Starting a Sole Proprietorship in Washington State
Costs and Taxes
The filing fee is $20, with a processing fee of $15 and an additional $5 to register a trade name. In Washington State, there is no personal or business income tax. Instead, businesses are subject to the Business & Occupation Tax, sales and use taxes, property taxes, and various industry taxes. The Washington Department of Revenue administers over 60 taxes. Sole proprietors are responsible for paying these taxes themselves.
Registration and Licenses
A sole proprietorship in Washington state does not require registration, but an assumed name can be registered for $30.00. All businesses need a license, and some industries require additional licenses and permits. To start a sole proprietorship, one must:
- Choose a name
- File a trade name
- Obtain licenses and permits
- Obtain zoning clearance
- Obtain an Employer Identification Number (EIN)
Sole proprietorships offer no asset protection in contrast to an LLC. They are easy to set up, requiring no formal registration.
Ease of Setup and Protection
Establishing a sole proprietorship in Washington involves no legal filings, but it is recommended to form an LLC for asset protection. Washington provides infrastructure to facilitate easy setup, such as loans and assistance programs.
When starting a business, the following steps should be taken:
- Pick a name
- Submit a trade name (trade names must be unique)
- Get licenses and permits
- Obtain an Employer ID Number (EIN)
Ensure all licenses and permits are obtained, and consider getting an EIN for tax purposes even if it’s not required.
Business Licensing
In Washington, a generalized business license is required. This is acquired through the Washington State Department of Revenue (DOR). The Business License Application must be completed, along with the filing fee of $20 and $5 for a trade name registration. If operating from out-of-state, business owners must comply with Washington laws.
Decision-Making: LLC vs. Sole Proprietorship
While forming an LLC offers limited liability protection for personal assets, it does involve more paperwork and is more complex than setting up a sole proprietorship. A Washington sole proprietorship is suitable for small businesses due to its simplicity. However, the owner is personally liable for all debts and obligations.
Conclusion
Overall, starting a sole proprietorship in Washington is straightforward and does not require official paperwork. However, to operate legally, businesses still need to complete certain steps, including obtaining a business license and potentially professional licenses.
Washington extends various supports to businesses like tax incentives and resources for obtaining licenses. An in-depth guide can walk entrepreneurs through starting a sole proprietorship from choosing a business name to properly registering for taxes. WA also requires businesses to register with several state departments and obtain a Unified Business Identifier Number. All these contribute to setting up a compliant and successful sole proprietorship in the state.