How to Incorporate in Washington (May 2024 Update)

Deciding to incorporate your small business is an exciting milestone. Transitioning from a sole proprietorship or general partnership to a corporation comes with major benefits - including personal asset protection, tax savings, and increased credibility with customers.

While moving forward with officially incorporating is a big step, it doesn’t need to be overly complex if you understand the key requirements and steps involved. This comprehensive guide breaks down everything you need to know to incorporate your small business in Washington State.

Benefits of Business Incorporation

Before stepping through the nuts and bolts of the incorporation process, let’s look at some of the major advantages of structuring your business as a corporation:

Limited Personal Liability

One of the main reasons small businesses decide to incorporate is to protect the owners’ personal assets from the company’s debts and legal liabilities. As an incorporated business, your company can be sued, take on debt, and enter into contracts while shielding your personal bank accounts, investments, and property.

This is possible because incorporation creates a legal separation between business finances and personal finances. You maintain ownership as a shareholder, but your personal assets are no longer on the hook.

Another major benefit is that the corporation continues to exist even if a shareholder dies, retires, or needs to exit the business for any reason. This continuity makes it easier to raise investment capital and plan for long-term growth.

Potential Tax Savings

Certain corporations benefit from tax rates lower than the personal income rates paid by sole proprietors and partners in an unincorporated business. As a corporation, you also gain access to more deductions that can further lower your overall tax bill.

Any tax savings does depend largely on your profit level and business structure, so be sure to consult with a tax professional about your specific situation before incorporating.

Increased Credibility

Consumers often perceive an incorporated business as more established and lower risk to engage with. Operating as a corporation can help build credibility during sales conversations and contract negotiations.

Vendors may also prefer extending corporate discounts and net payment terms to an incorporated business. Even landlords may look more favorably on a corporation tenant.

Easier Transfer of Ownership

Distributing, selling, inheriting or otherwise transferring small business ownership shares is generally simpler with a corporation than other unincorporated entities. The perpetual existence of a corporation helps facilitate the transition of shares when an owner dies, retires or needs to exit their stake in the business for any reason.

Steps for Incorporating Your Washington Business

Now that you know the many advantages of incorporating in Washington, let’s look at the step-by-step process for making it official:

1. Name Your Washington Corporation

Your business name will play a prominent role in branding and marketing, so choose carefully. It’s also important to check availability and follow state guidelines for corporate naming conventions.

Rules & Restrictions

To help prevent confusion with other businesses, Washington State requires that corporation names include an identifier like:

• Corporation
• Incorporated
• Inc.
• Corp
• Ltd
• Co.

You also can’t use words that imply your business is a different type of legal entity like “partnership” or “LLC”. Industry-specific terminology like “bank”, “banking” or “trust” require additional approval to use in the name.

Check Availability

Before settling on a business name, you should thoroughly search Washington's corporation name database to ensure your chosen name isn’t already taken. You can also check for names trademarked at the national level using the USPTO’s free TESS search tool.

Reserve a Name

If you’ve landed on the perfect corporation name but need more time to handle the incorporation paperwork, you can quickly reserve the name with the state for up to 180 days by filing a Name Reservation form and paying a small $30 processing fee.

2. Appoint a Registered Agent

Washington State law requires all corporations to designate a registered agent. This is a person or business entity that agrees to accept legal correspondence like service of process and state notifications on behalf of your company.

While you can serve as your corporation's registered agent, many businesses prefer appointing a qualified third-party commercial agent. This keeps your home address private and ensures someone is always available during business hours to accept time-sensitive legal documents for your company.

3. File Articles of Incorporation

Formalizing your Washington corporation requires submitting Articles of Incorporation and paying a small filing fee to the Secretary of State's office.

Required Information

Your articles of incorporation form must include:

• Your corporation's complete name
• Number and type of stock shares created
• Registered agent’s name & signature consenting to the appointment
• Names and addresses of all incorporators
• Effective incorporation date

You'll also need to include a Unified Business Identifier (UBI) number if your business already has one from previous state registrations.

Filing Options

You can submit your Washington Articles of Incorporation by mail, in-person, or electronically through the Secretary of State’s online submission system.

Online filing is fastest and most convenient, costing just $20 more than the standard $180 mail submission fee. Paying an additional expediting fee of $50 for mailed paper filings reduces the processing time from 60+ days down to 5-7 business days.

4. Obtain an EIN

While not strictly required for incorporation, every Washington corporation needs an Employer Identification Number (EIN) to handle payroll taxes, open business bank accounts, and file state tax returns.

Also commonly referred to as a Federal Tax ID Number, EINs function like Social Security Numbers for business entities. The IRS issues EINs at no charge, with the entire application process available online taking just minutes to complete.

5. File Beneficial Ownership Information

Starting in January 2024, nearly all corporations formed in the US will need to provide detailed information about their “beneficial owners” by filing a Beneficial Ownership Information (BOI) Report with the Financial Crimes Enforcement Network (FinCEN).

Purpose & Requirements

The BOI report requires identifying details on all individuals owning 25% or more equity stake in the company. It also compels disclosure of executive leaders like CEOs and CFOs with substantial control over company operations.

For corporations structured in 2024 or later, you’ll also need to provide information on the original incorporator who filed the business formation documents.

Companies created before 2024 must submit their first BOI Report by January 1, 2025. Otherwise the deadline for new corporations is within 90 days of initial formation.

6. Apply for a Washington Business License

While incorporating formally registers your corporation with the Washington Secretary of State, your business still needs to license with the Department of Revenue to legally operate within the state.

All corporations hiring employees or otherwise conducting taxable business transactions in Washington must obtain a standard Business License (BL). The BL registration process centralizes requirements across multiple state agencies - including tax, employment, workplace safety, trade names, and specialty licensing programs.

The $19 standard filing fee covers registering for basic state tax reporting. Additional agency endorsements may increase the total licensing cost depending on your specific business activities. It’s recommended applying through the simpler online BL application system.

7. Submit Initial Report

Within 120 days of incorporating in Washington, all new corporations must file an Initial Report with the Secretary of State. This short report basically confirms key details from your original Articles of Incorporation paperwork.

You'll need to pay a small $10 processing fee when filing the Initial Report. Failing to meet the 4 month deadline results in penalties and the possible suspension of your corporation.

8. Open a Business Bank Account

Maintaining company finances separately from your personal bank accounts is critical for preserving your corporation's liability protections. Always deposit client payments and pay company expenses from a dedicated business checking account.

To open a corporate bank account, you’ll need to provide branch representatives with a copy of your filed Articles of Incorporation, corporate bylaws, and your EIN confirmation letter.

Bringing a Corporate Resolution to Open a Bank Account authorizes the specific individuals trying to establish the account access on behalf of your company.

For more information, take a look at our article on the key benefits of business checking accounts.

9. Obtain Specialty Licenses (If Required)

While the Business License registration covers participating in general commercial and retail activities, Washington requires specialty licensing for engaging in certain professional services and regulated industries like:

• Construction
• Child Care
• Healthcare
• Alcohol Sales

Research whether your unique business activities require additional specialty licensing through the Department of Licensing. Failure to obtain mandatory specialty licenses can result in significant civil penalties or criminal prosecution.

10. File Annual Report

Incorporated businesses in Washington must submit an Annual Report along with a $60 processing fee at the end of each year following incorporation. This mandatory report confirms your corporation remains active and renews required business registrations.

Missing the annual filing deadline triggers financial penalties and risks administrative dissolution of your company if left unresolved. Many business owners find it helpful to enroll in automatic renewal services that handle submitting these annoying recurring filings on your behalf.

Washington State Taxes & Incorporation Fees

While Washington doesn’t impose corporate income taxes, most incorporated businesses pay the Business & Occupation (B&O) tax along with sales tax obligations. New corporations also face modest filing and licensing fees during the formation process:

• B&O Tax: levied on gross receipts from business activities occurring within Washington - rates vary across industries from 0.138% up to 1.5%
• Sales Tax: imposed on end consumer transactions - 6.5% statewide rate plus up to 3.7% in local fees
• Articles of Incorporation Filing Fee: $200 (includes $20 e-filing charge)
• Initial Report Filing Fee: $10
• Annual Report Filing Fee: $60
• Name Reservation Fee (Optional): $30

Recap & Additional Resources

As highlighted throughout this guide, starting a corporation in Washington involves:

• Naming your business
• Appointing a registered agent
• Filing Articles of Incorporation
• Obtaining an EIN
• Submitting Beneficial Ownership Information
• Applying for your Business License
• Filing the initial report
• Opening a corporate bank account
• Securing specialty licenses as required
• Renewing annual report

Check out the helpful small business resources published by the Washington Secretary of State and Department of Revenue websites for more information. The state provides free online Business Licensing Wizards answering common questions about forming corporations and other entities.

An experienced corporate attorney or filing service can also guide you through ensuring the process goes smoothly while avoiding costly mistakes.