latest tax information.        obtained by contacting the assessor’s office in your
E-file is protected by encryption and passwords. It          county.
allows you to customize your tax return and
delivers an electronic confirmation message when                 Other State Excise Taxes
it’s received. To learn more about e-file and to see
if your business qualifies, visit http://dor.wa.gov.             Various other excise taxes ranging from
                                                             Regional Transit Authority tax to litter tax may
    Geographic Information System for Sales Tax              apply to your business. Please contact Ryan,
                                                             Swanson & Cleveland for further information on
    With more than 350 state and local sales and             applicable tax requirements.
use tax codes, taxpayers are often uncertain which
codes and tax rates apply to specific locations. The         2. Federal Taxes
Department of Revenue has developed an Internet-
based Geographic Information System (GIS) that                   Federal Employer Identification Number
links to tax information. When a person types in a
street address or points to a location on a state map,          Sole proprietors who are not employers usually
the system automatically provides the applicable             do not have to apply for a Federal Employer




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Identification number (FEIN) unless they engage in           previous business owner, or the average rate for
certain types of business activities. All other              your industry. You cannot charge any part of the tax
business entity types must apply for this registration       to your employees.
whether they have employees or not. The FEIN is
obtained by filing a Form SS-4 with the U.S.                    Exemptions        to   Unemployment     Insurance
Internal Revenue Service.                                    Coverage

    Social Security Taxes                                        You may not have to pay unemployment
                                                             insurance on certain types of employment, such as
    Nearly all self-employed persons are required            outside salespersons of merchandise who are paid
to participate in the Social Security program.               solely by commission. Unemployment insurance
                                                             coverage for corporate officers is also voluntary. If
3. City and County Taxes                                     you do not elect to provide coverage for corporate
                                                             officers, you must inform each corporate officer in
    If the city where you are located has business           writing that he or she does not have unemployment
taxes and you do business within the city limits, you        insurance coverage.
will need to register with the city taxing authority,
such as the city auditor. Businesses located outside             State Industrial Insurance
the city limits should contact the county auditor, to
determine county registration requirements.                      Almost all employers in Washington are
                                                             required to carry industrial insurance for each
    V.      OPENING A BANK ACCOUNT                           employee. This coverage provides dual protection.
                                                             As a business owner, you are protected from
     Among other requirements, you will likely need          lawsuits due to job-related injuries or illnesses, and
to provide your bank with the following in order to          your employee gains compensation if an injury or
open a bank account for your business: (i) your              occupational illness occurs and time is lost from
Federal Employer Identification number (FEIN);               work.
(ii) the formation documents for your business; and
(iii) a copy of the completed Master Application                  An account for industrial insurance is opened
filed with the Department of Licensing.                      by completing the Master Application. The type of
                                                             business described on your Application will be used
    VI.     HIRING EMPLOYEES                                 by the Department of Labor and Industries to assign
                                                             risk classifications and premiums.
    If you will be hiring employees for your
business, you must register with the Washington                  Self-Insurance
Department of Labor and Industries, the
Washington Employment Security Department, and                   The self-insurance program is an alternative
the U.S. Internal Revenue Service. In addition,              industrial insurance option designed for large
there are both state and federal requirements                employers. These employers must meet minimum
regarding employee pay, working hours, and                   financial requirements, demonstrate the ability to
conditions.                                                  make prompt payment of all benefits and
                                                             assessments under the industrial insurance law, and
    Employer Registrations                                   maintain an active safety program with a record of
                                                             accident prevention.
    State Unemployment Insurance
                                                                 Exemptions to Industrial Insurance Coverage
   You will probably be required to make
unemployment insurance contributions if you have                 Certain types of employment are excluded from
employees. Contribution rates depend on your                 mandatory coverage, but you may obtain coverage
experience as an employer, the rate paid by the              if you wish. The following are examples of




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 employment where industrial insurance coverage is                    • Employees whose industrial insurance benefits
 optional:                                                            are provided by another government plan.

 •    Sole proprietors or partners of a business.                         Federal Employer Identification Number

 • Managers or members of an LLC who are both                             If you are an employer, you must obtain a
 a member (i.e., owner) and a manager.                                Federal Employer Identification Number (FEIN)
                                                                      from the U.S. Internal Revenue Service.
 • Members of an LLC with members only (no
 managers).

 • Up to eight bona fide corporate officers of a
 non-public corporation. Such officers must be
 shareholders and exercise substantial control in the
 daily management of the corporation.




                                         For further information, please contact:

                                          Ryan, Swanson & Cleveland, PLLC
                                            1201 Third Avenue, Suite 3400
                                           Seattle, Washington 98101-3034
                                                  phone 206-464-4224
                                                    fax 206-652-2914
                                                    www.ryanlaw.com




This guide is adapted from Operating a Business in Washington State produced by the Washington Department of Licensing.
This guide is provided for informational purposes only and does not constitute legal advice. Please consult your legal and tax
advisors regarding all legal, tax, and business formation issues.

IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with new requirements of the Internal Revenue Service, we
inform you that, to the extent any advice relating to a Federal tax issue is contained herein, it was not written or intended to be
used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other
person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or
matter addressed in this document.




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